Meredith Corporation & Subsidiaries - Page 4

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          the years through internal growth and acquisitions.  Petitioner             
          is an accrual basis taxpayer that keeps its books and records,              
          and files its Federal income tax returns, on a taxable year                 
          ending (TYE) June 30th.                                                     
               In connection with its January 3, 1986, purchase of the                
          magazine Ladies' Home Journal (LHJ), Meredith assumed certain               
          contingent obligations of the seller, Family Media, Inc. (FMI),             
          relating to an intangible asset designated "subscriber                      
          relationships".  Meredith agreed to produce and deliver copies of           
          LHJ to subscribers already existent on the acquisition date for             
          the remainder of their subscription terms, necessarily entailing            
          fulfillment costs for which Meredith was to receive no                      
          reimbursement from FMI.  Such costs included, but were not                  
          limited to, expenses associated with paper, printing, editorial             
          salaries, and delivery (editorial costs).  The fulfillment costs            
          were contingent for two reasons:  (1) The costs were variable;              
          and (2) LHJ subscribers were permitted to request cash refunds              
          for the remaining terms of their subscriptions at any time, for             
          which FMI remained solely liable.  The contingent expenditures at           
          issue herein were editorial costs incurred by Meredith during its           
          TYE 1990.                                                                   
               The years before the Court in Meredith I were petitioner's             
          TYE 1986 and TYE 1987.  Meredith I addressed the issues of                  
          petitioner's entitlement to amortization deductions with                    

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