Meredith Corporation & Subsidiaries - Page 8

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          conclusion that the fulfillment obligation assumed by Meredith on           
          January 3, 1986, was contingent.                                            
               The Court calculated petitioner's initial basis in the                 
          subscriber relationships asset as of January 3, 1986, by first              
          finding that its value was $40,300,000 (including value                     
          attributed to tax savings).  This was determined by using the               
          income approach of petitioner's expert (Grabowski), and by                  
          assuming an exclusion during the first 35 months of a portion of            
          the advertising revenues of LHJ attributable to the efforts of              
          the magazine's editor-in-chief (editor advertising exclusion).              
          Using Grabowski's amortization factor of .37634, we calculated              
          this value to be approximately $25,133,500 prior to the addition            
          of tax savings.  The Court thereafter decreased this pretax                 
          savings figure by the present value of the stipulated editorial             
          costs through June 30, 1991 (approximately $18,762,500) since               
          these costs were contingent, and increased the resulting figure             
          by the present value of the 35 months of the editor advertising             
          exclusion (which we computed to be approximately $2,760,000).  We           
          thus found petitioner's initial basis to be $14,641,000, after              
          the addition of tax savings of $5,510,000.  Meredith Corp. &                
          Subs. v. Commissioner, supra at 463.  The Court reasoned that, to           
          be consistent with the parties' stipulation requiring                       
          capitalization of the editorial costs and with the income                   
          approach, the proper treatment of the amounts was to charge them            
          against revenues in determining petitioner's initial basis and to           

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