Meredith Corporation & Subsidiaries - Page 11

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               It is true, as respondent points out, that the allocable               
          purchase price exceeded the fair market value of the acquired               
          tangible and amortizable intangible assets of LHJ.  That does not           
          dictate, however, that editorial costs incurred after the                   
          expiration of the 42-month useful life must be assigned to                  
          nonamortizable goodwill or going concern value.  As we stated in            
          Meredith I, "the sole reason why the subscriber relationships are           
          not treated as goodwill is that they can be valued and have a               
          limited useful life which can be estimated with reasonable                  
          accuracy".  Meredith Corp. & Subs. v. Commissioner, 102 T.C. at             
          460.  The aforementioned editorial costs were found to constitute           
          part of the value of that asset, and not of goodwill.  In arguing           
          to the contrary, respondent ignores our rationale in Meredith I             
          that such contingent costs were to be added "to the basis of the            
          subscriber relationships in the years in which such amounts are             
          incurred".  Id. at 455 (emphasis added).                                    
               The Court initially subtracted from Grabowski's income                 
          approach valuation of the subscriber relationships the present              
          value of all of the stipulated editorial costs (including costs             
          incurred during Meredith's TYE 1990 and TYE 1991) due to their              
          contingency, and then prescribed adjustments for TYE 1986 and TYE           
          1987 based on the actual costs incurred by Meredith in each of              
          those years.  Id. at 463.  It would be inconsistent with the                
          analysis in Meredith I to deny petitioner an increase in the                






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