- 11 -
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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011