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capital one, the Court held that the related transaction was also
capital. Arrowsmith v. Commissioner, supra at 8.
Respondent gainsays the applicability of the foregoing
discussion to the issue herein because, among other reasons,
section 1.338(b)-3T, Temporary Income Tax Regs., 51 Fed. Reg.
3592 (Jan. 29, 1986), postdates Meredith's purchase of LHJ's
assets, and Arrowsmith does not directly address the
deductibility of contingent asset acquisition costs.
We agree with respondent that the regulations and case law
are not controlling authority. Nevertheless, we think the
general principles espoused therein comport equally well with the
increase in basis of fully amortized subscriber relationships as
they do with adjustments to AGUB of fully amortized or disposed
assets under section 338. For present purposes, we descry no
reason to distinguish the two situations.
Moreover, these tax law principles antedate petitioner's
purchase of the assets of LHJ and are thus appropriately
considered by the Court. The Secretary states:
These [section 1.338(b)-3T] rules provide for the
incorporation of general principles of tax law which
are applicable to the determination of the basis of
assets acquired in actual asset purchases. * * *
* * * * * * *
For example, an amount of adjusted grossed-up basis
otherwise allocable to a disposed of capital asset may
be deducted by new target as a capital loss. [T.D.
8072, 1986-1 C.B. 111, 114; citation omitted.]
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