- 16 -
The Secretary cites Arrowsmith v. Commissioner, supra, a case
decided well before petitioner's acquisition of LHJ, as authority
for that assertion. See T.D. 8072, supra.
We now apply the preceding analysis to the facts before us.
Meredith is entitled to an increase in the basis of the
subscriber relationships due to contingent acquisition costs
becoming fixed in its TYE 1990. The section 338 regulations
supra provide a template for petitioner to treat the fully
amortized subscriber relationships asset as if it had been
disposed of before the increase in basis, and to determine the
character of the resulting deduction pursuant to Arrowsmith v.
Commissioner, supra. Since the added basis would have resulted
in ordinary amortization deductions if it had been included in
the original acquisition cost, we hold that petitioner is
entitled to an ordinary deduction in its TYE 1990 of the entire
amount of the contingent editorial costs becoming fixed in that
year. See Meredith Corp. & Subs. v. Commissioner, 102 T.C. at
455.
IV. A Deduction for Contingent Costs Incurred During TYE June
1990 Does Not Result in Excessive Cost Recovery for Petitioner
Finally, respondent contends that, "implicit" in the Court's
calculation of petitioner's initial basis in the subscriber
relationships in Meredith I is a "maximum" "fair market value
[basis] * * * as of January 3, 1986 of $44,725,488" and that
since petitioner has already deducted $48,798,243, "over $4
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