Meredith Corporation & Subsidiaries - Page 16

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          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              
          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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