-77-
FIA leases to be 11.49 percent annually. The purchase price set
forth in the March Agreement was subject to reduction in the event
that the yield on the leases, computed as of February 28, 1989, was
less than 11.49 percent. The purchase price was to be reduced by
the amount needed to produce an 11.49-percent yield.48 However, no
purchase price adjustments were subsequently needed.
D. Petitioner's 1989 Return
On its 1989 return, petitioner allocated $131,513,038 of the
$141,456,620 it paid for FIA's assets to the lease portfolio. None
of the purchase price was allocated to goodwill. The present
dispute centers around the correctness of petitioner's allocation.
E. Notice of Deficiency
Respondent determined that petitioner overstated the fair
market value of (and thus its basis in) the lease portfolio by
$1,328,618, which respondent determined should be allocated to
goodwill, going-concern value, or other nonamortizable intangible
assets.
48 The required yield of 11.49 percent meant that lease
rents, plus book residual values, less nonrecourse debt payments,
when discounted to present value of 11.49 percent, had to equal
$39,788,569. If the discounted present value using 11.49 percent
was less than $39,788,569, the purchase price was to be reduced
by the amount of the difference.
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