-79-
Regs., 53 Fed. Reg. 27039-27040 (July 18, 1988).49 After being
reduced by the amount of class I assets, consideration is allocated
among assets in class II in proportion to the fair market values of
such assets on the purchase date, then among class III assets in
proportion to the fair market values of such assets on that date.
Sec. 1.1060-1T(d)(2), Temporary Income Tax Regs., supra. The
amount of consideration so attributed to an asset in classes I
through III may not exceed the fair market value of the asset on
the purchase date. All remaining consideration, or residual
consideration, must be allocated to class IV assets. See, e.g.,
East Ford, Inc. v. Commissioner, T.C. Memo. 1994-261.
Petitioner did not allocate any portion of the purchase price
to class IV assets. If we determine that petitioner overvalued the
FIA lease portfolio on its 1989 tax return, then the difference
between the fair market of the lease portfolio and the purchase
price must be allocated to class IV assets.
Petitioner claims it neither acquired a trade or business when
it purchased FIA's assets, nor paid a premium for FIA's assets, nor
acquired goodwill. Respondent, on the other hand, contends that
49 This temporary regulation was amended on Jan. 16, 1997.
See 62 Fed. Reg. 2267 (Jan. 16, 1997). Because the amended
regulation is effective for asset acquisitions completed on or
after Feb. 14, 1997, it is inapplicable herein.
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