Utilicorp United, Inc. & Subsidiaries, F.K.A. Missouri Public Service Co. - Page 13

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          Maine (the hydroelectric facility), should in part be reallocated           
          to either goodwill or going concern value.  At trial, respondent            
          conceded that, if there was any goodwill, it was “very small or             
          nothing”.  We accept that statement as a concession by respondent           
          that UtilCo did not acquire goodwill.  Thus, we shall limit our             
          inquiry to the question of whether UtilCo acquired going concern            
          value.  Also at trial, the parties agreed that the Court, as an             
          initial matter, should determine the fair market value of the               
          assets listed in Warranty Deed and Bill of Sale No. 2 (the bill             
          of sale assets).  We have found that UtilCo acquired an undivided           
          50-percent interest in the bill of sale assets.  Going concern              
          value is not one of the bill of sale assets.  Respondent concedes           
          that, if the fair market value of the bill of sale assets was at            
          least $65,000,000, then UtilCo acquired no going concern value.1            
          As set forth below, we find that the value of the bill of sale              
          assets was $65,000,000.  Accordingly, we find that UtilCo                   



          1    Where assets are purchased and the fair market value of                
          assets other than goodwill or going concern value equals or                 
          exceeds the purchase price, goodwill or going concern value is              
          not generally attributable to the purchase price.  See, e.g.,               
          UFE, Inc. v. Commissioner, 92 T.C. 1314, 1328 (1989); Citizens &            
          Southern Corp. v. Commissioner, 91 T.C. 463, 511-512 (1988),                
          affd. 919 F.2d 1492 (11th Cir. 1990).  Sec. 1060 provides special           
          allocation rules for certain asset acquisitions.  Under the                 
          residual method described in sec. 1.1060-1T(d), Temporary Income            
          Tax Regs., 53 Fed. Reg. 27040 (July 18, 1988), consideration is             
          first allocated among cash and other items, including both                  
          tangible and intangible property (but not intangibles in the                
          nature of goodwill and going concern value), before being                   
          allocated to goodwill and going concern value.                              




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