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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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