- 27 -
Based upon the above computations, Mr. Meade concludes
that the useful life of the client list in petitioner's
business must be at least 15 years in order to permit
petitioner to realize an amount, $265,341.95, that
approximates the gross sales of the business in 1986, the
year prior to the subject transaction, in the amount of
$267,000. Mr. Meade described this amount during his
testimony as "the historical economic value of the prac-
tice". Thus, Mr. Meade equates the gross receipts from the
subject accounting business for 1 year with the "economic
value" of the business to the owner. It is not evident to
us why a hypothetical buyer would enter into the trans-
action only if the buyer netted approximately $267,000.
Allocation Between Client List and Going Concern
In UFE, Inc. v. Commissioner, 92 T.C. 1314, 1323
(1989), we described going-concern value as follows:
Going-concern value is an intangible,
nonamortizable capital asset that is often
considered to be part of goodwill. Goodwill
has been defined as the "expectancy of both
continuous excess earning capacity and also of
competitive advantage or continued patronage."
Wilmot Fleming Engineering Co. v. Commissioner,
65 T.C. 847, 861 (1976). (Emphasis added.) On
the other hand, going-concern value has also
been described as related less to the business
reputation and the strength of customer loyalty,
than to the operating relationship of assets
and personnel inherent in an ongoing business.
Going-concern value has been defined as "the
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011