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RIC, has no market value unless and until investors place funds
in the RIC.8
Respondent contends that the expenditures served to create
82 separate and distinct mutual funds and allowed petitioner to
obtain ownership in, and control over, those mutual funds through
the execution of separate management contracts with each.
Respondent claims that the control, or right, represented by each
management contract represents a separate and distinct asset for
petitioner.
In examining the case law on this issue, we fail to find any
controlling definition of the term "separate and distinct
asset".9 Some courts have indicated that the existence of a
8Petitioner also argues that only a small portion of the
costs at issue relates to the actual drafting of the management
contracts, the expenditures are not refundable, and the
expenditures were not incurred in connection with the purchase of
an intangible asset.
9Respondent presented the expert testimony of R. Glenn
Hubbard, a professor in economics and finance. The main thrust
of Professor Hubbard's testimony is directed at the issue of
future benefit, rather than the identification of a separate and
distinct asset. Professor Hubbard states: "Economic analysis
indicates simply that a capital asset is one which produces
income and creates value beyond the period in which its cost is
incurred. Economically, identifying a separate and distinct
asset created by these expenditures is not required."
Nevertheless, Professor Hubbard opined that "In this case, mutual
fund management contracts are, of course, identifiable assets."
According to Professor Hubbard's economic analysis, there seems
to be no distinction between future benefit and the existence of
an asset. Although we do not necessarily disagree with Professor
Hubbard's statements as they relate to economics, his
determination of the existence of "separate and distinct assets"
is arguably inconsistent with the analysis contained in certain
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