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Petitioner conducted studies to determine the useful life of
a new RIC based solely on the estimated duration of the initial
investments in a new RIC from customers who invested during the
first 6 months of the existence of the RIC. Petitioner argues
that the reason a 6-month time period was selected for this study
is that during the taxable years in issue, current performance
information about a new mutual fund was not available for the
first 6 months after a new RIC's introduction. Thus, petitioner
posits, any investors who decided to invest in a new mutual fund
during the first 6 months after its introduction would
necessarily have based their decision on factors other than
current performance. In petitioner's view, these are the only
investors that conceivably could be attributed to the actions
undertaken by petitioner during the period prior to the launch
date of a new RIC.
Petitioner provides no support for its assumption that the
benefits of the expenditures it incurred were limited solely to
initial investors.21 In fact, we have found that the benefits
received from the RIC launching costs were significant and long
lasting and certainly not limited to initial investments.
21Petitioner submitted the expert report of Fred C.
Lindgren, an actuary with Coopers & Lybrand L.L.P. Although Mr.
Lindgren's report set forth in great detail the methodology and
statistics used to determine the average useful life of these
initial investments, he relied upon petitioner's request to focus
on investments made in the first 6 months rather than his own
independent analysis.
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