- 14 -
outstanding corporate liabilities assumed by the shareholders, if
any. Here, the loans payable to the shareholders totaled $96,678
as of June 30, 1992.4
We have recognized that goodwill is a vendible asset which
can be sold with a professional practice. LaRue v. Commissioner,
37 T.C. 39, 44 (1961); Watson v. Commissioner, 35 T.C. 203, 209
(1960). Goodwill is often defined as the expectation of
continued patronage. Newark Morning Ledger Co. v. United States,
507 U.S. 546 (1993). In Rudd v. Commissioner, 79 T.C. 225, 238
(1982), we stated:
The goodwill of a public accounting firm can
generally be described as the intangibles that attract
new clients and induce existing clients to continue
using the firm. These intangibles may include an
established firm name, a general or specific location
of the firm, client files and workpapers (including
correspondence, audit information, financial
statements, tax returns, etc.), a reputation for
general or specialized services, an ongoing working
relationship between the firm's personnel and clients,
or accounting, auditing, and tax systems used by the
firm. * * *
3(...continued)
calculated on a per-share basis. The parties have stipulated the
shareholders' bases in the corporation's stock, which are used
for purposes of calculating the shareholder gain on the
distribution.
4It is not clear from the record whether respondent allowed
any reduction for liabilities assumed by the shareholders in
making his determination.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011