William Norwalk, Transferee, et al. - Page 14

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          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.  * * *                                                           

          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                     
               4It is not clear from the record whether respondent allowed            
          any reduction for liabilities assumed by the shareholders in                
          making his determination.                                                   

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