- 33 -
In addition to the adjustment necessary for the discount
rate, we are not persuaded that other assumptions made in the BVS
cash-flow analysis are warranted. The BVS analysis incorporates
an amount, by way of an add-back item, for amortization of
intangibles. The report assumes that a purchaser of the 56.7-
percent share holding would be allowed to make a section 338
election and, as a consequence, would be able to amortize the
franchise agreement under section 1253. There are a variety of
reasons we find this assumption unwarranted, the most compelling
of which is that a purchaser of 56.7 percent of a company would
not make a “qualified stock purchase”22 as required by section
338, and therefore the postulated election would not be
22 Sec. 338(d)(3) provides:
(3) Qualified stock purchase.--The term “qualified
stock purchase” means any transaction or series of
transactions in which stock (meeting the requirements
of section 1504(a)(2)) of 1 corporation is acquired by
another corporation by purchase during the 12-month
acquisition period.
Sec. 1504(a)(2) provides:
(2) 80-percent voting and value test.--The
ownership of stock of any corporation meets the
requirements of this paragraph if it–-
(A) possesses at least 80 percent of the
total voting power of the stock of such
corporation, and
(B) has a value equal to at least 80 percent
of the total value of the stock of such
corporation.
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