- 47 -
Although respondent asserts that some value should be
attributed to goodwill, patents, and other intangibles not shown
on G�nther's balance sheet, in our view the evidence showed that
G�nther had destroyed its goodwill with ongoing quality problems
and that its patents had little or no value. We find nothing in
the record to indicate that these assets had significant value,
and much to indicate that they did not.
Respondent also argues that petitioner aggressively wrote
down the values of G�nther’s assets to support its claims of
worthlessness and that use of discontinued operations treatment
was improper. Respondent urges us to rely instead on G�nther’s
German commercial report for its FYE April 30, 1992, which was
prepared on a going concern basis.
Petitioner responds that the writedowns jeopardized its own
banking and surety relationships and thus threatened the
existence of the parent company. Consequently, petitioner
contends that it had a strong disincentive to overstate any
writedowns. Petitioner further contends that its treatment of
G�nther as a discontinued operation was appropriate and that the
resulting adjustment in the value of G�nther’s assets confirmed
management’s evaluation of the fair market value of those assets.
Petitioner also argues that it was required to use U.S. GAAP by
section 446(a) which states that a taxpayer shall compute taxable
income “under the method of accounting on the basis of which the
taxpayer regularly computes his income in keeping his books.”
Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 NextLast modified: May 25, 2011