Illinois Tool Works, Inc. & Subsidiaries - Page 14

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               Because we believe that David R. Webb Co. is the controlling           
          authority in this case, we need not decide the dispute between              
          the parties over the status of Pac. Transp. Co. v. Commissioner,            
          supra.  We note, however, that the Court of Appeals, in reversing           
          our decision, relied on two Supreme Court cases, Woodward v.                
          Commissioner, 397 U.S. 572 (1970), and United States v. Hilton              
          Hotels, 397 U.S. 580 (1970), decided after our Memorandum Opinion           
          was released.                                                               
               In settling on a final price for the DeVilbiss industrial              
          and commercial assets, the possibility of incurring a liability             
          on the patent infringement claim in the Lemelson lawsuit was                
          considered by both petitioner and DeVilbiss.  DeVilbiss, as                 
          seller, disclosed the patent infringement claim that arose from             
          its activities to petitioner during the due diligence period.               
          Petitioner, as buyer, was aware of the Lemelson lawsuit and                 
          expressly assumed the contingent liability as part of the                   
          acquisition agreement.  Both petitioner and DeVilbiss                       
          contemplated the possible exposure that might result from the               
          Lemelson lawsuit and sought the opinion of their corporate                  
          officers.  Although the liability did not affect the negotiations           
          or the final established purchase price, the assumed liability of           
          the Lemelson lawsuit transferred to petitioner pursuant to the              
          purchase agreement.                                                         

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