Federal Home Loan Mortgage Corporation - Page 16

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          acquired in a purchase of a number of banks.  The taxpayer sought           
          to amortize the present value of the income that it expected to             
          derive from the use of the core deposits which it had acquired in           
          those transactions.  The Commissioner argued that deposit base              
          was not a separate and distinct asset from the goodwill of the              
          acquired banks since deposit base involved terminable-at-will               
          customer relationships.  We held that deposit base represents an            
          intangible asset subject to amortization under section 1.167(a)-            
          3, Income Tax Regs., where a taxpayer can prove that core                   
          deposits have an ascertainable value separate and distinct from             
          the goodwill and going-concern value of the bank acquired:                  
                    The evidence in the instant case establishes that                 
               the acquisition of core deposits was the primary reason                
               petitioner purchased the Acquired Banks and that                       
               petitioner paid a premium in order to obtain the core                  
               deposits.  In Banc One Corp. v. Commissioner, * * * [84                
               T.C. 476, 490 (1985)], we stated that “Often the                       
               assumption of the deposit liabilities, rather than the                 
               purchase of the assets, represents the economic purpose                
               behind the acquisition of a bank.”  These core deposits                
               are a low-cost source of funds and are an important                    
               factor contributing to the profitability of a                          
               commercial bank.  Moreover, the economic value                         
               attributable to the opportunity to invest the core                     
               deposits can be valued.  The value is based solely upon                
               the core deposits acquired in the purchase. * * *   The                
               value of deposit base rests upon the ascertainable                     
               probability that inertia will cause depositors to leave                
               their funds on deposit for predictable periods of time.                
               * * *  [Id. at 498-500; fn. ref. omitted.]                             
          We have reiterated that holding in a number of cases following              
          our holding in Citizens & S. Corp.  See, e.g., IT&S of Iowa, Inc.           
          v. Commissioner, supra; First Chicago Corp. v. Commissioner, T.C.           






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