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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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