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banks expect to retain for extensive lengths of time.”
Respondent contends that “Petitioner has nothing comparable to a
core group of depositors who, through their inertia and their
focus on savings accumulation instead of market-based returns,
are willing to leave funds on deposit at below-market rates for
extended periods of time.”
We agree with respondent that deposit base involves what we
might term a “customer-based intangible”. See, e.g., sec.
197(d)(2)(B). However, we cannot agree that this effectively
distinguishes the above cases. Indeed, the customer
relationships in the cases involving core deposits formed the
basis for the Commissioner’s objections to the taxpayer’s
amortization deductions for deposit base. However, apart from a
customer-based relationship, deposit base, like the favorable
financing in the instant cases, involves a debtor-creditor
relationship. Also, like petitioner’s favorable financing, core
deposits represent a relatively low-cost source of funds, see
Citizens & S. Corp. v. Commissioner, 91 T.C. at 465, which carry
below-market interest rates, and which support the obligor’s
financing of its profit-making activities. Also, in the same
manner that an acquirer of a bank with an established deposit
base would pay a premium for deposit base of the target bank, we
believe that the hypothetical buyer would pay a premium for the
acquisition of a company with below-market indebtedness.
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