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“indivisible asset” rule, as a matter of law, prevents
depreciation deductions for customer-based intangible assets
where such assets are linked to goodwill and where the intangible
assets possess some of the same qualities as goodwill. Id. at
1249-1250.
The Court of Appeals, however, provided general guidance as
to the burden of proof where tax deductions relating to
intangible assets are claimed:
we are convinced that the “mass asset” rule does not
prevent taking an amortization deduction if the
taxpayer properly carries his dual burden of proving
that the intangible asset involved (1) has an
ascertainable value separate and distinct from
goodwill, and (2) has a limited useful life, the
duration of which can be ascertained with reasonable
accuracy. [Id. at 1250.]
In Newark Morning Ledger Co. v. United States, 507 U.S. 546
(1993), with its purchase of a commercial newspaper, a taxpayer
acquired subscriber contracts. The Supreme Court, before
deciding whether the taxpayer could depreciate the value assigned
to the subscriber contracts, explained the mass asset or
indivisible asset rule and why certain customer-based
intangibles, as a factual matter, may be nondepreciable
thereunder, as follows:
When considering whether a particular customer-
based intangible asset may be depreciated, courts often
have turned to a “mass asset” or “indivisible asset”
rule. The rule provides that certain kinds of
intangible assets are properly grouped and considered
as a single entity; even though the individual
components of the asset may expire or terminate over
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