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purchase of an ongoing general insurance agency. The taxpayer
argued that the group of insurance accounts constituted separate
assets with respect to which loss deductions under section 165
should be allowed as the accounts were terminated in amounts
equal to the alleged cost of the accounts. Id. at 1354. The
court concluded that because the taxpayer failed to make an
adequate factual showing that it had valued each customer account
separately, no loss deductions were allowable on termination of
the separate contracts. Id. at 1355.
In affirming the District Court’s decision, the Court of
Appeals for the Ninth Circuit in Ralph W. Fullerton Co. v. United
States, 550 F.2d 548 (9th Cir. 1977), concluded that the formula
used by the taxpayer was designed to value the aggregate and was
inadequate to value separate accounts. The court stated as
follows:
valuation of customer accounts by resort to a formula
applied indiscriminately to all accounts does not
sufficiently establish the portion of the purchase
price allocable to the individual accounts so as to
avoid application of the mass asset rule. Indeed,
resort to a formula * * * [is] an indication that the
individual value of the accounts cannot satisfactorily
be ascertained. * * * [Id. at 550 (citing Sunset Fuel
Co. v. United States, supra).]
As indicated, supra, recently in Trigon Ins. Co. v. United
States, 215 F. Supp. 2d 687, 720 (E.D. Va. 2002), claimed losses
relating to health insurance group contracts similar to those
involved herein were not allowed because the taxpayer had not
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