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impacted by what is referred to as “human elements”. These human
elements associated with petitioner’s group contracts created a
significant element of unpredictability with regard to the useful
life of petitioner’s group contracts.
Various courts have commented on the difficulties presented
when such human elements are associated with the valuation of
intangible assets. In Ithaca Indus., Inc. v. Commissioner, 17
F.3d at 689-690, the Court of Appeals for the Fourth Circuit
concluded that the taxpayer was not allowed to amortize the value
of its employee workforce due in large part to the human elements
associated with employee behavior.
In Globe Life & Accident Ins. Co. v. United States, 54 Fed.
Cl. 132 (2002), the Court of Federal Claims held that the claimed
value of a group of insurance agents was not subject to
amortization due to the many variables involved in attempting to
determine the useful life of an intangible asset that is directly
tied to human relations. Id. at 139.
Petitioner’s expert did not adequately take into account
these human elements. Indeed, there is not a single clear
reference in his valuation report relating to the human elements
to be taken into account in the valuation of petitioner’s health
insurance group contracts. One vague reference thereto comments
simply that “It is not possible to predict when any particular
group contract will lapse.”
By valuing all 23,526 of petitioner’s group contracts based
on a useful life of 20 years, petitioner’s expert implicitly
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