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P, a discount stock brokerage, purchased all of
the stock of a smaller discount stock brokerage and
elected to allocate the purchase price amongst the
assets of the acquired brokerage. P valued the
customer accounts acquired in the stock purchase and
amortized them. R contends that P’s acquired discount
brokerage customer accounts are not amortizable because
of differences from the customers/subscribers for which
the Supreme Court permitted amortization in Newark
Morning Ledger Co. v. United States, 507 U.S. 546, 566
(1993). R further contends that P has overvalued the
customer accounts and that, in some instances, the
useful lives of the accounts may not be determinable.
Held: Sec. 461(d), I.R.C., interpreted--P is not
entitled to accelerate California franchise tax
deductions for the years under consideration.
Held, further, P’s discount brokerage customer
accounts may be amortized and are not necessarily
distinguishable from the subscriber accounts considered
in Newark Morning Ledger Co.
Held, further, P has shown the value and useful
life of the acquired customer accounts and is entitled
to amortize them.
Glenn A. Smith, Erin M. Collins, Laurence J. Bardoff, and
Patricia J. Galvin, for petitioner.
Rebecca T. Hill, for respondent.
GERBER, Judge: Respondent, in these consolidated cases,1
determined deficiencies in petitioner’s2 1989, 1990, 1991, and
1 These cases have been consolidated for purposes of trial,
briefing, and opinion. Docket No. 16903-98 pertains to
petitioner’s 1989, 1990, and 1991 tax years, and docket No.
18095-98 pertains to petitioner’s 1992 tax year.
2 The use of “petitioner” relates to the three entities that
make up the consolidated group.
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