The Charles Schwab Corporation and Subsidiaries - Page 2

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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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