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appraisal, petitioner allocated approximately $12,587,000 to the
Rose customer accounts it acquired through the stock purchase
from Chase.
Deloitte’s $12,587,000 value for the Rose accounts for
section 338 tax basis purposes comprised the following:
Customer Accounts Amount
Cash brokerage $4,014
Margin brokerage 6,522
Pension 2,051
Total customer accounts 12,587
In valuing the Rose accounts, Deloitte compared Rose’s customer
account categories with those of petitioner and determined, with
one exception, that both companies used similar categories to
differentiate their customers. In addition to cash, margin, and
pension accounts, Rose also had a category for “Institutional”
customers.
Deloitte’s first step was to analyze Rose’s annual (12-
month) income for each of the four types of accounts for the
period ended March 31, 1989. Next, the useful lives of the
accounts were determined on the basis of petitioner’s actual
experience. Petitioner’s data was used because Rose’s data was
not available and it was expected that petitioner’s data would be
more accurate since the Rose customers were to be part of
petitioner’s business environment.
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Last modified: May 25, 2011