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acquired Rose customer accounts was $12,951,000, which was
adjusted to $12,587,000 as an allocation of tax basis under
section 338.
Deloitte allocated the value of Rose’s institutional
customers, which represented a small portion of Rose’s total
customers (in actual numbers and revenue), between the intangible
assets denominated “Chase Vendor Agreements” and “Chase Priority
Marketing Access Agreement”. The vendor and marketing agreements
were valued at $592,000 and $690,000, respectively, and were
assigned a tax basis of $575,000 and $671,000, respectively.
On April 30, 1989, Rose was merged into petitioner, and by
June 30, 1989, petitioner had withdrawn Rose’s trade name from
use. By that same time, petitioner had closed all Rose’s offices
and sold Rose’s furniture and fixtures. Approximately 25 of the
107 Rose employees continued their employment with petitioner,
and the others either refused offers or were terminated after the
acquisition. Former Rose brokers who stayed on with petitioner
were required to service any retained Rose customers under
petitioner’s service policies. For example, it was Rose’s policy
to have a specific broker service a particular customer, whereas
under petitioner’s approach, customer representatives did not
typically have specific customers.
In determining the price to offer or pay for Rose,
petitioner used comparable sales and discounted cashflow
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