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asset. Once the allocations have been made to the various
categories of tangible assets, the remainder of the MADSP, if
any, is then allocated to certain intangible assets, other than
goodwill. Finally, any remaining portion of the MADSP is
residually allocated to goodwill, a nonamortizable intangible
asset.
Just after the 1989 Rose acquisition, Deloitte prepared an
appraisal of the fair market values of the Rose assets. After
calculating the $181,376,869 MADSP and allocating amounts to the
tangible assets, Deloitte allocated a $12,587,000 value to the
Rose customer accounts petitioner acquired by purchase of Rose’s
stock from Chase. The $181,376,869 MADSP comprised petitioner’s
cash payment ($34,122,661), petitioner’s assumption of Rose’s
liabilities ($146,279,570), and petitioner’s acquisition costs
($974,638).
B. Are the Acquired Rose Discount Brokerage Customer
Accounts Amortizable?
Section 167 provides for depreciation of property used in a
trade or business or held for the production of income. Section
1.167(a)-3, Income Tax Regs., interprets section 167 with respect
to the depreciation of intangible assets in the following manner:
If an intangible asset is known from experience or
other factors to be of use in the business or in the
production of income for only a limited period, the
length of which can be estimated with reasonable
accuracy, such an intangible asset may be the subject
of a depreciation allowance. * * * No allowance will be
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