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In Newark,15 the Government’s principal argument was that
the intangible asset (list of paying subscribers) was
indistinguishable from goodwill and hence not amortizable. The
Supreme Court noted that the Government’s argument was based on
the premise that goodwill was not amortizable because it has “no
determinate useful life of specific duration.” Newark Morning
Ledger Co. v. United States, supra at 564-565. The Supreme Court
further noted that the Government’s justification for denying the
amortization of goodwill evaporates “when the taxpayer
demonstrates that the asset in question wastes over an
ascertainable period of time”, as it did in Newark. Id. at 565.
In holding that a customer list could be established as a
depreciable asset and thereby distinguished from goodwill, the
Supreme Court observed that the burden of doing so might be
substantial. Id. at 566-567. On the basis of the Supreme
Court’s observation, respondent contends that the burden of proof
15 Before the holding in Newark Morning Ledger Co. v. United
States, supra, the Government had generally taken the position,
as a matter of law, that many intangibles were part of goodwill.
In Newark, the Supreme Court identified several customer-based
intangibles which had been the subject of prior controversy,
including “customer lists, insurance expirations, subscriber
lists, bank deposits, cleaning service accounts, drugstore
prescription files, and any other identifiable asset the value of
which obviously depends on the continued and voluntary patronage
of customers.” Id. at 557. The Supreme Court did not list
brokerage accounts as one of the intangibles that had been in
controversy; however, respondent has agreed that they “appear to
be in the category of identifiable assets whose value depends on
continued patronage of customers.”
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