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Petitioner relies on J. Henry Knoblick of Deloitte, who had
prepared the 1990 valuation analysis of goodwill petitioner
relied on to make allocations of the $181,376,869 MADSP.
Respondent relies upon Lee B. Shepard of Houlihan Lokey Howard &
Zukin, who prepared a report 10 years later (on May 2, 2000) in
anticipation of this litigation. Each report contains an opinion
regarding the March 31, 1989, values of Rose’s assets and the
useful lives, if any, of Rose’s customer accounts. Both of the
expert’s reports contain values with respect to the Rose customer
accounts; however, respondent’s expert concluded that the useful
lives of pension accounts could not be determined and,
accordingly, those accounts would not be amortizable.
Conversely, on the basis of petitioner’s experiences with each
type of discount brokerage customer, Mr. Knoblick arrived at a
useful life for each category of customer account acquired by
petitioner.
The following chart compares the variations in the experts’
opinions as to the fair market values17 and useful lives to be
17 In the comparative chart, petitioner’s values are
reallocated from the $181,376,869 Modified Aggregate Deemed Sales
Price (MADSP) under the sec. 338 election. Petitioner’s values
and resulting allocations did not result in any residual amount
of goodwill. On the other hand, respondent’s expert’s fair
market values, if found to be correct, would represent the
maximum amount that petitioner would be able to allocate under
sec. 338. Because the values respondent reached are
approximately $35 million less than the $181,376,869 MADSP, the
result under respondent’s approach would be $35 million in
(continued...)
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