The Charles Schwab Corporation and Subsidiaries - Page 38

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          $146,280,000 results in a residual of approximately $35 million,            
          which would be classified as goodwill and therefore be                      
          unamortizable.                                                              
               Concerning the intangible asset valuation, a difference of             
          approximately $10 million exists between respondent’s expert’s              
          value of $4,775,000 and petitioner’s expert’s value of                      
          $14,494,000.  A substantial portion of that difference is                   
          attributable to the experts’ valuations of the customer accounts.           
          Respondent’s expert valued the aggregate of the customer accounts           
          at $2,350,000, whereas petitioner’s expert’s value was                      
          $12,587,000.  Accordingly, in our consideration of the value of             
          the intangibles, our primary focus is upon the acquired customer            
          accounts.                                                                   
               2.  Valuation of Customer Accounts                                     
               Under a section 338 election, the cost of the Rose shares              
          allocated to an individual asset may not exceed the fair market             
          value of the asset.  Respondent contends that petitioner’s expert           
          did not use the standard for fair market value set forth in                 
          section 1.170A-1(c)(2), Income Tax Regs., and section 20.2031-              
          1(b), Estate Tax Regs., to wit:  The price at which the property            
          would change hands between a willing buyer and a willing seller,            
          neither being under any compulsion to buy or sell and both having           









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Last modified: May 25, 2011