Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 8

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          lives for the Paramount, MGM/UA, and MCEG relationships were                
          6.25, 6.33, and 6.08 years, respectively.  Beginning in 1989,               
          Technicolor claimed amortization deductions based on the values             
          C&L determined for the Paramount, MCEG, and MGM/UA relationships.           
          Petitioners, on their 1992 tax return, deducted the remaining               
          adjusted basis of the Paramount relationship.  Similarly, on                
          their 1993 tax return, petitioners deducted the remaining                   
          adjusted bases of the MGM/UA and MCEG relationships.                        
               D.   The Closing Agreement                                             
               During the examination of petitioners’ 1988 through 1992               
          returns, respondent challenged the bases and lives ascribed to              
          the relationships.  The parties resolved the valuation dispute              
          under the Intangibles Settlement Initiative Program.  In a                  
          closing agreement (i.e., executed on September 16, 1994, by                 
          petitioners and April 29, 1997, by respondent) the parties agreed           
          to reduce the bases of the relationships by 15 percent with no              
          adjustment to the remaining lives as determined in the 1989                 
          Valuation.  In addition, the parties agreed that the basis                  
          amounts allocated to the class IV nonamortizable intangible                 
          assets would be increased by $36,458,000.                                   
               E.   The 1994 Goodwill Valuation                                       
               In a letter dated September 30, 1994 (1994 Valuation), C&L             
          determined the value of film customer relationships acquired in             
          the purchase of Technicolor.  In preparing the 1994 Valuation,              






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