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P calculated the fair market value of its
favorable financing intangible assets to be
$428,391,551 using the market approach; the market
approach compared the adjusted issue prices of P’s debt
instruments to their market prices on Jan. 1, 1985. P
calculated the limited useful lives of its 30 debt
instruments to be their average weighted lives. R
argues that P’s favorable financing had no value and
was not an asset. R also argues that P did not
properly adjust for the volatility of the market in
determining the useful lives.
Held: P may amortize its favorable financing
intangible assets because it reasonably estimated the
fair market value of its favorable financing to be
$428,391,551 and reasonably estimated the remaining
limited useful lives.
Robert A. Rudnick, B. John Williams, Jr., James F. Warren,
Alan J.J. Swirski, and Richard J. Gagnon, Jr., for petitioner.
Gary D. Kallevang, John A. Guarnieri, Ruth M. Spadaro, and
Charles E. Buxbaum, for respondent.
CONTENTS
MEMORANDUM FINDINGS OF FACT AND OPINION ............ 3
FINDINGS OF FACT ....................... 5
I. Favorable Financing Intangible Assets .......... 6
A. Ginnie Mae Bonds .................. 7
B. Notes Issued to Federal Home Loan Banks ....... 7
C. Debenture ...................... 7
D. Note Payable to North Dakota Bank .......... 8
E. Capital Debentures ................. 8
F. Zero Coupon Bonds .................. 8
G. Collateralized Mortgage Obligations (CMOs) ..... 8
H. Guaranteed Mortgage Certificates (GMCs) ...... 10
II. Average Weighted Lives of the Debt Instruments ..... 15
III. Tax Returns ...................... 17
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