- 31 -
significance only in a larger context, but that does not prevent
giving them a separate value. See Fed. Home Loan Mortgage Corp.
v. Commissioner, 121 T.C. at 266-267, where we stated:
We also cannot distinguish the cases involving
deposit base for the reason that those cases involved
an acquisition of deposit base in conjunction with a
larger acquisition of assets of a company. We might
agree that, as a practical matter, a debtor’s position
with respect to its favorable financing would not be
transferred, except as a part of a larger acquisition
of a company or property. However, this is not, in our
view, determinative of the question of whether there
exists an amortizable asset of value. * * *
3. Contra-Liability Theory
Respondent argues that petitioner’s favorable financing is a
contra-liability, not an asset. Respondent’s expert Dr. Hakala
explained that a contra-liability is a liability on the balance
sheet that is misstated in some economic sense because the
liability is worth less than face value and the liability has
been marked to market. Dr. Hakala further explained that
transferring the liability to the asset side of the balance sheet
13(...continued)
stable source of funds. Banks typically invest the
funds in loans or other income-producing assets, and
receive fees for services rendered to the depositors.
The excess of the income generated from the core
deposits over the associated expenses contributes to
the profitability of the bank. Core deposits are a
separate and distinct intangible asset with an inherent
value because they provide an inexpensive means to
generate income. Therefore, when one bank considers
acquiring another bank, core deposits can represent an
attractive intangible asset and a reason for acquiring
a bank. [Fn. ref. omitted.]
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