Academic journal article Journal of Accountancy

Newark Morning Ledger: A Clear but Narrow Victory

Academic journal article Journal of Accountancy

Newark Morning Ledger: A Clear but Narrow Victory

Article excerpt

The U.S. Supreme Court decision in Newark Morning Ledger (4/20/93), while a clear victory for taxpayers seeking to amortize "customer-based" intangibles (CBIs), does little to clear up the confusion that consistently has surrounded this area. (For background on this case, see Tax Briefs, JofA, Apr.93, page 24).

The Court concluded CBIs are not, as a matter of law, inseparable from goodwill even though their value is related to the expectancy of continued customer patronage. The Court reaffirmed the notion CBIs are depreciable if the taxpayer can prove they have an ascertainable value separate from goodwill and limited useful lives the length of which can be ascertained with reasonable accuracy.

The Court rejected the premise of the Third Circuit's decision (945 F. 2d 562, 3d Cir., 1991), which had concluded that, in the context of a going concern's sale, it is simply too difficult to separate the customer list's value from the goodwill value of the customer structure or customer relationships.

In this case, the taxpayer was able to sustain its "heavy" burden of proof regarding the values and duration of CBIs. …

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