NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being
done in connection with this case, at the time the opinion is issued.  The
syllabus constitutes no part of the opinion of the Court but has been prepared
by the Reporter of Decisions for the convenience of the reader.  See United
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States v. Detroit Lumber Co., 200 U. S. 321, 337.
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                       SUPREME COURT OF THE UNITED STATES

                                    Syllabus

   NEWARK MORNING LEDGER CO., AS SUCCESSOR TO THE HERALD CO. v. UNITED STATES
                                                            ____

     CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

        No. 91-1135.   Argued November 10, 1992 - Decided April 20, 1993

Petitioner newspaper publisher is the successor to The Herald Company.  When, in
 1976, Herald purchased substantially all the outstanding shares of Booth
 Newspapers, Inc., it allocated its adjusted income tax basis in the Booth
 shares among the assets it acquired in its merger with Booth.  Among other
 things, it allocated $67.8 million to an intangible asset denominated ``paid
 subscribers,'' a figure that was petitioner's estimate of future profits to be
 derived from identified subscribers to Booth's eight newspapers on the date of
 merger.  On its federal income tax returns for 1977-1980, Herald claimed
 depreciation deductions for the $67.8 million, which were disallowed by the
 Internal Revenue Service (IRS) on the ground that the concept of ``paid
 subscribers'' was indistinguishable from goodwill and, therefore, was
 nondepreciable.  Herald paid the taxes, and petitioner filed refund claims and
 ultimately brought suit in the District Court to recover taxes and interest
 paid.  At trial, the Government did not contest petitioner's expert evidence
 on the methodology used to calculate its figure and stipulated to the useful
 life of ``paid subscribers'' for each newspaper.  Instead, it estimated the
 asset's value at $3 million, the cost of generating new subscriptions, and its
 principal argument remained that the asset was indistinguishable from
 goodwill.  The court ruled in petitioner's favor, finding that the asset was
 not self-regenerating - i.e., it had a limited useful life, the duration of
                         _____
 which could be calculated with reasonable accuracy - that petitioner properly
 calculated its value, and that it was separate and distinct from goodwill. 
 The Court of Appeals reversed, holding that even though the asset may have a
 limited useful life that can be ascertained with reasonable accuracy,

                                                                    I           

II                 NEWARK MORNING LEDGER CO. v. UNITED STATES
                                            ____

                                    Syllabus

 its value is not separate and distinct from goodwill.

Held:
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   1.  A taxpayer able to prove that a particular asset can be valued and that
 it has a limited useful life may depreciate its value over its useful life
 regardless of how much the asset appears to reflect the expectancy of
 continued patronage.  Pp. 6-19.
    (a)  While the depreciation allowance of S167(a) of the Internal Revenue
 Code applies to intangible assets, the IRS has consistently taken the position
 that goodwill is nondepreciable.  Since the value of customer-based
 intangibles, such as customer and subscriber lists, obviously depends on
 continued and voluntary customer patronage, the question has been whether
 these intangibles can be depreciated notwithstanding their relationship to
 such patronage.  The ``mass asset'' rule that courts often resort to in
 considering this question prohibits depreciation when the assets constitute
 self-regenerating assets that may change but never waste.  Pp. 6-13.
    (b) Whether or not taxpayers have been successful in separating depreciable
 intangible assets from goodwill in any particular case is a question of fact. 
 The question is not whether an asset falls within the core of the concept of
 goodwill, but whether it is capable of being valued and whether that value
 diminishes over time.  Pp. 13-19.
   2.  Petitioner has borne successfully its substantial burden of proving that
 ``paid subscribers'' constitutes an intangible asset with an ascertainable
 value and a limited useful life, the duration of which can be ascertained with
 reasonable accuracy.  It has proved that the asset is not self-regenerating
 but rather wastes as a finite number of component subscriptions are canceled
 over a reasonably predictable period of time.  The Government presented no
 evidence to refute the methodology petitioner used to estimate the asset's
 fair market value, and the uncontroverted evidence presented at trial revealed
 that ``paid subscribers'' had substantial value over and above that of a mere
 list of customers, as it was mistakenly characterized by the Government. 
 Pp. 20-24.

945 F. 2d 555, reversed and remanded.

 BLACKMUN, J., delivered the opinion of the Court, in which STEVENS, O'CONNOR,
KENNEDY, and THOMAS, JJ., joined.  SOUTER, J., filed a dissenting opinion, in
which REHNQUIST, C. J., and WHITE and SCALIA, JJ., joined.