From: cp2w+@andrew.cmu.edu (Conrad Poelman)
Newsgroups: alt.politics.elections
Subject: Fwd: High Court - Subscriber Lists -2-: Appeal By Morning Ledger
Date: 6 Apr 92 14:48:01 GMT
Organization: Doctoral student, Computer Science, Carnegie Mellon, Pittsburgh, PA

Just to add some fuel to the debate about simplifying the tax code - I
wonder how much money the lawyers are earning on this case...

--Conrad

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          Mon,  6 Apr 1992 10:23:34 -0400 (EDT)
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From: DowJones@andrew.cmu.edu
To: bb+dow-jones@andrew.cmu.edu
Subject: High Court - Subscriber Lists -2-: Appeal By Morning Ledger
Date: Mon,  6 Apr 1992 10:23:34 -0400 (EDT)

  

  WASHINGTON -DJ- The Supreme Court agreed to decide whether a newspaper
publisher may depreciate the value of a subscriber list and therefore
take tax deductions based on the depreciation.   

  The justices said they would consider an appeal by Newark Morning Ledger
Co. of a ruling by the federal appeals court in Philadelphia that such
depreciation isn't allowed.  A unit of the Newhouse family's Advance
Publications Inc., Morning Ledger publishes the Newark Star Ledger. 
 

  The case has potential ramifications far beyond the publishing field.
 Companies in numerous industries seek deductions woth billions of dollars
annually based on the presumed depreciability of intangible assets such
as subscriber or customer lists.  In its petition seeking Supreme Court
review, Morning Ledger said that the lower court's decision cast doubt
on the depreciability of more than $10.5 billion of such assets as bank-deposi-
tor lists and information on customers of insurance, financial-services
and retail firms.   

  Although the Justice Department said the lower court had resolved the
issue correctly, the agency filed a brief conceding that the depreciation
issue was important and had produced conflicting decisions from federal
appeals courts.  These inconsistencies mean that the law on depreciation
now varies, depending on what part of the country a company is in.  The
Supreme Court presumably agreed to decide the case to establish a single
national rule.   

  The federal Tax Code permits deductions based on the amounts that certain
assets decline in value each year.  Some intangible assets that diminish
by a measurable amount may be depreciated for tax purposes.  A company's
''goodwill,'' in contrast, isn't depreciable because it has an indefinite
life.   

   The case the high court agreed to hear has its origins in the acquisition
by Morning Ledger Co.'s predecessor company of a Michigan newspaper publishing
firm.  Of the $314 million total value of the purchase, $67 million was
allocated to the paid-subscriber lists of the Michigan publisher.  Beginning
in 1977, Morning Ledger Co.'s predecessor company claimed depreciation
deductions on the value of the paid subscribers.   

  The Internal Revenue Service denied the claims, asserting that the
paid subscribers were part of the goodwill of the acquired publisher
and weren't depreciable.  Morning Ledger later filed a lawsuit seeking
refunds for millions of dollars in taxes paid from 1977 through 1980.
 A federal judge ruled that paid-subscriber list was depreciable because
the customers could be identified and ''their value...measured with a
fair degree of accuracy.''   

  The appeals court reversed that decision last year, stressing that
as an asset contributing to continued patronage, the subscriber list
was similar to nondepreciable goodwill.  The appeals court emphasized
that the subscribers could stop buying papers at any time, making their
value uncertain.  The Philadelphia appeals court acknowledged that other
federal appeals courts have ruled that such customer lists are depreciable.
  

  10:25 AM