FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WASHINGTON MUTUAL INC., as
successor in interest to H.F.
Ahmanson & Co. and No. 09-36109
Subsidiaries,
Plaintiff-Appellant, D.C. No.
2:06-cv-01550-JCC
v. OPINION
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted
November 1, 2010—Seattle, Washington
Filed March 3, 2011
Before: Betty B. Fletcher, Ferdinand F. Fernandez, and
Jay S. Bybee, Circuit Judges.
Opinion by Judge B. Fletcher;
Concurrence by Judge Fernandez
3055
3058 WASHINGTON MUTUAL v. UNITED STATES
COUNSEL
Alan I. Horowitz, Steven R. Dixon, and Maria O’Toole Jones,
Miller & Chevalier, Chartered, Washington, D.C., Thomas D.
WASHINGTON MUTUAL v. UNITED STATES 3059
Johnston, Shearman & Sterling, Washington, D.C., for the
plaintiff-appellant.
Arthur Thomas Catterall, Henry C. Darmstadter, David N.
Geier, Teresa E. McLaughlin, and James E. Weaver, U.S.
Department of Justice, Washington, D.C., Helen J. Brunner,
Office of the U.S. Attorney, Seattle, Washington, for the
defendant-appellee.
OPINION
B. FLETCHER, Circuit Judge:
This is yet another case arising in the aftermath of the Gov-
ernment’s efforts to contain the savings and loan crisis of the
late 1970’s and the early 1980’s. In 1981, Home Savings of
America, FSB (“Home Savings”), agreed to acquire three fail-
ing savings and loan associations, or thrifts. In exchange, the
Federal Savings and Loan Insurance Corporation gave Home
Savings a generous package of incentives that included,
among other items, the right to maintain branches in other
states (the “branching rights”) and the right to use the pur-
chase method of accounting for regulatory capital reserve pur-
poses (the “RAP rights”) (together, “the Rights.”).
Washington Mutual, Inc. (“Washington Mutual”), as suc-
cessor in interest to Home Savings and its parent company,
H.F. Ahmanson & Co. (“Ahmanson”), filed amended tax
returns with the Internal Revenue Service (IRS), seeking
refunds for 1990, 1992, and 1993 based on the amortization
of the RAP rights and the abandonment of the branching
rights. After the IRS denied the claims, Washington Mutual
sued in district court. The district court ruled on summary
judgment that Home Savings did not have a cost basis or a
fair market value basis in the RAP rights and the branching
rights and rejected Washington Mutual’s amortization and
loss deduction-related refund requests.
3060 WASHINGTON MUTUAL v. UNITED STATES
Washington Mutual appeals. We hold that Home Savings
had a cost basis in the RAP rights and the branching rights
equal to some part of the excess of the three acquired thrifts’
liabilities over the value of their assets. In light of our ruling,
we do not address Washington Mutual’s alternative theory,
that Home Savings had a fair market value basis in the Rights
pursuant to 26 U.S.C. § 597 (Supp. V 1981) and 12 U.S.C.
§ 1729(f) (Supp. V 1981). Accordingly, we reverse and
remand.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Savings and Loan Crisis
The savings and loan crisis of the late 1970’s and early
1980’s has been chronicled in detail in United States v. Win-
star Corp., 518 U.S. 839 (1996).
The savings and loan, or thrift, industry is one of the busi-
nesses most highly regulated by the Government. 518 U.S. at
844. The modern regulatory regime emerged after the Great
Depression, when Congress created the Federal Home Loan
Bank Board (“the Bank Board”), vested with authority to
charter and regulate federal thrifts, and the Federal Savings
and Loan Insurance Corporation (“FSLIC”), under the Bank
Board’s authority, which was given responsibility to insure
thrift deposits and regulate all federally-insured thrifts. See id.
In the late 1970’s and early 1980’s, high interest rates and
inflation left many thrifts in distress. See id. at 845. Many
thrifts found themselves holding long-term, fixed-rate mort-
gages created when interest rates were low; when market rates
rose, the thrifts had to raise the rates they paid to depositors
in order to attract funds. See id. When the costs of short-term
deposits overtook the revenues from long-term mortgages,
hundreds of thrifts became insolvent. See id.
The crisis was exacerbated by initial efforts to resolve it,
especially by thrift deregulation, weakening the capital
WASHINGTON MUTUAL v. UNITED STATES 3061
reserve requirement, and replacing generally accepted
accounting principles with new “regulatory accounting princi-
ples” for the purpose of determining thrifts’ compliance with
their capital requirements. See id. at 845-46. Combined, these
measures encouraged expansion by thrifts into new and riskier
fields of investment without a corresponding increase in their
capital base, and, in many cases, resulting in weaker institu-
tions. See id.
While the regulators tried to mitigate the crisis generally
through deregulation, the liabilities of the numerous already-
failed thrifts threatened to exhaust FSLIC’s insurance
reserves. See id. at 846. To avoid further insurance liability,
the Bank Board decided to induce healthy financial institu-
tions to take over troubled thrifts in a series of “supervisory
mergers.” See id. at 847-48. Such transactions, in which the
acquiring parties assumed the obligations of thrifts with liabil-
ities that far outstripped their assets, were not intrinsically
attractive to healthy institutions; nor did FSLIC have suffi-
cient cash to promote such acquisitions through direct subsi-
dies alone. See id. at 848. Instead, the principal inducement
for these supervisory mergers was an understanding that the
acquisitions would be subject to a particular accounting
treatment—the “purchase method”—that would help the
acquiring institutions meet their capital reserve requirements
imposed by federal regulations. See id.
The critically appealing aspect of the purchase method of
accounting is that it permits the acquiring entity to designate
the excess of the purchase price over the fair value of all iden-
tifiable assets acquired as an intangible asset called “good-
will.” 518 U.S. at 848-49. Goodwill recognized under the
purchase method as the result of an FSLIC-sponsored supervi-
sory merger was generally referred to as “supervisory good-
will.” Id. at 849. Supervisory goodwill was attractive to
healthy thrifts, and thus an essential element in FSLIC’s
efforts to promote supervisory mergers, because thrift regula-
tors let the acquiring thrifts count supervisory goodwill
3062 WASHINGTON MUTUAL v. UNITED STATES
toward their regulatory reserve requirements and, conse-
quently, enabled the thrift to leverage more loans. Id. at
850-51. Supervisory goodwill was also attractive because the
regulators allowed acquiring thrifts to amortize it over long
periods, up to the 40-year maximum permitted by the gener-
ally accepted accounting practices. Id. at 851. In conjunction
with increases in the value of the thrift’s loans over the life
of the loans (as redemption of the loan approaches), amortiza-
tion of goodwill resulted in net profits during the initial years
following the acquisition, thus allowing acquiring thrifts to
seem more profitable than they in fact were. Id. at 851-53.
B. The Savings and Loan Crisis—Further Developments
In 1989, unsatisfied with the results of the regulatory
response to the thrift industry crisis and in an effort to prevent
the collapse of the industry, Congress enacted the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989,
Pub. L. No. 101-73, 103 Stat. 183 (“FIRREA”). Among other
significant changes, FIRREA required thrifts to “maintain
core capital in an amount not less than 3 percent of the sav-
ings association’s total assets” and defined “core capital” to
exclude “unidentifiable intangible assets” such as supervisory
goodwill. Winstar, 518 U.S. at 857 (quoting 12 U.S.C.
§§ 1464(t)(2)(A), (9)(A)). These new capital requirements
had swift and severe impact upon institutions that had
acquired failed thrifts, as they had relied on supervisory good-
will and capital forbearance granted them at acquisition. See
id.
Three thrift institutions created by way of supervisory
mergers sued for damages on both contractual and constitu-
tional theories. Id. at 858. They argued that the Bank Board
and FLSIC had promised them that the supervisory goodwill
created in their merger transactions could be counted toward
regulatory capital reserve requirements. Id.
After reviewing the transactions, the Court agreed with the
lower courts that “the realities of the transaction favored read-
WASHINGTON MUTUAL v. UNITED STATES 3063
ing those documents as contractual commitments, not mere
statements of policy . . . .” Id. at 863. The Court therefore had
“no reason to question the Court of Appeals’s conclusion that
the government had an express contractual obligation to per-
mit [the plaintiff thrifts] to count supervisory goodwill gener-
ated as a result of [their supervisory] merger[s] . . . as a capital
asset for regulatory capital purposes.” Id. at 864 (internal quo-
tation marks omitted). The Court also “accept[ed] the Federal
Circuit’s conclusion that the Government breached these con-
tracts when, pursuant to the new regulatory capital require-
ments imposed by FIRREA, 12 U.S.C. § 1464(t), the federal
regulatory agencies limited the use of supervisory goodwill
and capital credits” as acceptable regulatory capital. Id. at
870.
The Court rejected all special defenses advanced by the
Government in its effort to prevent enforcement of the con-
tracts at issue, see id. at 860, and affirmed the Federal Cir-
cuit’s ruling that the United States was liable to the thrifts for
breach of contract. Id. at 910.
C. Home Savings’ Acquisition of Security Federal Savings
and Loan Association, Hamiltonian Federal Savings and
Loan Association, and Southern Federal Savings and
Loan Association
One of the supervisory mergers undertaken pursuant to the
Bank Board’s strategy to mitigate the savings and loan crisis
involved H.F. Ahmanson & Co. and its wholly-owned subsid-
iary, Home Savings of America, FSB. On November 5, 1981,
Home Savings, at the time a California-chartered thrift, sub-
mitted a proposal to acquire Southern Federal Savings and
Loan Association (“Southern”), an ailing federally-chartered
mutual thrift located in Florida. Home Savings subsequently
offered to acquire two other struggling thrifts: Hamiltonian
Federal Savings and Loan Association (“Hamiltonian”) and
Security Federal Savings and Loan Association (“Security”),
both located in Missouri. Although other institutions had
3064 WASHINGTON MUTUAL v. UNITED STATES
expressed interest in acquiring the three thrifts, FSLIC recom-
mended that the Bank Board approve the acquisitions by
Home Savings as the proposals least costly to FSLIC.1
Following negotiations, FSLIC and Home Savings agreed
that the acquisition was to be structured as two separate merg-
ers. First, Hamiltonian and Security was merged into South-
ern. Southern was then merged into Home Savings, upon
which event Home Savings was reorganized into a federally
chartered thrift. This second merger was subject to several
conditions. Among them was the Bank Board’s approval of
the transactions accomplished by the two mergers and, addi-
tionally, that “FSLIC shall have entered into an agreement
with Home [Savings] in form and substance satisfactory to
Home [Savings].”
On December 17, 1981, FSLIC and Home Savings entered
into an “Assistance Agreement.” The agreement referenced
the two mergers and stated that FSLIC “has decided, pursuant
to § 406(f) of the [National Housing] Act, 12 U.S.C. § 1729(f)
(Supp. III 1979), to provide indemnification and/or financial
assistance as set forth in this Agreement having determined
that each MERGING ASSOCIATION is in danger of default
and that the amount of such assistance would be less than the
losses [FSLIC] would sustain upon the liquidation of each
such MERGING ASSOCIATION through a receivership
accompanied by the payment of insurance of accounts.”2 The
1
The Bank Board had to approve all mergers involving thrifts. See 12
U.S.C. §§ 1467a(e)(1)(A)-(B), 1817(j)(1) (Supp. V 1981).
According to FSLIC, Home Savings’ proposal to acquire Southern,
Hamiltonian, and Security would cost FSLIC $2.5 million. This was
$252.2 million less than the cost to FSLIC of liquidating the three thrifts
and $167.3 million less than the cost to FSLIC of a controlled payout of
the thrifts over fifteen years.
2
The Assistance Agreement’s reference to the 1979 supplement of the
United States Code, as opposed the 1981 supplement (applicable at the
time of the agreement) has no particular relevance. At both times, 12
U.S.C. § 1729(f) read identically. Compare 12 U.S.C. § 1729(f) (Supp. III
1979) with 12 U.S.C. § 1729(f) (Supp. V 1981).
WASHINGTON MUTUAL v. UNITED STATES 3065
Assistance Agreement recited that the Home Savings-
Southern merger was to be “a tax free reorganization pursuant
to Section 368(a)(1)(G) of the Internal Revenue Code . . . .”
The Assistance Agreement contemplated a complex system
of assistance to be provided to Home Savings. It included,
among other items: indemnification against losses resulting
from unreserved-for liabilities or losses arising out of legal
challenges to the mergers or the Assistance Agreement; cash
contributions equal to the negative net worth, if any, of each
merging thrift, with the negative net worth including the
amounts by which appraised losses exceeded appraised gains
on real estate owned by the merging thrifts as of the effective
date of the mergers; and indemnification for indicated losses
on “problem loans” of the merging thrifts identified as such
during the initial audit.
The obligations of Home Savings and FSLIC under the
Assistance Agreement were subject, among other conditions,
to the merger of Hamiltonian and Security into Southern, and
then of the new Southern into Home Savings. Home Savings’
obligations were subject to satisfaction of several additional
conditions, among them the Bank Board’s issue of the federal
charter to Home Savings, a supervisory forbearance letter in
approved form, and a letter containing “certifications that
grounds specified in 12 U.S.C. § 1464 (d)(6)(A)(i) or (iii)
exist or will exist with respect to each MERGING ASSOCIA-
TION. . . .”
The Assistance Agreement contained an integration clause
that incorporated by reference “the merger agreement
between SOUTHERN and HOME and any resolutions or let-
ters issued contemporaneously herewith by the Federal Home
Loan Bank Board or [FSLIC] . . . .” Unless otherwise agreed
by the parties, the Assistance Agreement was to terminate
after five years.
3066 WASHINGTON MUTUAL v. UNITED STATES
Also on December 17, 1981, the Bank Board issued Reso-
lution 81-803. The resolution stated that the Bank Board
determined that the merger of Southern into Home Savings3
was “pursuant to an action by the FSLIC to prevent the failure
of Southern” and “the insurance liability or risk of the FSLIC
will be reduced as a result of” the merger. The resolution
explained that these findings constituted certification that the
grounds specified in 12 U.S.C. § 1464(d)(6)(A)(i) or (iii)
existed and were necessary to ensure that the merger of
Southern into Home Savings would qualify as a tax-free reor-
ganization under 26 U.S.C. § 368(a)(1)(G). See 26 U.S.C.
§ 368(a)(3)(D)(ii)(III) (Supp. V 1981).
Also in Resolution 81-803, the Bank Board approved the
establishment of Home Savings’ Florida and Missouri
branches resulting from Home Savings’ acquisition of the
merging thrifts, and conditionally approved Home Savings’
establishment of two more branches in each of those states.
As a result, “future applications of Home . . . for permission
to establish or maintain branch offices in the State of Florida
and Missouri shall be processed . . . as if the home office of
Home were located in Florida or Missouri, respectfully [sic].”
The resolution authorized the issuance of a letter to Home
Savings, also dated December 17, 1981, confirming these
branching rights. These rights were valuable to Home Savings
because until 1981, Bank Board regulations prohibited thrifts
from opening branches outside of the state in which they had
their home office.4
3
When referring to the Home Savings-Southern merger, we refer to
Southern as it existed after the merger of Security and Hamiltonian into
it.
4
In September 1981, the Bank Board issued regulations that made
branching rights available, but only if the first branch in the non-home
state was acquired in a supervisory merger. See 12 C.F.R.
§ 556.5(a)(3)(ii)(a) (1982 ed.); Statement of Policy Regarding Supervisory
Mergers and Acquisitions, 46 Fed. Reg. 45120-1, 45,120 (Sept. 10, 1981).
WASHINGTON MUTUAL v. UNITED STATES 3067
Resolution 81-803 further approved the purchase method of
accounting for the acquisition of Southern by Home Savings,
and stated that
the Bank Board hereby determines that it does not
object to (1) the amount of any resulting intangible
assets being first assigned to the acquired savings
deposit base in the amount of .5 percent of the
acquired savings balances and .05 percent of the
acquired certificate balances, which will have a life
of ten (10) years, and (2) any excess being assigned
to goodwill and initially amortized, in accordance
with generally accepted accounting principles, over
forty (40) years . . . .
The parties refer to these rights, cumulatively, as the “RAP
rights.”
Finally, Resolution 81-803 authorized the issuance of a
supervisory forbearance letter. The letter, also dated Decem-
ber 17, 1981, represented that, during the five-year term of the
Assistance Agreement, the regulators would waive violations
by Home Savings of regulatory reserve and net worth require-
ments attributable to the merger of Southern into Home Sav-
ings. The letter also represented that losses of Southern shall
not be deemed to reduce Home Savings’ net worth for the
purpose of regulations of the Bank Board or for FSLIC’s per-
mitting the waiver of net worth requirements.
The merger of Hamilton and Security into Southern, and
then Southern into Home Savings proceeded as planned, on
the same day as the Assistance Agreement, December 17,
1981.
In the wake of the Supreme Court’s decision in Winstar,
Ahmanson and Home Savings filed their own Winstar-like
damage suit. The lawsuit concerned several supervisory merg-
ers, including the Southern-Home Savings merger. See Home
3068 WASHINGTON MUTUAL v. UNITED STATES
Sav. of Am. v. United States, 50 Fed. Cl. 427, 430-31 (2001)
(“Home I”), aff’d 399 F.3d 1341 (Fed. Cir. 2005). Although
Home Savings “tacitly acknowledge[d] the lack of explicit
language regarding the inclusion of supervisory goodwill in
regulatory capital,” id. at 434, the court concluded based on
its analysis of the Assistance Agreement and the FHLBB Res-
olution 81-803 that “the [Bank Board] and . . . FSLIC prom-
ised that plaintiffs would be able to count supervisory
goodwill acquired in the Florida/Missouri . . . transaction[ ] in
meeting their regulatory capital requirements until such good-
will was completely amortized.” Id. at 438. The court then
held that “the limitation imposed by FIRREA on plaintiffs’
ability to count supervisory goodwill in meeting their regula-
tory capital requirements constituted a breach of the contracts
entered into by plaintiffs and the government in the Flori-
da/Missouri . . . transaction[ ].” Id. at 439. In Home Sav. of
Am. v. United States, 57 Fed. Cl. 694 (2003), aff’d 399 F.3d
1341, and Home Sav. of Am. v. United States, 70 Fed. Cl. 303
(2006), the court awarded Home Savings a total of
$90,360,000 in damages and grossed up the awards for taxes,
resulting in a total award of $149,951,000.
D. Current Litigation
In 1992 and 1993, Home Savings sold its Missouri
branches.
In 1998, Washington Mutual acquired Ahmanson and its
wholly-owned subsidiaries, including Home Savings. In 2005,
Ahmanson filed amended income tax returns, claiming
refunds for the years 1990, 1992 and 1993. Ahmanson con-
tended that, for those years, the Internal Revenue Service
failed to allow Home Savings amortization deductions for the
RAP rights and abandonment loss deductions for its abandon-
ment of the Missouri branching rights. Ahamanson claimed
refunds of $91,442,362 each for the years 1990 and 1992 and
$8,935,369 for the year 1993. The Service denied the refund
requests.
WASHINGTON MUTUAL v. UNITED STATES 3069
Washington Mutual, as successor in interest to Ahamanson
and Home Savings, brought this refund lawsuit. Washington
Mutual alleged that Home Savings’ tax basis in the RAP
rights was $46,809,000 under 26 U.S.C. § 1012, the general
cost-basis rule, $63,000,000 under 26 U.S.C. § 362(b), the
carryover-basis rule applicable to tax-free reorganizations, or
$63,000,000 under 26 U.S.C. § 597, regarding assistance
received from FSLIC under 12 U.S.C. § 1729(f). Based on
those figures, Washington Mutual alleged that Home Savings
was entitled to amortization deductions for the RAP rights for
each year of either $6,436,238 or $8,662,500 (based on the
accelerated five-year phase-out under FIRREA), or
$1,170,225 or $1,575,000 (based on the initial 40-year life
under the Assistance Agreement). Alternatively, Washington
Mutual alleged that, if there were separate RAP rights associ-
ated with Home Savings’ Missouri branches, then it was enti-
tled to abandonment loss deductions for the years 1992 and
1993 equal to any remaining unamortized basis in those
rights, pursuant to 26 U.S.C. § 165.
Washington Mutual further alleged that Home Savings’ tax
basis in the Missouri branching rights was $25,605,000 under
26 U.S.C. § 1012 or $35,000,000 under § 362(b) or § 597. It
therefore argued that Home Savings was entitled to an aban-
donment loss deduction for 1992 in an unspecified amount
with respect to the branching rights associated with the
branches divested in that year and an abandonment loss
deduction for 1993 of either $25,605,000 or $35,000,000.
Finally, Washington Mutual argued that, to the extent
Home Savings was not entitled to recover its alleged basis in
the Missouri branching rights or in any separate RAP rights
associated with the Missouri branches through loss or amort-
ization deductions, those amounts should be added to Home
Savings’ basis in those branches in computing its gain or loss
on its sales of the branches in 1992 and 1993.
Based on the above figures, Washington Mutual sought a
total minimum refund of $15,542,584.
3070 WASHINGTON MUTUAL v. UNITED STATES
Both Washington Mutual and the United States filed
motions for partial summary judgment on the issue of Home
Savings’s tax basis in the RAP rights and the Missouri
branching rights.
Washington Mutual contended that, under the doctrine of
collateral estoppel, the Winstar-type litigation between Home
Savings and the United States conclusively established that
“(1) Home contracted with FSLIC; (2) Home received the
Branching Rights and RAP Right as consideration or induce-
ment from FSLIC; and (3) Home’s consideration for the
Rights was the assumption of FSLIC’s liability.” Therefore,
Washington Mutual argued, Home Savings had a cost basis in
the Rights equal to FSLIC’s liability on account of and to the
extent of the three acquired thrifts’ inability to satisfy its
depositors, that is, an amount equal to “the excess of the total
liabilities over the current fair market value of the failed
thrifts’ assets.” Washington Mutual argued alternatively that
Home Savings had a fair market value basis in the Rights
because they were granted as an inducement to enter into the
supervisory merger. Thus, Washington Mutual reasoned, the
Rights qualified as “assistance” under 12 U.S.C. § 1729(f)
and no reduction in the tax basis of Home Savings’ assets was
to be taken by reason of that assistance, pursuant to 26 U.S.C.
§ 597.5
The United States attacked both Washington Mutual’s the-
ories as an effort to get “double recovery.” It argued that rec-
ognizing Home Savings a cost basis in the Rights based on
the assumption of FSLIC’s liabilities requires characterizing
some of the acquired thrifts’ liabilities as FSLIC’s liabilities,
because Home Savings did not pay FSLIC or the Bank Board
separate consideration for the Rights. In the United States’
view, that would be inconsistent with the supervisory merg-
er’s treatment as a tax-free “G” reorganization, which
5
Washington Mutual’s partial summary judgment motion did not
address its third tax basis theory, premised on 26 U.S.C. § 362(b).
WASHINGTON MUTUAL v. UNITED STATES 3071
requires, among other conditions, that Home Savings assume
“substantially all” of Southern’s liabilities as a result of the
merger. See 26 U.S.C. § 368(a)(3)(D)(ii)(II) (Supp. V 1981).
The United States also argued that neither the branching
rights nor the RAP rights qualified for tax-free treatment
under 26 U.S.C. § 597 because, in its view, that section con-
cerns financial assistance provided by FSLIC pursuant to 12
U.S.C. § 1729(f) and not non-financial intangibles.
The district court granted partial summary judgment in
favor of the United States. Preliminarily, the district court
held that neither Winstar nor the decisions issued in the
Winstar-type lawsuit between Home Savings and the United
States decided the precise issues raised by this case.
The district court rejected Washington Mutual’s cost basis
theory. The court first rejected the distinction drawn by Wash-
ington Mutual between the acquired thrifts’ liabilities and
FSLIC’s insurance liabilities with respect to those thrifts,
holding that they were “one and the same” and that the
merger did not relieve FSLIC of its insurance obligations, but
only that those obligations were “simply less likely to come
to fruition.” It further held that Home Savings received the
Rights as part of the same transaction encompassing the
merger, and not as a separate transaction. Finally, the district
court reasoned that Home Savings did not bargain for the
right to assign a basis to the Rights and that whatever tax ben-
efits were conferred were limited to the tax-free “G” reorgani-
zation, for which the parties specifically bargained.
The district court also rejected Washington Mutual’s fair
market value theory. The court held that the Rights do not
qualify as assistance under 26 U.S.C. § 597, which the district
court determined is limited to financial assistance received
under 12 U.S.C. § 1729(f).
After the parties settled Washington Mutual’s other claims,
the district court entered judgment in favor of the United
3072 WASHINGTON MUTUAL v. UNITED STATES
States with respect to Washington Mutual’s claim that it had
a cost basis or a fair market value basis in the Rights and
rejected Washington Mutual’s amortization and loss
deduction-related refund requests.
Washington Mutual appeals.
DISCUSSION
We review de novo a district court’s grant of partial sum-
mary judgment. United States v. $100,348.00 in U.S. Cur-
rency, 354 F.3d 1110, 1116 (9th Cir. 2004). Summary
judgment is warranted when “there is no genuine dispute as
to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). Where, as here, the
case turns on a mixed question of fact and law and the only
disputes relate to the legal significance of undisputed facts,
the controversy is a question of law suitable for disposition on
summary judgment. Thrifty Oil Co. v. Bank of America Nat.
Trust and Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003).
Before turning to the merits, we address Washington Mutu-
al’s argument that the doctrine of collateral estoppel precludes
relitigating the two underlying issues presented by this case:
(1) whether Home Savings received the Rights in exchange
for its assumption of FSLIC’s liabilities on account of and to
the extent of the three failing thrifts’ inability to satisfy their
liabilities to their depositors; and (2) whether Home Savings
received the Rights from FSLIC as an inducement to the
supervisory merger, pursuant to 12 U.S.C. § 1729(f).
Collateral estoppel, or issue preclusion, bars the relitigation
of both issues of law and issues of fact actually adjudicated
in previous litigation between the same parties. Steen v. John
Hancock Mut. Life Ins. Co., 106 F.3d 904, 910 (9th Cir.
1997). Collateral estoppel applies not only against actual par-
ties to prior litigation, but also against a party that is in privity
to a party in previous litigation. Id.
WASHINGTON MUTUAL v. UNITED STATES 3073
In Home I, the Court of Federal Claims held, in relevant
part, that: (1) the Bank Board Resolution 81-803, incorporated
by reference in the Assistance Agreement, contained an
enforceable promise that supervisory goodwill would count in
Home Savings’ meeting regulatory capital requirements until
such goodwill was completely amortized; and (2) the limita-
tions imposed by the government in FIRREA constituted a
breach of that promise. Home I, 50 Fed. Cl. at 434-39. This
holding does not reach the issues raised in the current litiga-
tion. Collateral estoppel therefore does not apply. We now
turn to the merits.
Washington Mutual’s main theory on appeal is that the
Assistance Agreement, the Bank Board Resolution 81-803,
and the December 17, 1981, supervisory forbearance and
branching rights letters memorialized a three-party transaction
in which Home Savings agreed to acquire Hamilton, Security,
and Southern, and thereby relieve FSLIC of its impending
insurance liability to the depositors of those ailing thrifts, in
exchange for the branching rights and the RAP rights. Wash-
ington Mutual contends that the cost to Home Savings to
acquire the Rights was the amount by which the acquired
thrifts’ liabilities exceeded the value of their assets, also
referred to as “excess liability.” Washington Mutual therefore
concludes that Home Savings took a tax basis in the Rights
equal to that excess liability, pursuant to 26 U.S.C. § 1012.
The United States counters that, although Home Savings
lessened FSLIC’s insurance risks by engaging in the supervi-
sory merger, the only liabilities it assumed through the merger
were those belonging to the three failing thrifts. The United
States also argues that Washington Mutual’s theory presup-
poses that Home Savings acquired some of the failing thrifts’
liabilities outside the merger. This, the United States further
argues, is inconsistent with the supervisory merger’s treat-
ment as a tax-free “G” reorganization, which requires that
Home Savings had assumed “substantially all” of Southern’s
liabilities as a result of the merger.
3074 WASHINGTON MUTUAL v. UNITED STATES
I
[1] This case requires us to return to the very basics of tax
law. The term “basis” is a fundamental concept and refers to
a taxpayer’s capital stake in an asset for tax purposes. See In
re Lilly, 76 F.3d 568, 572 (4th Cir. 1996). It is taken into
account as an offset to the amount realized (or a measurement
of loss) upon the disposition of the asset, or, in the case of
certain business and investment assets, in the form of depreci-
ation or amortization deductions over the life of the asset. See
id.
[2] Generally, a taxpayer’s basis in an asset is equal to the
cost to the taxpayer of acquiring the asset. 26 U.S.C. § 1012.6
See also, e.g., Peracchi v. Comm’r, 143 F.3d 487, 490 (9th
Cir. 1998). The term “cost” generally includes any assump-
tion of the seller’s liabilities. See Comm’r v. Oxford Paper
Co., 194 F.2d 190, 192 (2d Cir. 1952). See also Oxford Life
Ins. Co. v. United States, 790 F.2d 1370, 1374 (9th Cir. 1986)
(“Where a taxpayer acquires all the assets of another in a
transaction, the amount of liability assumed is treated as part
of the cost of acquiring the tangible and intangible assets
received.”). The cost-basis rules apply equally to tangible and
intangible property. See Tenneco, Inc. v. United States, 433
F.2d 1345, 1346 (5th Cir. 1970).
As an overarching principle, absent specific provisions, the
tax consequences of any particular transaction must reflect the
economic reality. Kraft, Inc. v. United States, 30 Fed. Cl. 739,
766 (Fed. Cl. 1994). See also Winstar, 518 U.S. at 863.
6
That section provides: “The basis of property shall be the cost of such
property, except as otherwise provided in this subchapter and subchapters
C (relating to corporate distributions and adjustments), K (relating to part-
ners and partnerships), and P (relating to capital gains and losses).” 26
U.S.C. § 1012 (emphasis added). Neither Washington Mutual nor the
United States argue, on this appeal, that any of the exceptions provided for
in 26 U.S.C. § 1012 applies.
WASHINGTON MUTUAL v. UNITED STATES 3075
[3] The documentary evidence, as well as the economic
realities of the transaction, compel the conclusion that the
Home Savings-Southern supervisory merger and the Assis-
tance Agreement between FSLIC and Home Savings com-
prise one, all-encompassing transaction wherein the branching
rights and the RAP rights were part of the consideration
received by Home Savings. The merger agreement between
Home Savings and Southern was conditioned upon Home
Savings and FSLIC having entered into the Assistance Agree-
ment. Conversely, the Assistance Agreement was conditioned
upon the merger having been accomplished. The Assistance
Agreement was also conditioned upon several actions by the
Bank Board, which issued Resolution 81-803, the letter
regarding branching rights, and the supervisory forbearance
letter. The Assistance Agreement explicitly integrated the
Home Savings-Southern merger agreement, Resolution 81-
803, and the two Bank Board letters into the agreement, pro-
viding:
This Agreement, together with any interpretation
thereof or understanding agreed to in writing by the
parties, constitutes the entire agreement between the
parties hereto and supersedes all prior agreements
and understandings of the parties in connection here-
with, excepting only the merger agreement between
SOUTHERN and HOME and any resolutions or let-
ters issued contemporaneously herewith by the Fed-
eral Home Loan Bank Board or [FSLIC], provided,
however, that in the event of any conflict, variance,
or inconsistency between this Agreement and the
merger agreement, the provisions of this Agreement
shall govern and be binding on all parties insofar as
the rights, privileges, duties, obligations, and liabili-
ties of [FSLIC] are concerned.
The Home Savings-Southern merger, the Assistance Agree-
ment, Resolution 81-803, and the Bank Board letters confirm-
3076 WASHINGTON MUTUAL v. UNITED STATES
ing the branching rights and the supervisory forbearance were
all signed or issued on December 17, 1981.
[4] The conditioning of the Home Savings-Southern
merger and the Assistance Agreement each upon the other,
their synchronized timing, and, most importantly, the integra-
tion of the merger agreement into the Assistance Agreement,
conclusively establish that Home Savings and FSLIC
intended that the two transactions be integrated. The depen-
dence of the merger and the assistance agreement each upon
the other conforms to the economic realities. FSLIC had no
interest in offering Home Savings any incentives without the
guarantee of an immediate return. In the context of the sav-
ings and loan crisis, that return was the assimilation of three
failing thrifts by a healthy one, thereby considerably reducing
FSLIC’s own insurance liability exposure on account of the
failing thrifts’ deposit liabilities and contributing to the effort
to stabilize the thrift industry. See Winstar, 518 U.S. at 846-47
(“[T]he multitude of already-failed savings and loans con-
fronted FSLIC with deposit insurance liabilities that threat-
ened to exhaust its insurance fund. . . . Realizing that FSLIC
lacked the funds to liquidate all of the failing thrifts, the Bank
Board chose to avoid the insurance liability by encouraging
healthy thrifts and outside investors to take over ailing institu-
tions in a series of ‘supervisory mergers.’ ”). On its part,
Home Savings had no interest in acquiring the three failing
thrifts absent incentives from the government to compensate
for the assumption of liabilities well in excess of the value of
the thrifts’ assets. See id. at 848 (“Such transactions, in which
the acquiring parties assumed the obligations of thrifts with
liabilities that far outstripped their assets, were not intrinsi-
cally attractive to healthy institutions . . . . Instead, the princi-
pal inducement for these supervisory mergers was an
understanding that the acquisitions would be subject to a par-
ticular accounting treatment that would help the acquiring
institutions meet their reserve capital requirements imposed
by federal regulations.”).
WASHINGTON MUTUAL v. UNITED STATES 3077
Home Savings, indeed, received a generous incentive pack-
age, reflected in the Assistance Agreement, Resolution 81-
803, the Bank Board letter regarding the branching rights, and
the supervisory forbearance letter. That package included,
among other items, cash contributions from FSLIC equal to
the negative worth of the three acquired thrifts; various
indemnities; and the branching rights and the RAP rights. Fur-
thermore, FSLIC and Home Savings negotiated that the Home
Savings-Southern merger be structured as a tax-free “G” reor-
ganization, to which purpose the Bank Board made, in Reso-
lution 81-803, the necessary determinations in order for the
transaction to so qualify. See 26 U.S.C. § 368(a)(3)(D)(ii)(III)
(Supp. V 1981).
[5] The cost to Home Savings for acquiring these various
incentives and benefits was the excess of the three failing
thrifts’ liabilities over the value of their assets.7 Home Sav-
ings, therefore, received a cost basis in the branching rights
and the RAP rights equal to some part of the total amount of
that excess liability.8
7
According to a December 16, 1981, FSLIC memorandum to the Bank
Board, Home Savings estimated at that time that the supervisory goodwill
arising from the mergers would be approximately $150 million. Goodwill,
of course, is “the excess of the purchase price over the fair value of all
identifiable assets acquired.” Winstar, 518 U.S. at 848-49. The parties,
therefore, entered the transaction with a pretty clear picture of the cost
incurred by Home Savings by engaging in the mergers. We do not express,
however, any opinion on whether the parties are bound by that estimate.
8
We note here that Washington Mutual argues that the cost to Home
Savings for acquiring the Rights was the excess of the acquired thrifts’ lia-
bilities over their assets. The Rights, however, were part of a complex
consideration package, all of which was acquired by Home Savings in
exchange for its assumption of the thrifts’ liabilities. The issue of how to
allocate that cost among the various components of Home Savings’ con-
sideration package is not before us.
3078 WASHINGTON MUTUAL v. UNITED STATES
II
The United States contends that allowing Home Savings a
cost basis in the Rights is incompatible with the Home
Savings-Southern merger being recognized as a tax-free “G”
reorganization. The United States relies on Washington Mutu-
al’s statement that Home Savings obtained the Rights “outside
the framework of the merger.” The United States reads this
statement as saying that Home Savings acquired some of
Southern’s liabilities “outside the framework of the merger.”
If so, that was in violation of the tax-free “G” reorganization
requirement that “substantially all” of the transferor’s liabili-
ties be acquired by the acquiring institution in the transfer.
See 26 U.S.C. § 368(a)(3)(D)(ii)(II) (Supp. V 1981).
Special rules apply when a corporation acquires assets in a
tax-free reorganization under 26 U.S.C. § 368. The recipient
corporation takes a carryover basis in the assets of the trans-
feror (that is, it assumes the basis the property had in the
hands of the transferor), increased by the amount of gain, if
any, recognized by the transferor in the transfer. 26 U.S.C.
§ 362(a)(2), (b).
[6] A “G” reorganization is a § 368 court-approved trans-
fer by a corporation of all or part of its assets to another cor-
poration in a bankruptcy, receivership, foreclosure, or similar
judicial proceeding, provided generally that the owners of the
transferor corporation receive stock or securities of the trans-
feree corporation pursuant to the plan of reorganization. 26
U.S.C. § 368(a)(1)(G), (3)(A), (3)(B). Under former
§ 368(a)(3)(D)(ii), a transfer of assets by a thrift could qualify
as a “G” reorganization even if its owners did not receive
stock or securities of the transferee corporation, but only if (1)
the thrift transferred substantially all of its assets to the trans-
feree corporation, (2) substantially all of the liabilities of the
transferring thrift immediately before the transfer became lia-
bilities of the transferee corporation as a result of the transfer,
and (3) the Bank Board or FSLIC certified the existence of a
WASHINGTON MUTUAL v. UNITED STATES 3079
ground for appointing a receiver for the transferor thrift speci-
fied in 12 U.S.C. § 1464(d)(6)(A)(i) (insolvency), (ii) (dissi-
pation of assets), or (iii) (unsafe or unsound business
conditions). See 26 U.S.C. § 368(a)(3)(D)(ii) (Supp. V 1981);
12 U.S.C. § 1464(d)(6)(A)(i)-(iii) (1976 & Supp. V 1981).
At issue here is the second requirement, whether substan-
tially all of Southern’s liabilities became liabilities of Home
Savings as a result of the supervisory merger. To argue that
this requirement is not met, the United States seizes on iso-
lated, out-of-context statements made by Washington Mutual
in its effort to explain the complex nature of the transaction
between Home Savings and FSLIC, and to explain why Home
Savings took a cost basis in the Rights. There is no denying
that Washington Mutual struggled to try to explain its cost
basis theory. Washington Mutual, however, has never con-
tended that Home Savings acquired any portion of Southern’s
liabilities outside the merger. Its theory has always been that
Home Savings acquired the Rights outside the merger,
through the Assistance Agreement, in exchange for relieving
FSLIC of its impending insurance liability on account of
Southern’s liabilities to depositors.
[7] Furthermore, as we have explained, the Home Savings-
Southern merger and the assistance agreement between Home
Savings and FSLIC are integral parts of one, all-
encompassing transaction wherein Home Savings acquired
Southern’s excess liability in exchange for a complex consid-
eration package that included structuring the merger as a tax-
free “G” reorganization. For this purpose, the Home Savings-
Southern merger agreement explicitly provided that
all assets and property of every kind and character,
real, personal and mixed, tangible and intangible,
choses in action, rights and credits then owned by
[Southern], or which would inure to it, shall immedi-
ately . . . be vested in and become the property of the
[Home Savings] . . . . All rights, duties and obliga-
3080 WASHINGTON MUTUAL v. UNITED STATES
tions of [Southern] shall remain unimpaired, and
[Home Savings] shall, on the Effective Date, suc-
ceed to all of such rights and assume all of such
duties and obligations.
[8] Home Savings acquired “substantially all” of South-
ern’s liabilities in one transfer and met all other requirements
of 26 U.S.C. § 368(a)(3)(D)(ii) (Supp. V 1981). Recognizing
that Home Savings had a cost basis in the branching rights
and the RAP rights is not incompatible with the Home
Savings-Southern merger being recognized as a tax-free “G”
reorganization.
III
The district court also held that FSLIC and Home engaged
in one transaction wherein Home Savings agreed to acquire
the three failing thrifts and to assume their duties and obliga-
tions in exchange for “the package of regulatory ‘carrots’ con-
tained in the Assistance Agreement.” Nonetheless, the district
court held that Home Savings did not take a basis in the
Rights because it did not bargain for it and “[a]s a matter of
general contract interpretation, it makes more sense to con-
clude that whatever tax benefits were conferred came with the
part of the aid package specifically concerning taxation: the
‘G’ reorganization.”
The United States wisely does not make this argument on
appeal. First, what Home Savings bargained for was not that
it would not have to pay taxes on the merger, but that the
merger would be structured to qualify as a tax-free “G” reor-
ganization. The tax-free treatment resulted not from that
structure, but by operation of the Internal Revenue Code.
Similarly, the tax treatment of the Rights depends not on the
agreement of the parties on the issue, but on the provisions of
the Internal Revenue Code, as applied to the parties’ transac-
tion.
WASHINGTON MUTUAL v. UNITED STATES 3081
[9] Second, that Home Savings and FSLIC bargained for
structuring the merger as a tax-free “G” reorganization, but
did not also bargain for the tax treatment of the Rights, does
not mean we cannot recognize Home Savings’ cost basis in
the Rights. Because the tax consequences of a transaction
flow by operation of the tax law, the parties’ failure to antici-
pate and negotiate all tax consequences of their transaction
cannot be interpreted as limiting the transaction’s tax conse-
quences to only those expressly anticipated and bargained
over by the parties. That one party to this litigation was a gov-
ernmental entity is no reason to depart from this basic princi-
ple.
IV
“[W]here a transaction has economic substance and is eco-
nomically realistic, it should be recognized for tax purposes,
and the fact that a transaction is so arranged that the tax con-
sequences are highly favorable to one of the parties affords
the Commissioner no license to recast it into one of less
advantage.” Lewis & Taylor, Inc. v. Comm’r, 447 F.2d 1074,
1077 (9th Cir. 1971). Here, Home Savings agreed to acquire
Security, Hamiltonian, and Southern, whose liabilities far
exceeded their assets, in exchange for a complex consider-
ation package including, among other items, cash, indemni-
ties, the branching and the RAP rights, and the structuring of
the merger as a tax-free “G” reorganization. To this transac-
tion, we apply basic tax principles regarding basis. This leads
us to hold that Home Savings had a cost basis in the Rights
equal to some part of the acquired thrifts’ excess of liabilities
over the value of their assets.9
9
Because Washington Mutual prevails on the cost-basis theory, we need
not address its alternative theory, that it should be recognized a fair market
value basis because the Rights were “assistance” provided by FSLIC to
facilitate a supervisory merger, and therefore should receive the favorable
tax treatment afforded by 26 U.S.C. § 597 (Supp. V 1981).
3082 WASHINGTON MUTUAL v. UNITED STATES
[10] The district court’s judgment and grant of the United
States’ motion for partial summary judgment is REVERSED.
The case is REMANDED to the district court with instruc-
tions to grant Washington Mutual’s motion for partial sum-
mary judgment. It shall proceed to determine the cost basis
and conduct further proceedings in accordance to this opinion.
REVERSED and REMANDED.
FERNANDEZ, Circuit Judge, concurring:
I am not satisfied that Washington Mutual, Inc. (“WaMu”)
can establish a cost basis in the rights that the government
gave Home Savings of America (“Home Savings”) when
Home Savings took over other savings and loan institutions
pursuant to a tax-free “G” reorganization.1 However, I concur
in the result on a different ground — those rights have a fair
market value basis.2
WaMu, successor in interest to Home Savings, brought this
action to recover income taxes that Home Savings allegedly
overpaid to the United States. The district court granted sum-
mary judgment to the government, and this appeal followed.
WaMu asserts that the regulatory accounting privileges
(“RAP”) and the branching rights (hereafter collectively “the
Rights”) received from the Federal Savings and Loan Insur-
ance Corporation (“FSLIC”) as part of an Assistance Agree-
ment between FSLIC and Home Savings have a fair market
value basis.3 WaMu appears to be correct; surely they had
great value, which is why the transaction went forward. How-
1
26 U.S.C. § 368(a)(1)(G).
2
I therefore see no need to wrestle with the question of cost basis at this
time.
3
See 26 U.S.C. § 61(a)(1); 26 C.F.R. § 1.61-2(d)(1).
WASHINGTON MUTUAL v. UNITED STATES 3083
ever, the government asserts three reasons that WaMu is in
error. I reject those reasons.
First, the government says, the Rights were not received
from FSLIC at all, but were received from the Federal Home
Loan Bank Board (“the Board”). I disagree. No doubt the
Rights did flow from actions of the Board, but, then, FSLIC
is just an arm of the Board and is operated by the Board. See
United States v. Winstar Corp., 518 U.S. 839, 890, 116 S. Ct.
2432, 2462, 135 L. Ed. 2d 964 (1996); see also 12 U.S.C.
§ 1725(a). Indeed, the Board operates through FSLIC. See
Winstar, 518 U.S. at 891, 116 S. Ct. at 2463. So, it is almost
tautological to say that what FSLIC gave originated at the
Board. What is significant, however, is that the Assistance
Agreement was the contract between FSLIC and Home Sav-
ings and that agreement incorporates the Board resolutions
that ultimately conferred the Rights upon Home Savings. It
cannot be doubted that the Rights were received from FSLIC
as part of the compensation to Home Savings when it, at the
urging of FSLIC, merged with a number of insolvent savings
and loan institutions.
Second, the government argues that the Rights were not
given to Home Savings under the provisions of 12 U.S.C.
§ 1729(f). Again, I must disagree. If the Rights were not con-
veyed pursuant to that provision, it is difficult to see how they
were conveyed at all because that is the provision that grants
FSLIC the authority to enter into agreements and issue bene-
fits to an insured institution, like Home Savings, for the pur-
pose of facilitating a transaction of this type. It is already
established beyond peradventure that § 1725(f) provided
FSLIC’s authority to grant the RAP rights to Home Savings.
See Winstar, 518 U.S. at 890, 116 S. Ct. at 2462. Assuming
that the branching rights could be granted at all, and the gov-
ernment agrees that they could be, I see no principled basis
for declaring that, unlike the RAP rights, they did not flow
through FSLIC to Home Savings via the Assistance Agree-
ment.
3084 WASHINGTON MUTUAL v. UNITED STATES
Third, the government argues that even if the above is true,
Home Savings was not entitled to the beneficial treatment
granted by 26 U.S.C. § 597 (1981),4 a provision enacted for
the very purpose of facilitating the kind of transaction that
occurred here. At first blush, it is difficult to see why it was
not. Well, says the government, § 597 only applies to “money
or other property” and the Rights are neither. Why not?
Because, says the government, the section is entitled “FSLIC
financial assistance” and the Rights cannot be financial.
Again, it is difficult to see why that would be so. In the first
place, although titles might be helpful sometimes, they are not
necessarily a good guide. In fact, in a tax case, we held that
“the title of a statute cannot limit the plain meaning of its
text.” Nordby Supply Co. v. United States, 572 F.2d 1377,
1378 (9th Cir. 1978); see also 26 U.S.C. § 7806(b). Secondly,
the word “financial” does not exclude the concept of property,
and the words of the section itself demonstrate that. Finally,
there can be no doubt that the parties knew that the Rights
would aid Home Savings financially. Those rights were the
property that made the deal viable. It seems peculiar to say
that they are not the “property” referred to in § 597 because
that property can only be money or things like money. Can it
4
The section read as follows:
§ 597. FSLIC financial assistance.
(a) Exclusion from gross income.
Gross income of a domestic building and loan association does
not include any amount of money or other property received from
the Federal Savings and Loan Insurance Corporation pursuant to
section 406(f) of the National Housing Act (12 U.S.C. sec.
1725(f)) regardless of whether any note or other instrument is
issued in exchange therefor.
(b) No reduction in basis of assets.
No reduction in the basis of assets of a domestic building and
loan association shall be made on account of money or other
property received under the circumstances referred to in subsec-
tion (a).
WASHINGTON MUTUAL v. UNITED STATES 3085
be thought that Congress did not understand the broad mean-
ing of the word “property” in general? I think not.
Moreover, says the government, the legislative history5
refers to “payments” and that can only mean money. Again,
I fail to see why one cannot pay over consideration or pay
debts with property, and people often do. Moreover, the fact
that § 597 refers to an “amount” does not change the analysis.
Clearly, the whole of the phrase is “amount of money or other
property.” In the first place, the word “amount” could be
taken as modifying the word money only, in which case the
word “property” would stand alone. In the second place, there
is nothing peculiar about speaking of an amount of property,
if “amount” modifies that word also. For example, in 26
U.S.C. § 301(c) a stockholder, who receives a distribution
from a corporation, is taxed on the amount of the distribution.
And for that purpose, the word “amount” means “amount of
money received,”6 plus “the fair market value of the other
property received.”7 Finally, the net effect of the govern-
ment’s position would be to essentially read the word “prop-
erty” out of § 597. I see no basis for that reading.
In short, on its face § 597 appears to provide that when
Home Savings received the Rights, those constituted property
with a significant value and Home Savings was entitled to
have that property treated for tax purposes under those provi-
sions. Nothing the government has argued changes that. Thus,
WaMu has a fair market value basis in the Rights.
Home Savings greatly benefitted the government at a time
of great need. When Home Savings agreed to engage in the
mergers in question, it was given the Rights as part of the
inducement to do so. The Rights were no mere lagniappe;
5
See H.R. Conf. Rep. No. 97-215, at 284 (1981), reprinted in 1981-2
C.B. 481, 526.
6
26 U.S.C. § 301(b)(1)(A).
7
Id. at (b)(1)(B)(i).
3086 WASHINGTON MUTUAL v. UNITED STATES
they had substantial value. Whether one accepts the analysis
of the majority or mine, the result is that Home Savings did
have a basis in them.
Thus I concur in the result.