concurring:
The majority opinion concludes that (1) the “deposit base” that petitioner purchased when it acquired smaller banks has an ascertainable cost basis separate and distinct from the goodwill and going-concern value of the acquired banks; (2) petitioner established that deposit base has a limited useful life, the duration of which can be ascertained with reasonable accuracy; (3) using the cost savings method of valuation, petitioner is entitled to allocate to deposit base an amount equal to the present value of the difference in cost between the acquired core deposits and the market alternative (i.e., the next cheapest source of borrowed funds needed by petitioner to conduct its banking business); and (4) petitioner is entitled to an amortization deduction under section 167 for the year in issue in an amount equal to the present value on the acquisition dates of the difference in cost between the acquired core deposits and the market alternative.
The dissenting opinion of Judge Williams asserts that the majority commits legal error in ignoring the relationship between core deposits and customer business in applying the requirement that intangibles must be “separate and distinct” from goodwill if they are to be amortized. His disagreement is with the majority’s “willingness to accept the opportunity to arbitrage as the only value attributable to the core deposits.”
In a number of prior cases, respondent has prevailed because of a taxpayer’s failure to establish the facts found by the majority in this case. Yet, Judge Williams cites, and I have found, no authority for the proposition that assets, intangible or tangible, are not separate and distinct from goodwill unless no part of their value is related to continued patronage of customers of an ongoing business. As the majority opinion demonstrates in its exhaustive analysis of relevant authorities, assets are frequently found to be eligible for amortization even though the price paid took into account the probable continuance of terminable business relationships. See majority opinion at pp. 481-489 and, e.g., Houston Chronicle Publishing Co. v. United States, 481 F.2d 1240, 1246-1247 (5th Cir. 1973); Super Food Services, Inc. v. United States, 416 F.2d 1236, 1240 (7th Cir. 1969); First Pennsylvania Banking & Trust Co. v. Commissioner, 56 T.C. 677, 686-688 (1971); Manhattan Co. of Virginia, Inc. v. Commissioner, 50 T.C. 78, 90-91 (1968); Business Service Industries, Inc. v. Commissioner, T.C. Memo. 1986-86. Tangible property, such as special purpose equipment, is unquestionably subject to depreciation even though its value may be enhanced by its use in an ongoing business. It seems to me that the requirement that an asset be separate and distinct means only that it must have a measurable value for a specific use. That is what petitioner has established in this case.
Judge Williams also disagrees with the majority’s determination of limited useful life and the amount of amortization available to petitioner. He states that petitioner has not presented “adequate proof” of the useful life of the core deposits and that the amount claimed by petitioner is unreasonable. The code, regulations, and cases require only that the period be “estimated with reasonable accuracy” and that the amount claimed be a “reasonable allowance” for the exhaustion of the property. Sec. 167; sec. 1.167(a)-3, Income Tax Regs. Houston Chronicle Publishing Co. v. United States, supra at 1252-1253. The nature of estimates for depreciation or amortization is that they constitute only a “reasonable approximation”; absolute certainty is not required. Hindsight evidence based on actual experience repeatedly has been rejected as a basis for computing depreciation. See cases cited in Banc One Corp. v. Commissioner, 84 T.C. 476, 499-501 (1985), affd. without published opinion 815 F.2d 75 (6th Cir. 1987). Similarly, hindsight evidence does not discredit approximations that were reasonable when made. Depreciation is frequently based on assumptions of useful life and rates of exhaustion that appear arbitrary when compared to actual experience.
The evidence in this case persuaded the fact finder that petitioner’s method of amortization was justified. I believe that the standards that Judge Williams suggests as prerequisites to deductions for amortization of core deposits have not been applied in any case and would be unreasonably stringent in view of the nature of amortization or depreciation deductions.
Korner, Hamblen, Wells, and Whalen, JJ., agree with this concurring opinion.