Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.news From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Newspapers send Bork to Supreme Court Date: Wed, 11 Nov 92 14:23:38 EST Message-ID: \SE A;NATION \HD Newspapers send Bork to Supreme Court \BY Nancy E. Roman \CR THE WASHINGTON TIMES Robert Bork, the judge who came within nine votes of sitting on the Supreme Court, was before it yesterday, arguing that newspapers ought to be able to write off the value of subscriber lists for tax purposes. "We paid $68 million for it, so quite obviously it was an asset," said Mr. Bork, representing a New Jersey news firm. He was responding to Justice Anthony Kennedy, who was named to the court after the Senate rejected President Ronald Reagan's 1987 nomination of Mr. Bork. Deputy Solicitor General Lawrence Wallace, who argued for the administration, said a list of subscribers has value when sold separately but when acquired as part of a business transaction is no different than a clientele inherited by the new owner of a restaurant. The court's decision, expected by July, could be worth billions in tax dollars. Arrayed against the government are newspaper and magazine publishers, a major accounting firm, and members of the oil, insurance, banking and brokerage industries. The case evolved from the Herald Corp.'s 1976 purchase of Booth Newspapers Inc., owner of eight Michigan newspapers and the Sunday newspaper supplement Parade. In 1987 the Newark Morning Ledger Co. merged with the Herald Corp., acquiring its assets, its federal income tax status and a dispute with the Internal Revenue Service over deductions taken from 1977 to 1980. Based on the Herald Corp.'s purchase price of $328 million, including $68 million for 460,000 paid subscribers, the Newark company sued in 1990, claiming the subscribers as a depreciable asset worth about $10 million in tax savings. A federal trial judge allowed the deductions, but the 3rd U.S. Circuit Court of Appeals in Philadelphia reversed that decision and ruled for the IRS last year. Now before the high court, the case turns on a technical question: whether to characterize subscriber lists as "good will" or a "depreciable intangible asset." Good will refers to the reputation and customer base that a purchaser acquires when buying a business; it is not depreciable. Intangible assets, which include patents and copyrights, are depreciable if they have a limited useful life to the enterprise. "Suppose this were a printing machine," Mr. Bork said, drawing an analogy between the declining value of a $10 million piece of equipment and that of subscribers to a newspaper. Justice John Paul Stevens said that if newspapers were allowed to value customers like machinery for tax purposes, they might also write off relationships with advertisers and capitalized newsstand sales. "It does seem to me that your position will in time mean that there would seldom be any good will left," he told Mr. Bork. "If we could have, we would have" written off advertising relationships and newsstand sales, Mr. Bork said, getting a laugh from the audience. Mr. Wallace likened newspaper customers to patrons of fast-food restaurants. "In order to be depreciable there must be a value separate and distinct from good will," he said. Justice Antonin Scalia asked if newspaper customers are different from restaurant patrons because they pay on a regular, contractual basis. "Isn't that a contractual value beyond good will?" Mr. Wallace said there are many such fringe benefits when property changes hands. He used as an example the new owner of an apartment complex who inherits tenants with one-year leases. "Of course it can be valued, but not everything measurable is amortizable," he said. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM