¹This estimate assumes a 34% corporate tax rate and a 20% capital gain tax. Avoiding one dollar of gain at the corporate level will save 34 cents in corporate taxes; the shareholder will then pay a 20% capital gain tax on an additional 34 cents of proceeds, resulting in a net savings of roughly 27 cents (0.80 X 0.34). The effect of state income taxes is ignored.

²Sec. 453B(d) provides that this provision does not apply to subsidiary liquidations governed by Sec. 337(a).

³Sec. 336(d) limits loss recognition in certain anti-abuse situations.

⁴Of course, the shareholders basis in distributed assets will be adjusted to fair market value (FMV) under Sec. 334(a) if the distribution is taxable to the shareholder.

⁵Both the buyer and seller must consent to a Sec. 338(h)(10) election, as both will be affected by it.

⁶Under Sec. 1374(d)(1), NUBIG is the excess of the FMV of all corporate assets over the basis of such assets, determined as of the first day of S status.

⁷Martin Ice Cream Co., 110 TC 189 (1998).

⁸D.K. MacDonald, 3 TC 720 (1944).

⁹Stanton H. Bryden, TC Memo 1959-184.

¹⁰Frank J. Longo, TC Memo 1968-217.

¹¹Arthur G. Rudd, 79 TC 225 (1982).

¹²William Norwalk, TC Memo 1998-279.

¹³See the International Glossary of Business Valuation Terms, at www.bvappraisers.org/glossary/glossary.pdf.

¹⁴Financial Accounting Standards Board, Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations (June 2001), Appendix FGlossary.

¹⁵See note 13, supra.

¹⁶Transaction value is the sum of all consideration paid by a buyer, including that portion related to tangible and intangible business assets, CNTCs, employment and consultation arrangements, franchise fees, earn-outs, etc.

¹⁷See SFAS No. 141, note 14 supra.

¹⁸Regs. Sec. 1.1060-1(c)(4) states that parties to the written agreement may ignore it only if the agreements enforceability may be challenged by mistake, undue influence, fraud, duress and similar factors, under Carl L. Danielson, 378 F2d 771 (3d Cir. 1967).

¹⁹SFAS No. 141, note 14 supra, defines a financial asset to include cash, evidence of an ownership interest in an entity or a contract that conveys to a second entity a contractual right (1) to receive cash or another financial instrument from a first entity; or (2) to exchange other financial instruments on potentially favorable terms with the first entity.

²⁰SFAS No. 141, note 14 supra, defines intangible assets as assets (not including financial assets) that lack physical substance.

²¹Ray H. Schulz, 34 TC 235 (1960), affd, 294 F2d 52 (9th Cir. 1961).

²²Charles B. Thompson, TC Memo 1997-287.

²³Internal Revenue Service, ISP-MSSP, IRPO 80,245, Covenants Not To Compete (2/19/96).

²⁴In Martin Ice Cream Co., note 7 supra, the facts did not support the existence of business goodwill, but an amount was still allocated to going-concern value. The amount allocated is again affected by the facts and circumstances of the business acquisition.

²⁵Concord Control, Inc., TC Memo 1976-301.

²⁶See Pratt, Reilly and Schweihs, Valuing Small Businesses and Professional Practices (McGraw-Hill, 3d ed., 1998), p. 69.