Kraft, Inc. v. United States

OPINION

MOODY R. TIDWELL, III, Judge:

This is a suit for the refund of taxes in the amount of $94,702,599 paid by taxpayer following the disallowance of deductions by the Internal Revenue Service (IRS) for business losses arising out of the alleged abandonment of intangible assets in tax years 1972 through 1978. In the alternative taxpayer contends it is entitled to a capital loss if the court finds the disposition to have been a sale or exchange instead of an abandonment. Under Action (1)804-86T the complaint also contained counts for the refund of taxes for the alleged improper disallowance by the IRS of investment tax credits in the same tax years for films and videotapes of televised variety show specials. The Opinion in Action 804-86T resolves issues following trial. Action (1)804-86T was disposed of by summary judgment. The Opinion in (1)804-86T appears following that of 804-86T in this document. These two cases conclude all tax claims for the years in question. Taxpayer seeks interest on any amounts recovered, and costs pursuant to 28 U.S.C. § 1920 .

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*746 In the Matter of No. 804-86T Alleged Abandonment Of Intangible Assets

FACTS

In the early 1920’s, taxpayer’s predecessor, the National Dairy Products Corporation, set out to establish a national dairy business to provide consumers with a regular supply of disease-free, grade A, fresh milk and related products. Taxpayer’s strategy was two-fold. It sought to acquire one or more large operating dairies, referred to as “core” dairies and other smaller “non-core” dairies in selected geographic areas. Taxpayer acquired a number of product lines in its acquisitions but only three are at issue here: home (or retail) delivery of milk; wholesale milk; and ice cream. In its acquisition of core dairies, taxpayer sought out large, technically advanced dairies with surplus capacity that served a significant portion of a given market area. In addition to purchase of the tangible assets of a core dairy, taxpayer claimed it also acquired intangible assets that it identified as (1) Source of Supply — the value of a steady supply of disease-free milk at a favorable price; (2) Production Turnkey — the value of an up-and-running physical plant and assembled staff of trained employees and managers to operate the plant; (3) Distribution System — an assembled fleet of home-delivery vehicles and drivers who had “established relationships” with customers on their route; (4) Customer Base — the value of a constant and regenerating Customer Base; and (5) Trade Name — the value of the identity of the acquired company, including trademarks. The only intangible asset allegedly acquired from non-core dairies was the Customer Base that was integrated into the market’s core dairy Customer Base. Non-core dairy plants were closed immediately after acquisition.

Taxpayer explained how large expanding dairy companies purchased raw milk and how processed milk and ice cream were sold and distributed in the 1920’s and 1930’s. Dairies were valued, bought, and sold on the basis of the volume of milk sold to regular customers. The volume was measured by a system of “points:” A point represented the volume of product sold. A single point was equal to one quart of milk delivered to a customer. For all practical purposes the terms point and quart are used interchangeably. If a dairy delivered 1,000 quarts of milk a day for 200 days a year, the dairy would be credited with 200,000 points.

Most fluid milk in 1920 was sold in glass bottles by routemen driving horse-drawn milk carts on retail home delivery routes. Grocers carried small quantities of milk (wholesale) as an accommodation to their customers. Intense competition 'existed among a large number of relatively small independent milk processors and each wanted to enlarge its share of the profitable home delivery market. A dairy’s ability to provide its customers with a regular supply of fresh, healthy, disease free, grade A milk was its most important asset in building a strong, loyal customer base. Because of the lack of home freezer units, ice cream was largely a summertime business in the 1920’s and 1930’s. Most ice cream was packaged in large commercial size containers and sold either on a cone or hand-packed by dealers; ie., grocery and drug stores, restaurants, public and private institutions, and confectionery shops. Because ice cream had to be eaten soon after sale, business was dependent upon the whims of the ultimate consumer and the vagaries of the weather. Typical of the times, the “Eskimo Pie” and the “Good Humor Bar” were both invented between 1919 and 1924. The first Howard Johnson’s, with its “famous 28 flavors” of ice cream, opened in 1925.

Even though there were a considerable number of naysayers, the captains of the dairy industry saw a once-in-a-lifetime opportunity to consolidate hundreds, if not thousands, of small independent dairies into a few large, well-organized, centrally-operated dairy companies. What emerged are the large multinational dairy companies that exist today. As a result of consolidation taxpayer reportedly became the nation’s leading dairy company by 1928, the largest ice cream manufacturer in 1930, and controlled nearly ten percent of the entire commercial milk supply in the country by 1934. In some markets taxpayer controlled up to fifty percent of the milk and ice cream business. All of the emerging “super” dairies used the *747 acquisition of other dairies as a method of growth in the various market areas in which they were doing business; they did not view these acquisitions as passive investment opportunities. Taxpayer claimed that economy of scale, diversification, and greater market power motivated all of its acquisitions.

Economies of scale were possible in both production and distribution. Large dairies are able to afford and use modern technology more effectively than small, independent dairies that were generally undercapitalized or limited in growth by high competition and low sales. Due to lower unit costs and overhead costs, large dairies could also afford more advertising and greater merchandising efforts as well as increased expenditures for research and sales personnel. By increasing their size, dairies were also able to increase their market power. They became price leaders and were better able to resist the pressures to stop cub-throat market practices.

Internal growth reportedly would have been more costly, uncertain, slower, and difficult to finance. Acquisition of existing dairies with the requisite tangible and intangible assets was the answer. By acquiring a significant portion of the milk and ice cream business in a market, the acquiring dairy could improve the quality and quantity of supply, use its processing equipment more efficiently, improve costs, increase the number of customers, and make its name more dominant. All of which led to more control over its competitors in the market area.

Taxpayer related that between 1928 and 1932 it acquired 207 core and non-core dairy companies in eighteen different states. Of these, the court is asked to address 125 acquisitions acquired in 1923 through 1932 in fifteen markets. Taxpayer acquired both core and non-core dairies through three principal means; i.e., (1) purchase of assets, (2) purchase of stock followed by an immediate transfer of assets to taxpayer, and (3) purchase of stock not immediately followed by a transfer of assets. In approximately 120 acquisitions, taxpayer purchased the assets of the company. In eighty-six acquisitions the assets were purchased directly by one of taxpayer’s subsidiaries; in twenty-six instances the assets were purchased by taxpayer and contemporaneously transferred to a subsidiary; and in eight acquisitions taxpayer purchased the stock followed by an immediate transfer of assets. In eight core dairy acquisitions taxpayer purchased the stock but the assets remained in the acquired corporation until the 1940’s or 1950’s, at which time those dairies were liquidated or merged with taxpayer along with the assets. It was stipulated that in the case of all but a few core dairies taxpayer paid approximately one hundred percent over the fair market value of the tangible assets for the dairies it acquired.

Taxpayer was not the only dairy company expanding in the early 1900’s. Other dairy companies, such as Carnation, Pet Milk, and Beatrice Foods were emerging as nationwide dairy companies, and at times competed with taxpayer for the acquisition of core and non-core dairies in key market areas. As one of taxpayer’s expert witnesses, Professor Sidney Davidson testified:

Q. Did National Dairy identify a particular city and just run rampant through that city or was there any competition for some of those dairies?

A. Oh, man, there had to be a lot of competition because of the tremendous differences that you have in the price at which those dairies sold for[,] and in the differences between what those dairies were worth as I calculated it[,] and what they actually ended up being sold for. So, there was intense competition in some markets.

Federal and state legislative and regulatory bodies were just beginning to oversee the operations of this intensely local industry. Laws requiring tuberculin inoculation of dairy cows and pasteurization of fluid milk had either just been enacted by state legislatures or were about to be enacted. As a result major dairies found it difficult to successfully compete with each other within a particular market area, though there were exceptions to the general rule. Too much competition within a particular market would prevent a newly-emerging nationwide dairy company from capturing enough of that market to realize the economy of scale and other *748 sought-after benefits that came only to large dominant dairies. Without those benefits, a dairy could not adapt to the rapidly changing technologies, market forces, and government price and quality standards coming to bear upon the industry, and remain competitive. According to several witnesses, the technological growth forced upon the dairy companies, not only by competition for customers but from all levels of government, was phenomenal. Higher quality sources of supply needed to be developed and retained. Cleanliness and quality of milk was all important; poor quality was the death-knell of a dairy. In the 1920’s pasteurization was new and, even though some customers disliked its taste and favored their milk “straight from the cow,” government laws and regulations forced many dairies to produce a higher quality product than had theretofore been the case. Pricing was often controlled by government milk orders that set the prices of various grades of milk and milk products. In effect, the government milk orders created an oligopolistic market; a market structure between a fully competitive market and a monopoly market. The expanding national dairy companies all sought to acquire local dairies with modern plants producing pasteurized grade A milk, with skilled workers, and underutilized capacity that could absorb the production requirements to service more customers. Taxpayer reiterated often that to have done otherwise would have been counter to its goals. The court notes that this large-scale nationwide acquisition effort ceased in the early 1930’s as quickly as it had begun, as the result of antitrust investigations instituted in 1931 by the U.S. Department of Justice.

Following its acquisitions taxpayer began development of the “Sealtest System of Laboratory Protection” and introduced the “Seal-test” trade name on taxpayer’s products in 1935. By 1957, taxpayer had formally liquidated its acquired subsidiary dairies into the Sealtest Division. During the 1930’s through the 1950’s, taxpayer operated at a profit but, by the 1960’s, experienced declining profits in its home delivery milk and ice cream businesses. Taxpayer attributed the decline to several factors including competition for sales from supermarkets, cooperative and chain stores who in the interim years had built ■ their own processing plants, and increased mobility of consumers who were no longer dependent on home delivery.

In 1972 Mr. William Beers, Chairman of the Board of National Dairy Products Corporation and Chief Executive Officer, directed Mr. Kenneth Fishpaw, Vice President and Comptroller, to assess the prospects for restoring profitability to the home delivery milk and ice cream businesses. Mr. Fishpaw concluded that the prospects were slim to none, and despite several local attempts to reinvigorate these businesses, profits continued to decline rapidly. As a result, Mr. Beers ordered the immediate disposition by whatever means of many of its milk and ice cream businesses. Taxpayer asserted that it permanently abandoned intangible assets of the milk and ice cream businesses it had purchased over the preceding forty-five years and claimed an abandonment loss deduction pursuant to section 165(a) of the I.R.C. of 1954 in tax years 1972 through 1978. 1 Taxpayer filed timely tax returns, subsequently amended to reflect the alleged abandonment deductions. The complaint states that the amended returns, for the fiscal years shown, included the following deductions:

Table I

Increase in Other Deductions, Including Abandonment or Disposition of Intangibles. 2

Amount Claimed in Year Amended Returns

1972 $90,000,000

1973 90,000,000

1974 90,000,000

1975 67,000,000

1976 67,000,000

1977 67,000,000

1978 67,000,000

*749 At the conclusion of each amended tax return taxpayer stated: “[i]t is impracticable to include the detail required in these schedules with the return. Complete information is retained by taxpayer in its files.” Taxpayer did not clearly state as much, but the missing “detail” must have been at least part of the massive amount of evidence proffered in this case. To explain the change in the amended returns taxpayer stated the following in its 1974 amended return:

On December 30, 1973 taxpayer owned intangible assets, then utilized in its business, which had a remaining cost basis for income tax purposes of not less than $190,-000,000. Said intangible assets were acquired by the taxpayer or its predecessors by way of acquisition of the stock and/or assets of the companies and/or businesses at a cost as set out in [an attachment]. During the taxable year ended December 28, 1974, taxpayer disposed of a portion of said intangible assets by way of abandonment, which assets are identified [in another attachment], and which assets had a tax basis of $90,000,000. Taxpayer is entitled to an abandonment loss in the total amount of $90,000,000, or such other amount as may be abandoned during said taxable year. Such deduction is allowable pursuant to the provisions of Section 165 IRC (sic) and the authority of Massey[-]Fergu- son____

59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 . Each amended return contained substantially the same language. The Internal Revenue Service disallowed the deductions because of lack of proof of abandonment of the intangible assets, and value. For the tax periods ending in 1975-1978 IRS disallowed the claimed increase in deductions for abandonment losses because “[y]ou have not established that any abandonment of assets occurred. In addition, if an abandonment occurred, you have not established the basis of the assets abandoned.”

At trial defendant asserted that if taxpayer, in fact, ever acquired any intangible assets it retains them to this day, or disposed of them in a manner that did not permit it to take a business loss because it could not prove the adjusted fair market value of each alleged loss. 3

DISCUSSION

General

Section 165(a) of the Internal Revenue Code, 26 U.S.C. § 165 (a), states the general rule to be: “[t]here shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.” The Treasury Regulations implementing 26 U.S.C. § 165 are found at § 1.165. Section 1.165-1 provides that

(a) ... in computing taxable income ... any loss actually sustained during the taxable year and not made good by insurance or some other form of compensation shall be allowed as a deduction subject to any provision of the internal revenue laws which prohibits or limits the amount of the deduction. This deduction for losses sustained shall be taken in accordance with section 165 and the regulations thereunder.

(b) Nature of loss allowable. To be allowable as a deduction under section 165(a), a loss must be evidenced by closed and completed transactions, fixed by identifiable events, and, except as otherwise provided in section 165(h) and § 1.165-11, relating to disaster losses, actually sustained during the taxable year. Only a bona fide loss is allowable. Substance and not mere form shall govern in determining a deductible loss.

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(d) Year of deduction, (a) A loss shall be allowed as a deduction under section 165(a) only for the taxable year in which the loss is sustained____

Treas.Reg. § 1.165-2 provides specifically that

[a] loss incurred in a business or in a transaction entered into for profit and arising from the sudden termination of the *750 usefulness in such business or transaction of any nondepreciable property, in a case where such business or transaction is discontinued or where such property is permanently discarded from use therein, shall be allowed as a deduction under section 165(a) for the taxable year in which the loss is actually sustained.

As a general rule taxpayers who purchase or create intangible assets have a right to deduct the fair market value of those assets under section 165(a) of the Internal Revenue Code of 1954 if the assets are abandoned and a provable loss occurs. Parmelee Transp. Co. v. United States, 351 F.2d 619 , 173 Ct.Cl. 139 (1965); Massey-Ferguson, Inc. v. Commissioner, 59 T.C. 220, 230-31 (1972), acq., 1973- 2 C.B. 2 . Defendant argued that in order to obtain a refund of overpaid taxes taxpayer must show that particular intangible assets were actually acquired, the adjusted objectively determined pro rata fair market value of each intangible asset, the assets had not been previously deducted, the intangible assets were permanently discarded; i.e., neither sold nor retained, and the deductions were taken in the year of abandonment. See UFE, Inc. v. Commissioner, 92 T.C. 1314 , 1989 WL 66542 (1989). In addition, to establish a loss taxpayer must show that the abandoned intangible assets had not been acquired as a minor incident in a composite transaction. Domestic Management Bureau, Inc. v. United States, 38 B.T.A. 640 , 1938 WL 87 (1938).

Defendant challenged the very heart of taxpayer’s case; i.e., that there were no intangible assets acquired with the tangible assets: That it was nothing more than the “generalized undifferentiated goodwill of the dairies acquired — goodwill that remains with taxpayer today.” In the alternative defendant argued that specific intangible assets might be deductible as abandonment losses before a taxpayer completely leaves its business but with the caveat that the intangible asset of “goodwill” cannot be lost or abandoned until its owner ceases to operate completely. Defendant most strongly challenged taxpayer’s tax accounting methodology of assigning pro rata value to the individual intangible assets and argued that in the absence of an objective valuation methodology taxpayer could not prove the adjusted fair market value of any individual intangible asset so as to permit it to take an abandonment loss under the tax code, even if it did incur a loss. Taxpayer did not respond to all of the issues exactly as stated by defendant but did provide a plethora of testimony and documentary evidence that addressed the issues, and more.

Prior Litigation

This is not the first time that the parties have met in court over the tax treatment of assets arising out of these acquisitions. See Kraft v. Commissioner, 21 T.C. 513 , 1954 WL 382 (1954), acq., 1954- 1 C.B. 5 , rev’d on separate issue, Kraft Foods Co. v. Commissioner, 232 F.2d 118 (2d Cir.1956) (Kraft I). In 1952 taxpayer filed suit in the United States Tax Court seeking the refund of taxes under similar circumstances as here. Defendant proffered, and the parties stipulated in Kraft I, that the book value of taxpayer’s tangible assets was the fair market value and that the maximum value of the intangible assets was the difference, or residual, between the total price paid less the book value of the tangible assets. The Tax Court accepted the stipulation, Id. at 573, thereby rendering that fact res judicata. 4 The parties to this action stipulated to the fair market values given the tangible assets by defendant’s expert witnesses in Kraft I, and as outlined in Exhibit CV in that litigation. Kraft I addressed the determination of the fair market value of acquired patents and patent applications. The opinion is complex and extremely thorough in its analysis of the acquired assets. The testimony of the first of four witnesses “was to show the assets [of the seller] according to its books, both tangible and intangible, and finally the net tangible assets ...” Id. at 585. Taxpayer’s expert witnesses testified, in their independent opinions, that the value of the patents and *751 applications was $20 million. Following a thorough examination and analysis of the record the Tax Court rejected the expert valuation testimony and found that it could not conclude that taxpayer supplied adequate proof for the court to find that $20 million (twenty-five percent of the total compensation paid) was the fair market value of the patents and patent applications. The Tax Court nevertheless found that taxpayer had successfully refuted the presumption of correctness of the determination of taxes by the Commissioner, see Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Commissioner v. Riss, 374 F.2d 161, 166 (8th Cir.1967), and undertook an analysis of the entire body of the evidence of record. The Tax Court concluded that taxpayer was not vitally interested in the patents and applications and that the fair market value of the asset was $8 million. The court did not proportionally allocate the $8 million to individual patents and applications because the adjusted tax basis of only one intangible asset was at issue, albeit from the acquisition of a number of dairies. The principle to be gleaned from Kraft I is that book value may, in the proper circumstances, be the fair market value of assets and, more importantly, the court may determine the fair market value other than through the traditional willing buyer — willing seller methodology. Defendant’s Exhibit CV in Kraft I, adopted by the Tax Court, identified the cost of acquisition, book value of the tangible assets, and the residual amount. Of the fifty-four acquisitions listed in Exhibit CV, twenty-two are in issue here. Other data was provided in Exhibit CV but was not stipulated to by the parties. Exhibit CV, in part, contained the following pertinent information about the core dairies:

Table II

Name Total Cost Tangible Value Residual Akron Pure Milk Co. $ 3,974,132 $ 1,516,371 $ 2,457,760 Arctic Dairy Products Co. 8,570,672 4,577,987 1,624,312 The Breyer Ice Companies 22,840,865 7,175,051 16,610,622 Bryant & Chapman Dairy 1,868,636 596,400 1,272,235 City Dairies, Inc. 1,978,495 1,402,231 576,264 Detroit Creamery Co. 30,223,715 10,136,500 20,087,215 Ebling Creamery Co. 3,974,112 2,307,196 1,666,915 D.H. Ewing Sons, Inc. 1,423,757 706,925 716,832 Franklin Ice Cream Corp. 2,395,115 917,455 1,477,660 Gray-Von Allman Dairy 1,401,317 913,676 487,641 Luick Ice Cream Co. 1,955,390 1,117,289 838,101 Mathews Selected Dairies 955,750 385,284 570,466 Muller Dairies, Inc. 812,744 409,152 403,593 Ohio Clover Leaf Dairy 1,711,082 740,509 970,573 Ohio-Toledo Ice Cream Co. 1,082,022 490,415 591,606 Reick-McJunkin Dairy Co. 11,346,249 9,058,690 2,287,560 J.D. Roszel Co. 2,910,818 1,115,800 1,795,018 Sanitary Milk Co. 1,902,785 831,357 1,071,428 Sheffield Farms & Subsidiaries 37,459,686 21,987,857 15,471,829 Supplee-Will Jones Milk Co. 23,088,592 10,946,546 12,142,045 Telling-Belle Vernon Co. 11,691,694 9,193,777 2,497,917 Trapp Bros. Dairy Co. 614,609 527,165 87,444 Western Maryland Dairy 11,049,075 7,084,045 3,955,030 Wisconsin Creameries, Inc. 3,162,616 2,524,652 637,963 Youngstown Sanitary Milk 702,732 446,153 256,580

*752

Goodwill and the Severability of Intangible Assets

The term “goodwill” has been used as an umbrella covering all intangible assets; the way the public perceives a business through rose-colored glasses. Seneca Hotel Co. v. United States, 42 F.2d 343, 344 , 70 Ct.Cl. 316 (1930), cf. Parmelee Transp. Co. v. United States, 351 F.2d 619 , 173 Ct.Cl. 139 (1965). It can mean every positive advantage acquired by the purchase of a business that is expected to result in greater than normal earning power. It can also be but one of several intangible assets. Over the years some commentators and courts have created confusion by questioning whether goodwill is severable and can be partially abandoned prior to taxpayer’s total cessation of business. Modern judicial thought, including that of this court and the United States Court of Appeals for the Federal Circuit, considers the confusion a red herring. If there is an identifiable abandoned severable intangible asset whose fair market value can be proven through judicially accepted methodology, and which meets the other prerequisite standards, UFE, Inc. v. Commissioner, 92 T.C. 1314 , 1989 WL 66542 (1989), the taxpayer is entitled to a loss deduction per I.R.C. § 165(a). Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968); see also Domestic Management Bureau, Inc. v. Commissioner, 38 B.T.A. 640, 643 , 1938 WL 87 (1938); Miami Valley Broadcasting Corp. v. United States, 499 F.2d 677 , 204 Ct.Cl. 582 (1974). In Meredith the United States Court of Claims held that “it is clear the intangible value of a business is divisible into its identifiable constituent elements.” Meredith, 405 F.2d at 1224 , see also Miller & Sons, Inc. v. United States, 537 F.2d 446 , 210 Ct.Cl. 431 (1976). This court is of the opinion that continuance of a business does not prevent recognition of an abandonment loss for a severable intangible asset which is proved by the taxpayer to have an ascertainable fair market value and where such recognition is otherwise proper. Parmelee Trans., 42 F.2d 344 ; see also Massey-Ferguson, Inc. v. Commissioner, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 ; Metropolitan Laundry Co., Ltd. v. United States, 100 F.Supp. 803 (N.D.Cal.1951).

Dr. Knutson, taxpayer’s principal expert witness for identification and valuation of the alleged intangible assets, did not identify the five intangible assets at issue from contemporaneous documentation but from his knowledge of what emerging national dairy companies needed to acquire to be successful. He testified that all of the large dairy companies moving into nationwide sales did not acquire the five intangible assets of core dairies as ancillary to the tangible asset acquisitions but sought out only core dairies with those identified intangible assets. Taxpayer only purchased core • dairies that owned not just the tangible assets that taxpayer needed to enter a geographic market area, but who also owned the intangible assets to make its entry into the market area a success. Dr. Knutson testified that in his opinion the premium paid by taxpayer over the book value of the tangible assets of each acquired core dairy was attributable without exception to the five intangible assets he identified. There is no evidence, nor was there any argument or claim that other intangible assets were acquired with the purchase of core dairies; but, if such was the case, they were abandoned immediately upon acquisition and are not the subject of this litigation.

Integrated Transactions

This part of the discussion addresses the eight core dairies of which taxpayer acquired the stock but not the assets until years later. Defendant argued that taxpayer’s loss under I.R.C. § 165(a), for abandonment of an asset it received in liquidation of a subsidiary long after it was acquired is limited to the amount of the subsidiary’s adjusted tax basis in the asset. Section 332(a) of the I.R.C. states, in part, that “[n]o gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.” Section 334 states, in part, “[i]f property is received by a corporation in a distribution in a complete liquidation to which section 332(a) applies, the basis of the property in the hands of the distributee shall be the same as it would be in the hands of the transferor.” Defendant did not argue that the rule would apply to asset acquisitions or stock acquisitions fol *753 lowed quickly by liquidation because the latter are considered asset acquisitions under Kimbell-Diamond Milling Co. v. Commissioner, 14 T.C. 74, 80 , 1950 WL 118 (1950), aff'd, 187 F.2d 718 (5th Cir.1951), cert. denied, 342 U.S. 827 , 72 S.Ct. 50 , 96 L.Ed. 626 (1951).

The parties agree correctly that the issue of taxpayer’s entitlement to a deduction for the alleged abandonment of an asset at a rate different from the acquired dairy’s basis in the asset is controlled by Kimbell-Diamond Milling Co. v. United States, swpra, and that substance, not form, is determinative of the tax. Treas.Reg. § 1.165-1(b). Courts have consistently held that where a corporation intends to acquire the assets of another and through a series of intervening steps first acquires the stock, then dissolves the acquired corporation and distributes the assets to itself, the acquisition will be deemed to have been an asset acquisition. Defendant argued that Kimbell-Diamond applies only if the acquired corporation is dissolved and the assets transferred immediately, or shortly after, acquisition of the stock. Taxpayer countered that the dissolution need not be immediate as long as it can be proved that the original intent of the acquiring corporation was to acquire the assets. The issue was discussed in Kanawha Gas & Utils, v. Commissioner, 214 F.2d 685, 692 (5th Cir.1954), and requires the court, using the principal of substance over form, to make its adjusted tax basis determination as of the date of the original stock acquisition. Kanawha stated “[t]o determine what basis provision [of the I.R.C.] applies, we must first ascertain the true nature of the transaction.” Id. at 692 . Georgia Pac. Corp. v. United States, 264 F.2d 161, 163 (5th Cir.1959), held that

when stock in a corporation is purchased for the purpose and with the intent of acquiring its underlying assets and that purpose continues until the assets are taken over, no independent significance tax-wise attaches to the several steps of a multiple step transaction. The final step is, therefore, viewed not as independent of the stock purchase but simply as one of the steps in a unitary transaction, the purchase of assets.

In American Potash & Chem. Corp. v. United States, 399 F.2d 194 , 185 Ct.Cl. 161 (1968), motion for reconsideration denied, 402 F.2d 1000 , 185 Ct.Cl. 161 (1968), the United States Court of Claims held:

[I]f a taxpayer who is interested primarily in acquiring a corporation’s assets first purchases stock and then liquidates the acquired corporation to reach the assets, the interim, purportedly separate steps taken to accomplish the primary objective will be disregarded and the steps considered a single transaction. Objectively, in form a purchase of stock has been accomplished; in substance the transaction is considered a purchase of [assets].

In Knapp King-Size Corp. v. United States, 527 F.2d 1392 , 208 Ct.Cl. 533 (1975), the court compared the Kimbell-Diamond rule with Section 334(b)(2) of the Internal Revenue Code of 1954:

Kimbellr-Diamond ... holds that where one corporation purchases the stock of another with the intent of acquiring the latter’s assets by liquidation of the acquired corporation, and in fact liquidates it, the intermediate steps may be disregarded and the entire transaction treated as a purchase of assets at the purchaser’s cost of the stock, and such price shall be deemed the purchaser’s basis of the assets for sale, depreciation and other purposes. Section 334(b)(2) differs in some respect from the Kimbellr-Diamond rule. It ... does not depend upon the purchaser’s subjective intent.

The issue is thus a question of fact to be decided by the court, based upon the preponderance of the evidence, looking to the substance of the issues. Koppers Coal Co. v. Commissioner, 6 T.C. 1209, 1218 , 1946 WL 265 (1946); 83 A.L.R.2d 718 , §§ 2, 3, 6. When the assets of a corporation whose stock has been acquired are immediately integrated into the acquiring company proof of the original intent to acquire the assets is obvious. After the passage of time between a stock acquisition, and dissolution coupled with acquisition of the assets, the question becomes more difficult.

*754 Taxpayer purchased all or a controlling interest in the stock of the eight core dairies at issue here in the 1920’s and 1930’s but did not liquidate the dairies and transfer the assets, for the first time to taxpayer, for a period of years, even decades. Defendant identified the eight core dairies whose stock was purchased by taxpayer who held the stock for a period of years without liquidating and transferring the assets to itself.

Table III

Dairy Acquired Liquidated Years Held Detroit Creamery 5 1929 1936 7 Arctic Dairy Products 5 1928 1936 8 Harding Ice Cream Co. 6 1926 1937 11 Wisconsin Creameries 7 1929 1950 21 Western Maryland 1930 1956 26 Telling-Belle-Vernon 1928 1955 27 Supplee-Wills-Jones 1925 1956 31 Reick-McJunkm 1923 1956 33

Taxpayer’s “explanation,” that it operated some of the eight core dairies during the intervening years under their original names because it was advantageous to maintain their identity for reasons of customer loyalty in order to capitalize on the claimed intangible assets of Customer Base and Trade Name, is without merit. Taxpayer proved beyond doubt that its sole reason for acquiring core dairies was to create a large nationwide dairy business within which all of its products would be marketed and advertised under a common name. The only time it varied from that goal was when outside circumstances prevented immediate liquidation of an acquired dairy. The real reasons for the delay and the impact upon taxpayer’s claim is discussed in other sections of this Opinion. Dr. Knutson’s “tailor-made” for trial, inconsistent “explanation,” that it wished to capitalize on some acquired dairies trade names and trademarks, damaged his credibility.

Defendant asked the court to find that taxpayer’s basis of each intangible asset, for the purpose of determining taxpayer’s business loss deductions under I.R.C. § 165(a), was the acquisition cost of the assets to the acquired dairy. Defendant stated that some acquired dairies owned valuable intangible assets but the books and records showed that the acquired dairies spent only a small fraction of what taxpayer paid to acquire those assets from them. According to defendant the tax basis is what an acquired dairy could have taken as a business loss deduction had the acquired dairy liquidated its assets in the 1920’s and 1930’s instead of selling its stock to taxpayer. Under I.R.C. § 334, the adjusted tax basis of the intangible assets in the mid-1950’s to taxpayer would then be the *755 same as that of the acquired dairies in the 1920’s or 1930’s, and taxpayer may only take a deduction for its inherited base value in the assets in question; ie., the carry-over value. Taxpayer launched a strong counter to defendant’s argument premised in part upon the argument that in substance it always intended to purchase the assets, and actually acquired control of the assets of the challenged core dairies even though it owned only the stock.

Both parties cited pre-litigation statements of taxpayers to prove their theses. Defendant recalled a statement given by an officer of taxpayer to the Federal Trade Commission in 1926 that taxpayer was “merely a holding corporation owning the stock of its subsidiaries.” Taxpayer’s legal counsel explained its acquisition policy in a letter written in 1929 to a dairy that taxpayer intended to acquire:

The new company continues to operate under the same management as before it was taken over, with a few members of [taxpayer’s officers] on the Board of Directors. Some of the more mechanical details in connection with the operating and management of the business, such as keeping of books of accounts and records and the handling of the corporate records follow a uniform practice which the management will be expected to follow.

In connection with the 1931 antitrust investigation, taxpayer stated that the companies whose stock it acquired retained their identities. In conjunction with the antitrust investigation, the president and general manager of taxpayer’s St. Louis subsidiary (not in litigation here) testified under oath that “[t]here is no national superintendent, ... we run our business from a local standpoint, controlled by the Board of Directors.” Defendant concluded that this decentralization of management, control, and independence was so significant as to belie taxpayer’s position that it acquired and maintained control over the assets of the eight stock acquisitions. 8

Taxpayer responded that the substance of its acquisition policy was to acquire the tangible and intangible assets of operating dairies and that the form of the acquisitions was dictated by the exigencies of the selling dairy and not by any investment or tax considerations. See 26 U.S.C. § 165 ; Kimbell-Diamond, 14 T.C. at 80 . Each dairy acquired was intended to supplement the others as part of an integrated national dairy business. The assets of all acquired dairies were controlled as a unified business through direct lines of authority from taxpayer’s home office. Testimony of several witnesses and a 1930 document entitled “Confidential Report to the President [of taxpayer]” described the elements of centralized control, as exacted by taxpayer over its operating divisions.

Weekly reports of sales, weather and labor conditions were required. Each consolidated local business had to follow [taxpayer’s] Manual of Accounting. Financial statements had to be prepared following [taxpayer’s] prescribed format. Responses to governmental requests were to be handled by the home office. Uniform standards and rules of operation were imposed. Insurance for all operations was purchased by the home office. No funds could be borrowed except through the home office. All surplus funds were transferred to the home office. No acquisition or sale of businesses or properties could be undertaken without the direction and approval of the home office. All salary changes required home office approval.

Taxpayer also maintained centralized health and sanitation services to assure uniform quality of products, minimize health problems and assist in solving plant operating problems. Mr. Mclnnerney stated in taxpayer’s 1926 annual report that

[d]uring the year just closed, the management of your company has taken important *756 steps in unifying the purchasing, accounting control, technical research and other aspects of the business of its subsidiaries with the resulting economies of operation and standardization of methods.

The 1936 annual report announced the formation of the Sealtest System of Laboratory Protection as “a further step in [taxpayer’s] efforts to bring efficiencies and greater quality standards to its local dairy businesses:”

A significant step during the past year was the formation of the Sealtest System of Laboratory Protection. All the research, bacteriological and testing laboratories in the National Dairy organization, exceeding 100, together with the master laboratories at Baltimore and Chicago, have been merged into one centrally-directed laboratory system, the Sealtest System Laboratories, Inc.

:js #

Although this laboratory organization was only organized as a separate division of your company in 1935, its inception occurred some eight years ago [in 1927] when National Dairy’s first research laboratory was organized in Baltimore.

Witnesses for taxpayer agreed that senior local dairy and division managers operated with a set degree of autonomy premised on the principle that only responsible employees locally situated could efficiently operate a dairy. The purchase and sale price levels for milk and ice cream had to be based upon local market conditions. The local dairy negotiated with the local milk producers, or their cooperative, and competed with local competitors. Dr. Clarence Roberts, an employee of taxpayer from 1925, president of Sheffield Farms Dairy [acquired by taxpayer in 1925] from 1950 until 1960, and president of taxpayer’s Sealtest Division from 1960 until his retirement in 1965, testified, that “only occurrences in the day-to-day operations would dictate when to add, change, or drop delivery routes.” Another of taxpayer’s witnesses explained “[w]e elect the boards of directors and change management if results are unsatisfactory.”

Both parties cited and labeled as “consistent” and “inconsistent” prior statements that they opined best supported their positions, and a casual reading of the record could lead to an erroneous conclusion that the two positions were fundamentally inconsistent. Such is not the case. The court has carefully studied the voluminous record to identify how taxpayer met its avowed goals. In addition, the court had the benefit of observing the witnesses as they testified, and makes its findings with those observations in mind.

The court finds that taxpayer’s delegations of operating authority were nothing more than an example of reasonable corporate management policy. It is true that local managers exercised a significant degree of local autonomy and that some witnesses referred to decentralized management. Nevertheless, it is clear from the record that taxpayer did not delegate to the acquired dairies or operating divisions any of the authority or control that taxpayer perceived it needed to retain in order to assure its growth in the industry nationwide. Taxpayer proved by a great preponderance of the evidence that to have done otherwise would have defeated the very purpose of the consolidations; ie., to gain the economic benefits of scale and big business. Taxpayer effectively controlled the business and assets of all core dairies it acquired, regardless of the form of acquisition, by establishing policies and standards and reserving to itself the authority to approve or disapprove all major activities undertaken by its subsidiaries not directly related to the local physical sale of fluid milk and ice cream. Taxpayer’s management was certainly not hesitant about exercising its reserved right to make key policy decisions, to guide and direct local management, and to remove local management when it failed to meet or comply with taxpayer’s policies and direction. Dr. Roberts said he could have cared less what form the acquisitions took; stock or asset. He testified that Mr. Mcln-nemey was only interested in acquiring and controlling dairies that fit his grand plan and left the form of the transactions to his bankers and lawyers as long as the substance of the results met his goals.

Moreover, defendant previously had agreed in Kraft I that taxpayer always in *757 tended to acquire the assets of the dairies it purchased regardless of the means of acquisition. In its 1950 brief to the Tax Court, defendant argued that taxpayer “absolutely controlled the subsidiary operations it acquired in the 1920’s and 1930’s.” The Tax Court agreed and found that the consideration paid for each dairy, regardless of the form of acquisition, was for all of the tangible and intangible assets. Through the acquisition of stock and placement of taxpayer’s officers on the boards of directors of the acquired dairies, taxpayer gained full control of the assets of those dairies. The dairies were, as the Tax Court found in Kraft I, “operated as ‘divisions’ of [taxpayer].” The fact that taxpayer left several of its dairies in their acquired corporate shells for a number of years, in the circumstances of this case, is not evidence of lack of control or an intent not to operate as an integrated or unified dairy business in its newly acquired market areas. See KFOX, Inc. v. United States, 510 F.2d 1365, 1378 , 206 Ct.Cl. 143 (1975). The preponderance of the evidence supports taxpayer’s position that in the circumstances of this case the means of acquisition was form, whereas taxpayer’s intent and the result was the substance to which the court must look. Had a contemporaneous, formal, specific plan of acquisition and liquidation existed there would have been no question of taxpayer’s intent. But the absence of such a plan is not presumptive evidence of the contrary. The law merely requires that taxpayer’s intention be evident from all the available facts and circumstances. Commissioner v. Ashland Oil & Ref. Co., 99 F.2d 588 (6th Cir.1938), cert. denied, 306 U.S. 661 , 59 S.Ct. 786 , 83 L.Ed. 1057 (1939); Kimbell-Diamond Milling Co. v. Commissioner, 14 T.C. 74 , 1950 WL 118 (1950), aff'd, 187 F.2d 718 (5th Cir.1951), ce rt. denied, 342 U.S. 827 , 72 S.Ct. 50 , 96 L.Ed. 626 (1957); American Potash & Chemical Corp. v. United States, 399 F.2d 194 , 185 Ct.Cl. 161 (1968).

The determination of whether taxpayer purchased the stock of the eight core dairies at issue without any view to acquiring the assets is not difficult in this case. The Tax Court found in Kraft I, and this court also finds, based upon its understanding of the milk industry and taxpayer’s goals specifically, coupled with the evidence and testimony of a number of very credible witnesses, that in all instances taxpayer intended to, and did, acquire control of the assets of the core dairies that it purchased regardless of when they were dissolved and the assets transferred to taxpayer. Taxpayer conducted its business through a number of regional divisions that were controlled in accordance with instructions from its home office and subject to home office approval for numerous specific activities and actions. The fact that taxpayer did not immediately liquidate several core dairies and distribute the assets to itself does not change the fact that each acquisition was part of a single integrated unified transaction entitling taxpayer to treat each acquisition as the purchase of assets at taxpayer’s cost of the stock. In attempting to prove the fair market value of the intangible assets of the eight core dairies that were not immediately dissolved taxpayer’s business losses, if otherwise proved, are not limited to the carry-over value; i.e., the cost of the assets to the acquired dairies. American Potash, supra. In substance the challenged eight core dairy stock acquisitions were integrated acquisitions of assets.

Fair Market Value

How fair market value is defined is a legal question; what constitutes fair market value in a particular case is a factual matter and the burden of proof is on the taxpayer. Miller v. United States, 620 F.2d 812, 825 , 223 Ct.Cl. 352 (1980). That burden is, however, not absolute. In a tax refund case there is a strong presumption that the assessment of taxes determined by the Commissioner of Internal Revenue is correct. Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Stubbs, Overbeck & Assoc. v. United States, 445 F.2d 1142, 1148 (5th Cir.1971); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Commissioner v. Riss, 374 F.2d 161 (8th Cir.1967). The presumption can be overcome but taxpayer must prove by substantial evidence the wrongfulness of the Commissioner’s determination. Riss, 374 F.2d at 166 . If taxpayer meets its burden of proof the presumption disappears and the court is left to independently resolve *758 the question of the tax upon the basis of all of the evidence of record before it. Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968); Helvering v. Taylor, 293 U.S. 507 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935); Stubbs, Overbeck & Assoc., supra; Commissioner v. Riss, supra. Riss held:

The presumption of correctness rule is usually dispositive of a case in situations where the taxpayer offers no substantial evidence to overcome the presumption created by the Commissioner’s determination. However, when the taxpayer has offered substantial evidence to support his position, the presumption disappears. The fact issue must then be resolved by the court upon the basis of the evidence before it____

Riss, 374 F.2d at 166 .

One of taxpayer’s expert witnesses was Professor Sidney Davidson who testified in the main about “generally accepted accounting principles” (GAAP) in the 1920’s and 1930’s and how taxpayer accounted for its acquisitions. Professor Davidson testified that there was “no significant difference” between financial and tax accounting in the 1920’s and 1930’s. Professor Davidson also offered several definitions of intangible assets but prefaced his remarks with the statement: “[Accountants have had difficulty developing a precise definition of intangible assets.” Referring to a book by Eric Kohler, The Language of Business, 9 Professor Davidson said that an intangible asset was

a capital asset having no physical existence, its value being limited by the rights of ... anticipative benefits that possession confers upon the owner. [Kohler] goes on to say, [i]ntangible assets appearing in published financial statements may include goodwill acquired in the purchase of a business, representing the excess of costs of investment in the partial or total equity of another organization, over its reported book value at the time of acquisition.

Professor Davidson testified that he has written: “Intangible assets are, or an intangible asset is, a non-physical, non-current right that gives a firm an exclusive or preferred position in the marketplace.” He continued, there are frequently listings of intangible assets that have no common characteristics that are frequently grouped together under the heading “goodwill.” Professor Davidson identified two types of intangible assets. Those having an ascertainable life, such as patents, and those for which a reasonable life cannot be determined. The latter do not necessarily last forever but at the time of acquisition have no indication of limited life. Examples of such intangible assets are “going-concern,” “trade names,” “subscription lists,” and “organization costs.” If any life limit were put on them at the time of acquisition, it would be totally arbitrary. It is because no reasonably accurate life can be ascribed to the latter intangible assets that they cannot be amortized. See Burnet v. Niagara Falls Brewing Co., 282 U.S. 648, 654-56 , 51 S.Ct. 262, 264-265 , 75 L.Ed. 594 (1931); Manhattan Co. of Virginia, Inc., 50 T.C. 78, 96 , 1968 WL 1494 , appeal dismissed (4th Cir.1968), acq., 1974- 2 C.B. 3 ; Cornish v. United States, 348 F.2d 175 , 185 (9th Cir.1965).

Professor Davidson justified his conclusion that taxpayer had purchased intangible assets because the purchase price, less book value of the tangible assets as identified in the annual financial statements and other related documents of a number of the acquired dairies, left a residual of about half the purchase price. Professor Davidson did not review the files for all acquisitions but upon the basis of representative review of the major acquisitions, taxpayer’s litigation files, and Kraft I, concluded that the total residual for all 125 acquisitions was $175 million and concluded that taxpayer was “not stupid, and therefore, they must have acquired some intangibles.” At least he “hope[d] so.” He also testified that taxpayer charged the residual in the 1920’s and 1930’s to surplus, and later to profit and loss, but in any event the residual was written off and *759 never carried forward on taxpayer’s annual financial statements. 10 Professor Davidson concluded that “[t]here was nothing left to write off because they [the intangible assets] had been written off to surplus at the date of acquisition.” A short while later he testified “the intangible assets ... never got onto plaintiffs books and were never, therefore, available to be written off or deducted for tax purposes.” 11

Based upon Professor Davidson’s highly credible testimony and its thorough review of the record, specifically taxpayer’s returns during the period 1924 through 1978, the court found no evidence that taxpayer took prior deductions for, or any other favorable tax treatment of, the allegedly acquired intangible assets in issue. The court gave special consideration to taxpayer’s returns for the years 1924 through 1932 seeking a pattern of deductions contemporaneous with the acquisitions. No “suspicious” deductions were found, neither was any pattern discovered in later returns from which the court could infer such tax treatment. The fact that eight consolidated tax returns during the 1930’s were missing from the record does not detract from this finding. See Massey-Ferguson, Inc. v. Commissioner, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 . Parts of the eight consolidated tax returns were lost in the past sixty years but the available returns and Professor Davidson’s testimony that the value of the intangible assets had been written-off at or near the time of acquisition support the finding. Id.

Taxpayer’s intangible asset identification and valuation expert witness was Dr. Ronald Knutson, an individual with a depth of knowledge of the dairy industry matched by few. He prefaced his testimony with the unrefuted statement that the dairy industry was the most extensively studied industry in the United States.

Dr. Knutson testified that he had a “fair amount” of experience in valuing land to determine the effect a government program, or a company’s proposed use, would have upon it in terms of dollars; i.e., how economic forces affected values. As an example, Dr. Knutson stated that he could value a federal or local government’s regulatory policy against a dairy’s assets. He also testified that he knew how to establish the fair market value of an asset by capitalizing the asset. In the latter context, Dr. Knutson testified that he had valued tangible and intangible assets of companies to determine what an asset would be worth to a buyer or seller, but not necessarily what a buyer would pay for an asset or what a seller would sell it for. The latter, he contended, was a different issue than the former and to be found only through the process of negotiation. His valuation might or might not have been the final purchase price, and he opined, might or might not have been what the asset was worth on the open market “in a vacuum.” Dr. Knutson stated that he was very familiar with the traditional open, or fair market, willing buyer — willing seller valuation methodology but could not use that method because the necessary comparative data was lacking. 12 He found no eontempo- *760 raneous reported similar sales from which he could draw information for comparison purposes. As a result, Dr. Knutson determined what assets would have been of value to taxpayer, and the value of those assets to taxpayer.

Dr. Knutson did not use the residual method to determine the value of the intangible assets. He instead used what he characterized as the “reasoned value method” to suggest the fair market values of the individual intangible assets acquired from each dairy. In so doing, the sum of the values he found in each acquisition was in a few instances in excess of the residual values, but the parties stipulated that the maximum amount taxpayer could recover for each acquired dairy would be no greater than the residual value. Dr. Knutson also testified that in his opinion the intangible assets acquired from each dairy were permanently abandoned at the time taxpayer left the geographic market area.

Defendant charged that Dr. Knutson did not know how fair market value was calculated and, by his own admission, did not purport to do so. Defendant continued, that “[o]ne way of describing the main difference between [Dr.] Knutson’s ‘value’ and ‘fair market value,’ is that the former is subjective to the purchaser;” that Dr. Knutson asked what an asset was worth to a particular buyer. That is, what taxpayer would have paid for the asset as opposed to its price on the open market, whereas “[v]alue must be determined objectively.” Travelers Ins. Co. v. Bullington, 878 F.2d 354, 358 (11th Cir.1989). Dr. Knutson admitted that his valuation might or might not be the fair market value; “[v]alue is not intended to be a reflection of what that asset might [realistically] sell for on the open market.”

Taxpayer referred to United States v. 564.54 Acres of Land, 441 U.S. 506 , 99 S.Ct. 1854 , 60 L.Ed.2d 435 (1979), for the proposition that “fair market value does not include the special value of property to the owner arising from its adaptability to his particular use.” The case does stand for the proposition asserted by taxpayer but has no relevance to the issues at bar. United States v. 561.51 Acres of Land was a case of condemnation of privately owned land under the Just Compensation requirement of the Fifth Amendment to the Constitution. The United States took land for a public purpose from a church that had used the land as nonprofit summer campsites. The United States offered $485,400 as the fair market value. The church refused the offer and demanded $5.8 million, the cost of developing functionally equivalent substitute facilities at a different site. 13 The Supreme Court rejected the equivalent substitute facilities cost as the fair market value of the land taken, and said

[b]ecause of serious practical difficulties in assessing the worth an individual places on particular property at a given time, we have recognized the need for a relatively objective working rule. See United States v. Miller, 317 U.S. 369, 374 [, 63 S.Ct. 276, 280 , 87 L.Ed. 336 ] (1943), United States v. Corps, [sic] 337 U.S. 325, 332 [, 69 S.Ct. 1086, 1090 , 93 L.Ed. 1392 ] (1949). The Court therefore has employed the concept of fair market value to determine the condemnee’s loss. Under this standard, the owner is entitled to receive “what a willing buyer would pay in cash to a willing seller’ at the time of the taking. United States v. Miller, supra, [317 U.S.] at 374 [, 63 S.Ct. at 280 ]; accord, City of New York v. Sage, 239 U.S. 57, 61 [, 36 S.Ct. 25, 26 , 60 L.Ed. 143 ] (1915); United States v. Virginia Electric & Power Co., 365 U.S. 624, 633 [, 81 S.Ct. 784, 790 , 5 L.Ed.2d 838 ] (1961); Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 474 [, 93 S.Ct. 791, 794 , 35 L.Ed.2d 1 ] (1973).

^ ^ ^ ^

*761 But while the indemnity principle must yield to some extent before the need for a practical general rule, [the Supreme] Court has refused to designate market value as the sole measure of just compensation. For there are situations where this standard is inappropriate. As we held in United States v. Commodities Trading Corp., 339 U.S. 121, 123 [, 70 S.Ct. 547, 549 , 94 L.Ed. 707 ] (1950): ‘[W]hen market value has been too difficult to find, or when its application would result in manifest injustice to owner or public, courts have fashioned and applied other standards ... Whatever the circumstances under which such constitutional question arise, the dominant consideration always remains the same: What compensation is ‘just’ both to an owner whose property is taken and to the public that must pay the bill?’ See also United States v. Corps, [sic] supra, [337 U.S.] at 332 [, 69 S.Ct. at 1090 ;] United States v. Toronto, Hamilton & Buffalo Nav. Co., supra, [ 338 U.S. 396 ] at 402 [, 70 S.Ct. 217 at 221 , 94 L.Ed. 195 ]; United States v. Miller, supra [317 U.S.] at 374 [, 63 S.Ct. at 280 ].”

United States v. 564.54 Acres of Land, 441 U.S. at 511, 512 , 99 S.Ct. at 1857, 1858 . There is no disagreement that the measure of just compensation for property taken by the United States should be its fair market value, but that circumstances do arise where it is judicially acceptable to utilize a different measure. That is not, however, the case in tax accounting. Taxpayer has not cited, and after an exhaustive search the court is aware of no court that has adopted the proposition that the value of an intangible asset for tax purposes was not its fair market value.

One of defendant’s principal contentions was that taxpayer could not prove a separate fair market value for each intangible asset. Taxpayer responded that the record for each of the 125 acquisitions in issue established, by the preponderance of the evidence, the fair market values of the intangible assets. Proof, taxpayer claimed, was in the record and included expert and factual testimony, stipulations of fact, contemporaneous audit reports, New York Stock Exchange Listing Applications, contemporaneous internal financial data, and Accounting Acquisition Cards, though not all of the listed forms of proof were present in each instance.

Defendant specifically challenged Dr. Knutson’s use of taxpayer’s Accounting Acquisition Cards for proof of the matters contained in the Cards; i.e., corporate histories of acquired companies, mergers, liquidations, and transfers of assets. Defendant argued that the origin of the Accounting Acquisition Cards and the basis of the reported data was unknown. However, prior to trial taxpayer employed an expert document witness to review and verify the accuracy of the Accounting Acquisition Cards. Defendant deposed the document expert, and following the deposition, wrote taxpayer that

This is to confirm the statement that our trial attorney made to your partner, James Malone. For purposes of this case only, the Government does not dispute that the “Accounting Acquisition Cards” included on the exhibit lists attached to Kraft’s first and second requests for admissions are authentic documents, the entries on which were made on or about the dates stated. (We do not hereby admit any facts that might be supported by reference to these cards. Our position here is directed only to the authenticity of the documents.)

Defendant’s acceptance of the Accounting Acquisition Cards as authentic was with reference only to the Accounting Acquisition Cards for the Peoria, Northeastern Ohio, Kansas City, Toledo, and Omaha market areas. In the Peoria market area, for example, the parties stipulated that the Accounting Acquisition Cards were prepared by company employees principally during the period 1925 through 1935 and that contemporaneous additions were made to the Cards to reflect various corporate transactions after that time. Defendant offered no evidence that any of the data listed on the dozens of Accounting Acquisition Cards was inaccurate. Moreover, the Price, Waterhouse & Co. acquisition audit reports and New York Stock Exchange Listing Applications, with but a few exceptions, verified the information and data in the Accounting Acquisition Cards. Defendant separately stipulated that the Accounting Acquisition Cards for the Peoria, *762 Northeastern Ohio, Omaha, and Louisville market areas were authentic business records.

Defendant’s implicit challenge to the Accounting Acquisition Cards was to their admissibility under the Hearsay Rule. Fed. R.Evid. 802. The Accounting Acquisition Cards are admissible pursuant to the “ancient document” exception. Fed.R.Evid. 803(16), to wit: “Statements in a document in existence 20 years or more whose authenticity is established [are admissible for the proof of the statements].” The “ancient documents” exception directs that the data or information contained therein be considered as true. Courts have traditionally relied on ancient documents because they antedate the present controversy and there is little that can be done to suggest that they were tailored to prove a point in the present controversy. See George v. Celotex Corp., 914 F.2d 26, 30 (2d Cir.1990). As noted by McCormick on Evidence, § 298, and referred to in the Notes of the Advisory Committee on the Federal Rules of Evidence, the “danger of mistake is minimized by the authentication requirements, and age affords assurance that the writing outdates the present controversy.”

There is no question but that the Accounting Acquisition Cards that were admittedly authentic, or stipulated to, are admissible for the proof of what is stated in them. Because the history and circumstances surrounding the other Accounting Acquisition Cards is the same as those that were not challenged, the court finds that the authenticity of the remainder of the Accounting Acquisition Cards has been established and are likewise proof of what is stated in them.

The Accounting Acquisition Cards are also acceptable for the proof of what is stated in them pursuant to the exception to the Hearsay Rule for a record that is a regularly conducted business activity. Fed. R.Evid. 803(6). 14 It is indisputable that taxpayer’s Accounting Acquisition Cards were kept in the course of a regularly conducted business activity. Once defendant stipulated that some of the Cards were authentic, it cannot, without proof, attempt to deny any “facts that might be supported by reference to these cards.” Defendant’s argument to exclude the Accounting Acquisition Cards from consideration by the court fails.

Defendant also challenged Dr. Knutson’s use of the New York Stock Exchange Listing Applications as proof of product volume sales, financial information, and historical data. However, during the trial of Kraft I, defendant introduced the testimony and report of its expert witness, Mr. Haslam. Mr. Haslam testified in Kraft I, that he relied extensively on the NYSE Listing Applications in preparing his report and that he had found them reliable because “[t]he New York Stock Exchange required a listing application be adequate and that it state the true condition of the company being acquired.” Mr. Haslam used the information contained in the NYSE Listing Applications to allocate the portions of the purchase prices for the fifty-four acquisitions he examined to the tangible assets acquired from each dairy. It is his conclusions that are set out in Table II, supra. Mr. Haslam also stated that

[f]or purposes of this study, we proceeded on the assumption that any excess [residual] consideration paid over and above the tangible assets acquired, represented for all intents and purposes, the intangibles purchased.

The Tax Court accepted Mr. Ha-slam’s suggested findings and conclusions. Defendant’s use of the NYSE Listing Applications to prove the value of taxpayer’s as *763 sets in Kraft I is sufficient proof of their veracity at this time. “As a general rule the pleadings of a party made in another action ... are admissible as admissions of the pleading party to the facts alleged therein, assuming of course that the usual tests of relevancy are met.” Continental Ins. Co. of N.Y. v. Sherman, 439 F.2d 1294 , 1298 (5th Cir.1971). Such prior pleadings represent either an exception to the hearsay rule or, alternatively, meet the requirements for admissible hearsay. Defendant is bound by its earlier testimony in Kraft I.

An equally applicable doctrine to govern the effect given Mr. Haslam’s testimony is that of “preclusion of inconsistent positions,” or “judicial estoppel.” While Moore refers to judicial estoppel as one of “rather vague outline,” IB J. Moore, et al., Moore’s Federal Practice, 110.405[8], at 239 (2d ed. 1991) [hereinafter IB Moore’s Federal Practice], the United States Court of Appeals for the Federal Circuit has dealt with this issue extensively, and has provided standards for the application of judicial estoppel. See Water Technologies v. Calco, Ltd., 850 F.2d 660 , 665-66 (Fed.Cir.1988); Jackson Jordan, Inc. v. Plasser Am. Corp., 747 F.2d 1567 , 1578-80 (Fed.Cir.1984).

Many jurisdictions have recognized that “a litigant is not completely free to argue whatever state of facts seems advantageous at a point in time, and a contradictory state [of facts] whenever self-interest may dictate a change.” 1B Moore’s Federal Practice, 110.405[8], at 240. The goal of “judicial estoppel” is to prevent litigants from “playing fast and loose” with the courts, to protect judicial integrity, Scarano v. Central R.R. of New Jersey, 203 F.2d 510, 513 (3d Cir.1953), and to “avoid unfair results and unseemliness.” Jackson Jordan, 747 F.2d at 1579 (quoting Wright, et al., Federal Practice and Procedure: Jurisdiction, § 4477, at 779 (1981)). 15 Unlike res judicata or collateral estoppel, preclusion by judicial estoppel “is not based upon [the] finality of judgments.” 1B Moore’s Federal Practice, K 0.405[8], at 239.

The Federal Circuit has held that the application of judicial estoppel is unwarranted when the following seven factors are present: (1) no “judicial acceptance” of the previously asserted inconsistent position has taken place; (2) there is no risk of inconsistent results; (3) there is no effect of the pleading party’s actions on the integrity of the judicial process; and (4) there is no perception that the court has been misled. Water Technologies, 850 F.2d at 665-66. The Federal Circuit also requires (5) reliance by the opposing party, and (6) prejudice to the opposing party’s case as a result of the inconsistent position. Jackson Jordan, 747 F.2d at 1579-80. Most importantly, (7) the party against whom estoppel is invoked must have “received some benefit from the previously taken position; i.e., [it] Von’ because of it----” Id. at 1579.

Pursuant to the standards adopted by the Federal Circuit, defendant is judicially es-topped from denying the veracity of the NYSE Listing Applications. The Tax Court adopted Mr. Haslam’s testimony and data, including his reliance on the NYSE Listing Applications, and if this court were to ignore defendant’s prior pleading there could be an unnecessary risk of inconsistent results on the issue of the proof to be drawn from the Applications that could be misleading to this court. Dr. Knutson testified that he relied on the data in the NYSE Listing Applications and if the court were to deny the veracity of the evidence it could be at odds with the Tax Court and defendant’s prior position on the same issue. Because the elements of judicial estoppel are present defendant is estopped from challenging the veracity of the very same data it successfully presented to the Tax Court in Kraft I.

The court is of the opinion that in tax accounting the determiner of fair market value need not be hampered with blinders; the value given an intangible asset by another methodology, or different data, can be the fair market value, even if different methodologies, or data, suggest different fair market *764 values. See Massey-Ferguson v. United States, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 . Dr. Knutson and counsel for taxpayer stated on several occasions throughout trial that taxpayer gave the court the best information and analyses available and it was the responsibility of the court to find if the result was the fair market value, and if not, what was.

The Tax Court in Massey-Ferguson, faced with this “duty” addressed a corporate taxpayer’s claim that it had abandoned four intangible assets; i.e., trade name, distributorship system, product line and going-concern, and took a tax deduction for the loss incurred. Defendant asserted that taxpayer failed to prove what intangible assets had been acquired, and the pro rata fair market value of each. The Tax Court found that intangible assets had been acquired, that some were abandoned in the proper tax year, and others were not. In determining the fair market value of each intangible asset, the Tax Court relied upon the testimony of two expert witnesses each of whom valued the trade names on the basis of the reputation of the seller’s products in the light of the industrial products field; the general line distributorship on the basis of the buyer’s sales which it made in the first part of 1957; the product line on the basis of reproduction costs; and going-concern value on the basis of the costs of moving and reestablishing the operations elsewhere. In valuing the trade name, the court concluded from a review of the entire record that it was the average of the two values reported by the two experts. In discussing the value of the general line distributorship system the court simply concluded that “both expert witnesses used reasonable, although somewhat different, methods. ...” The court also found that “[t]heir reliance upon incomplete sales records [was] also reasonable. The records were sufficient to accurately determine total sales, and the incompleteness was due to the fact that some records had been lost when the [taxpayer’s] corporate offices were moved.”

The Tax Court found that the expert witnesses reasonably valued the seller’s product line in terms of what it would have cost to establish a similar product line. However, the Tax Court found the value of the going-concern intangible asset to have been improperly derived. “[G]oing-eoncern value has been defined as [the] value existing in a proven operating property, considered as an entity with business established, above that of a property complete and ready to operate but without business,” Appraisal Terminology & Handbook 85 (4th ed. 1961). The expert witnesses suggested a value based on what it would cost to move and reestablish the operation at another site which was, in effect, the functionally equivalent substitute facilities valuation method condemned even in just compensation takings cases. See United States v. 565.4 Acres of Land, 441 U.S. 506 , 99 S.Ct. 1854 , 60 L.Ed.2d 435 (1979).

The Tax Court also held that the expert witnesses had provided sufficient evidence in the record to enable it to determine the value of three of the four intangible assets in litigation and that the fair market value was, in the absence of evidence to the contrary, “the amount paid for each such intangible asset — ” See United States v. Davis, 370 U.S. 65 , 82 S.Ct. 1190 , 8 L.Ed.2d 335 (1962). The court then concluded that it could independently determine the fair market value of the going-concern intangible asset, under the residual method, by subtracting the sum of the determined pro rata values of the three intangible assets from the total cost paid for the four intangible assets. See Youngstown Sheet & Tube Co. v. Mahoning County Bd. of Revision, 66 Ohio St.2d 398 , 422 N.E.2d 846, 849 (1981), where the Supreme Court of Ohio found that the Board of Tax Appeals had made its value determination “after carefully considering the entire record,” and that the Board was not required to adopt the appraisal method of any expert or witness. Thus, in Massey-Ferguson, the pro rata fair market value of all four intangible assets was found and the taxpayer was allowed the abandonment loss deductions. The Tax Court concluded that both methodologies used by the expert witnesses were judicially acceptable even though different values were suggested.

Reliance upon a methodology incorporating a “high degree of objectivity” to establish fair market value, as argued by *765 defendant, is not necessary especially where the seminal transactions from which the adjusted tax basis is claimed are ancient and there is a serious question of whether hypothetical willing buyers and willing sellers could be identified, or even existed. To paraphrase Couzens v. Commissioner, 11 B.T.A. 1040 , 1928 WL 967 (1928), the court here must place itself in the acquisition years and, using whatever evidence is available, determine what an intelligent and reasonable buyer and seller would in their fairly mercenary interests find the fair market value of the assets to be, all the while attempting not to be unduly skeptical nor optimistic. Clearly opinions must differ.

The method of valuation is in itself unimportant, so long as it gives due regard to all the facts and relevant evidence, and results in a value which has a reasonable relation thereto. There may be no slavish adherence to a formula, Minnesota Rate Cases [v. Shepard], 230 U.S. 352 [, 33 S.Ct. 729 , 57 L.Ed. 1511 ] (1913); Georgia Ry. Co. v. R.R. Comm., 262 U.S. 625 [, 43 S.Ct. 680 , 67 L.Ed. 1144 ] (1923), and whether the method should proceed from a definite study of, say, original cost, see Donaldson Iron Co. v. Commissioner, 9 B.T.A. 1081 [, 1928 WL 1361 ] (1928), or cost of reproduction new less depreciation, see Paducah Water Co. v. Commissioner, 5 B.T.A. 1067 [, 1927 WL 1186 ] (1927), and compare Appeal of the Rockford Malleable Iron Works, 2 B.T.A. 817 [, 1925 WL 425 ] (1925), or from general opinions of qualified witnesses, or from book value, or from recognized market quotations or other data, must depend upon the nature of the property under consideration and the extent to which such evidence bears a relation to its value.

Couzens, 11 B.T.A. at 1162-3 ; cf. United States v. Kales, 314 U.S. 186 , 62 S.Ct. 214 , 86 L.Ed. 132 (1941).

Couzens was premised not upon an actual completed transaction involving the sale of property by a willing seller to a willing buyer but, rather, from an assumption using the known facts of a hypothetical transaction from which value was inferred. The principle that methodology is unimportant is of particular significance here because of the age of the transactions and the dearth of contemporaneous data. The court must recognize a rule of reason when determining the fair market value of assets in transactions, most of which are over sixty years old. The valuation process does not beget mathematical exactitude. Chesapeake & Ohio Ry. v. Commissioner, 64 T.C. 352 , 1975 WL 3144 (1975) (followed in Baltimore & Ohio Ry. v. United States, 603 F.2d 165 , 221 Ct.Cl. 16 (1979)). Taxpayer’s cite to Meredith is apropos in instances where it is extremely difficult to determine the allocation of value among several intangible assets with any degree of exactitude. Meredith Broadcasting Co. v. United States, 405 F.2d 1214, 1217 , 186 Ct.Cl. 1 (1968); see also Miami Valley Broadcasting Corp. v. United States, 499 F.2d 677, 687 , 204 Ct.Cl. 582 (1974), which also found that mathematical precision was impossible. The valuation process is an “inexact science” requiring reasonable practical, and rational approximation, Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976), based upon all information before the court. Chesapeake & Ohio Ry. v. Commissioner, 64 T.C. 352 , 1975 WL 3144 (1975). Taxpayer argued that Dr. Knutson more than met these standards in his valuation of the five intangible assets.

It is the function of this court to review the thousands of documents comprising the written record, and the transcript, to determine if taxpayer’s claimed valuations were reasonable, practical, and rational. If the court is not satisfied that taxpayer has properly allocated a value to an identified severable intangible asset, it is not a fortiori the duty of the court to determine that value, but the court may do so if the presumption of correctness of the Commissioner has been overcome by substantial evidence, Massey-Ferguson v. United States, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 ; Ferrell, et al. v. Commissioner, 90 T.C. 1154 , 1988 WL 59903 (1988), and if the value can be determined from a review of the record in its entirety. Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Com *766 missioner v. Riss, 374 F.2d 161 (8th Cir. 1967). Moreover, the court must conduct its review of the record with the understanding that the tax consequences of any particular transaction must be based upon economic realities — substance—as opposed to form. Mobil Oil Corp. v. United States, 8 Cl.Ct. 555 (1985). Fair market.value must be determined objectively, but with the realization that “objectivity” is not static; it has fuzzy boundaries. If after examination of the record before it, the court can find substantial proof of severable intangible assets, abandonment, the fair market value of each intangible asset, no prior abandonment, and that abandonment occurred in the proper tax year, taxpayer will be allowed the claimed refunds; otherwise not.

In its attack upon taxpayer’s valuation of the Customer Base assets allegedly acquired from the eighty-eight non-core dairies, defendant challenged taxpayer’s valuation of the tangible assets as being equal to book value thereby precluding any determination of the fair market value by the residual method. Hermes Consol., Inc. v. United States, 14 Cl.Ct. 398, 411 (1988), held that “[w]hen making a fair market valuation for purposes of the tax code, book value is only one of three factors to be reviewed; a corporation’s dividend yield and earnings must also be considered____ [B]ook value has consistently been held to have the least weight.” Hermes relegation of book value to the bottom of the preferred method list may or may not be the law. For example the Tax Court has approved at least three methods of determining the fair market value of intangible assets, all equal in weight: (1) the parties’ allocation of the values at the time of acquisition; (2) the residual, or gap, method; and (3) by capitalization. See Citizens & Southern v. Commissioner, 91 T.C. 463, 510 , 1988 WL 90987 (1988); Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976).

The court finds after careful consideration of the applicable law, and in light of the age of the acquisitions compounded by a dearth of contemporaneous records of comparable acquisitions, that fair market value may be proved by a methodology other than that of the traditional willing buyer — willing seller comparable sales methodology. Some latitude must be permitted because of the very nature of the assets. The court must recognize that proof of the fair market value of an intangible asset cannot, by its very nature, be totally objective. Such methodology is an inexact science and, within limits, any reasonable and practical process may be found to be judicially acceptable. Union Pac. v. United States, 524 F.2d at 1383 . Appraisers are capable of determining the fair market value of common tangible assets with a minimum of difficulty and a maximum of accuracy. It is more difficult to discover the fair market value of an intangible asset. A commercial ice cream machine has, for example, a known purchase price and life expectancy. For those very reasons there is enough objectively derived information to permit it to be depreciated under modern tax law. The intangible fair market value of a skilled operator of the ice cream machine is not so easily established. Other factors must enter into consideration in finding how and what any willing buyer and seller would value that person’s skills. Nevertheless a value can be determined and the court need not reject the value simply because it is not a “hard” unquestionable figure. This was exemplified in Massey-Ferguson v. United States, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 , where the court found the fair market value of the trade name intangible asset to be the average of the two expert appraisers’ suggested but different fair market values.

Dr. Knutson’s testimony that there was a dearth of comparable sales data of intangible assets in the dairy industry occurring in the early years of the twentieth century caused him to resort to three different methodologies whereby he utilized what existing data was available to attempt to determine the value of each claimed intangible asset. Dr. Knutson asserted that his suggested values would be the same for the seller of the asset, or taxpayer, or for that matter, any buyer. In sum, Dr. Knutson applied what knowledge was available, including educated, expert assumptions, to his methodologies to arrive at a suggested fair market value for each intangible asset. Taking the circumstances in their totality, the court finds that in some instanc *767 es Dr. Knutson used judicially acceptable valuation methodologies to determine fair market value that did not contain bias towards taxpayer’s “selfish mercenary interests.” See Couzens v. Commissioner, 11 B.T.A. at 1162-63 , 1928 WL 967 . The court must analyze the specific nature and accuracy of the data, how Dr. Knutson applied it to each intangible asset, and the reasonableness of the proof to the result. Id.; Massey-Ferguson v. United States, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 . In those instances where taxpayer’s methodology is judicially acceptable and the underlying data and information reasonably interpreted, the court will find his suggested value to be the fair market value. In other instances the court, where it can, will draw its own conclusions from an examination of the record as a whole. Id. In several instances the court was able to do neither, as will be explained in detail in following sections of this Opinion. The court will be guided by the precept that

[i]n the property valuation context, courts often express their discomfort with both positions [of expert witnesses] by choosing a value midway between the two alternatives. But the adversary system does not restrict courts to this unsatisfying state of affairs. By going behind the values to the assumptions, a court can make rational choices about the set of assumptions that a reasonable investor would adopt in setting a price for property. The court, like the investor, does not need an accounting degree. .. . 16

The court must also address defendant’s argument that the alleged assets overlapped, and that taxpayer’s methodology for severing the assets and their respective fair market values did not take the overlaps into consideration. Dr. Knutson repeatedly asserted that all five alleged intangible assets were severable, having no overlap with each other or with generalized goodwill, with the exception of the Distribution System and Customer Base assets for which he suggested a bifurcation methodology. The law, and common sense, dictate that if two or more allegedly severable intangible assets overlap, in fact, they must either be valued as one asset or as two or more,' but if the latter, a factor must be included in the valuation methodology to separate the value of all from the others. Here, because the value of the Distribution System asset included the value of the Customer Base asset, taxpayer deducted the suggested value of the latter from the former to arrive at a suggested separate fair market value for each claimed asset.

Determining the value of a tangible or intangible asset involves the application of a high dosage of common sense and may be found by any of several acceptable methodologies so long as the chosen methodology is reasonably applied to the facts and available data. The value may be easily determined or it may be extremely difficult to find. The Court in Cities Serv. v. United States, 580 F.2d 433 , 217 Ct.Cl. 590 (1978), citing Commissioner v. Marshall, 125 F.2d 943, 946 (2d Cir.1942), referred to the “eely and bewitching character of the word ‘value.’”

DISCUSSION OF TAXPAYER’S METHODOLOGIES

In his technical report and testimony, Dr. Knutson described how he identified the five alleged intangible assets and arrived at the value he suggested for each. He prefaced his Expert Witness Report 17 by stating:

Documenting the value of intangible assets acquired in the 1920’s and the 1930’s requires a comprehensive knowledge of the milk and ice cream industry during that era. This knowledge base [was] supplied by an extensive number of university and U.S. Department of Agriculture studies of the milk industry. Two of these studies were particularly important to supplying this background. The first is a compre *768 hensive study of the economic conditions in the milk industry by Harvard University Professor John M. Cassels, A Study of Fluid Milk Prices, Harvard University Press, 1937. The second study is by University of Illinois Professor Roland W. Bartlett, The Milk Industry, Ronald Press, 1946. 18

Source of Supply

The companies acquired by taxpayer in the 1920’s and 1930’s did not own their own herds of dairy cows. Instead, they were dependent upon local independent farmers or on farmers who were members of milk cooperatives for a steady supply of high-quality raw milk. By agreeing to purchase all of the raw milk of a producer the producer could be induced to provide a higher quality product.

Cows produce more milk in the spring and early summer than they do in the fall and winter but Mother Nature’s schedule does not match consumer demand. Milk consumption was relatively uniform throughout the year. Ice cream consumption is highest in the summer, but even in summer there is a wide variation in demand from day-to-day. Ice cream demand remained high in the fall school months, but shortages in milk supply occurred in the early fall. In the 1920’s, the ability of a dairy to obtain a steady and adequate, but not excessive, supply of high-quality raw milk at a relatively low price was a critical factor of profitability. Failure to secure an adequate source of supply would force a dairy into the spot market where prices were high and quality uneven. Pasteurized, high quality, disease-free milk was the most important factor in a dairy’s source of supply with favorable price running a close second. 19

In 1923, when taxpayer began its program of dairy acquisitions, there were considerable differences between individual milk producers and cooperatives in terms of the proportion of local milk marketed, pricing strategies used, and services performed. The most sophisticated cooperatives controlled the sale of a large percentage of local milk production; typically, they priced milk on the basis of end-use by processors. Under this system, milk used by processors for bottling was the most costly while surplus milk used for manufacturing butter and cheese was the lowest. Cooperatives paid their producer-members an “average” or “blend” price, which reflected the actual use of their milk by local processors.

Dr. Knutson reported that in any local market area a large core dairy had a valuable leveraged advantage over its smaller competitors. As the dominant milk buyer in the market a core dairy could lure the largest producers away from the cooperative or smaller dairies. This market power reduced the core dairy’s overall cost of milk procurement and gave it a relatively more stable source of supply. The value of the core dairy’s source of supply advantage typically varied with the strength of the bargaining position of the local cooperative ranging from 7<t to 10<f per hundredweight (per cwt.) of milk, in markets where cooperatives were weak or non-existent, to 2<f or 2/£<f per cwt. in markets where cooperatives were strong. In a market area with a weak cooperative, or high proportion of independent producers, a core dairy with a large fluid milk business was usually able to obtain its entire milk supply directly from the larger volume individual producers, thus avoiding the cooperative’s classified pricing system altogether. In addition, through price incentives and seasonal pricing techniques, the core dairy in *769 this type of market could encourage local farmers to adopt herd management techniques which would yield an adequate, but not excessive, supply of milk year-round. In a market area where cooperatives existed but were not particularly strong, a core dairy could usually contract with a large, high quality independent producer for at least part of its supply requirements; this type of arrangement could have given the core dairy a price advantage of as much as 5c per cwt. for its raw milk needs.

Even when a large core dairy found it necessary to buy all of its milk from a strong cooperative under a classified pricing system, it could still negotiate for special services which effectively reduced the price paid, or otherwise increased profits. Examples of such special services were delivery of milk as it was needed which reduced the core dairy’s storage expense, or delivery of milk from specified larger volume, less cyclical, high quality producers which permitted the core dairies to charge higher prices for their product, with the increased potential of increased profits. Moreover, a core dairy with an ice cream plant, or with a high proportion of home delivery retail milk sales as compared with bulk wholesale sales, could afford to pay more for raw milk. These factors ensured that the core dairy’s requirements would be filled first when milk shortages arose.

Dr. Knutson valued the Source of Supply asset by (1) multiplying what he determined was the core dairy’s Source of Supply price advantage per hundredweight by the number of hundredweight of milk processed annually and (2) capitalizing the price advantage at six percent. 20 Dr. Knutson used his “knowledge of the industry” and “own personal judgment [to derive] a price [advantage] per hundredweight associated with that milk supply that could be expected to be earned in the future.” In his analyses of the acquired dairies, Dr. Knutson reviewed the relative strength of the producer’s cooperative in each market, the data for which could often be found in contemporaneous studies, to guide his expertise. He then multiplied that by the number of hundredweight processed by each core dairy. Dr. Knutson stated that milk sold in the 1920’s and 1930’s “[generally ... in the range of $2.50 to $3.00 a hundredweight.” He determined that the prevailing interest rate in the 1920’s and 1930’s was between five and six percent; ie., “prevailing returns that one would get if you put money in a bank or if you took out a loan from the bank at that point of time.” Dr. Knutson favored the six percent capitalization rate because it properly reflected the true risk factors associated with acquiring a valuable raw milk Source of Supply price advantage in a market area. For each acquisition, determination of the’ Source of Supply price advantage was based on a consideration of producer milk prices, cooperative activity and research studies of cooperative impacts. See, e.g., R. Bartlett, Cooperation in Marketing Dairy Products (1931); R. Bartlett, The Milk Industry (1946); J. Cassels, A Study of Fluid Milk Prices (1937). Dr. Knutson found that Bartlett’s 1931 study was useful because it analyzed the producer cooperative activities in the milk industry in most of the major markets within which taxpayer acquired dairies. The 1931 study was comprehensive and provided information on milk quality, including pasteurization ordinances, among other matters. Bartlett’s 1937 study analyzed the milk markets and provided information about the number of quarts sold on a yearly basis, pricing in the industry, and an overview of the structure of the market. It permitted Dr. Knutson, for example, to determine which dairies were dominant and the place of each particular milk processor in its market area.

Defendant challenged Dr. Knutson’s methodology as based upon a faulty premise; ie., the price advantage would generate profit in perpetuity. Defendant argued that

... a dairy’s source consisted of dairy farmers who sold them milk; these farmers sometimes defected to other dairies, *770 and [taxpayer’s] core dairies had to work to replace them. Thus, even if ‘source of supply* has no determinable useful life for tax or accounting purposes, a valuation of it cannot rest on the faulty factual premise that it will generate profit forever. It will not. It must be replaced.

The court does not agree with defendant’s premise. Defendant cited no precedent for its position nor did it dispute taxpayer factually within the confines of this case. The Source of Supply intangible asset is, in tax vernacular, a mass asset; a self-perpetuating intangible asset. Metropolitan Laundry Co. v. United States, 100 F.Supp. 803 (N.D.Cal.1951). Like the Customer Base intangible asset, it is never depleted or replaced. Producers, like customers, may be lost over time but the asset continuously replicates itself. As one producer or customer is lost another is added. The fact that taxpayer had to “work” to replace producers lost over the years does not negate the factual premise. Taxpayer’s predominant position in the raw milk buying market within any given market area gave it an advantage each time it negotiated a purchase of raw milk regardless of the identity of the producer. At the most, the value may diminish over time, but diminution in value does not destroy the efficacy of a non-wasting asset to a point where it is of no value. Id. So long as the asset reasonably had even “potential value it cannot be said that the taxpayer’s investment therein has been lost.” E.B. Elliott Co. v. Commissioner, 2 T.C.M. (CCH) 444 (1943) (citing Lawson v. Commissioner, 42 B.T.A. 1103 , 1940 WL 144 (1940)). Conversely, a taxpayer is not entitled to an abandonment loss for the discontinuance of use of a portion of an asset. Golden State Towel & Linen Serv., Ltd. v. United States, 373 F.2d 938 , 179 Ct.Cl. 300 (1967).

The court finds the suggested six percent capitalization rate to be reasonable and proper. Based upon Dr. Knutson’s knowledge and various studies of the milk industry, and taking into consideration the state of the market in the early years of taxpayer’s growth, the court also finds Dr. Knutson’s suggested methodology to be judicially acceptable for identifying the fair market value of the Source of Supply asset, see Chesapeake & Ohio Ry. v. Commissioner, 64 T.C. 352 , 1975 WL 3144 (1975); Miami Valley Broadcasting Corp. v. United States, 499 F.2d 677, 687 , 204 Ct.Cl. 582 (1974); Couzens v. Commissioner, 11 B.T.A. 1040 , 1928 WL 967 (1928), dependant only upon the propriety of the selected price advantage variable. The principal variable in the methodology used by Dr. Knutson is the price advantage factor that is dependant upon the bargaining position of the local milk producers, or producer cooperative, vis-a-vis taxpayer. The court finds Dr. Knutson’s price advantage variable range of 2$ to 10$ per cwt. to be reasonable but reserves finding whether the suggested price advantage for each acquired dairy was proper in the circumstances of each acquisition. The court will address the proper specific price advantage in its discussion of each core dairy acquisition.

Defendant argued that taxpayer failed to prove that Source of Supply was a separate and distinct intangible asset in that it “overlapped” with the claimed Distribution System and Production Turnkey intangible assets, and was no more than part of general goodwill that taxpayer could not dispose of until it ceased to operate. The court finds that not to be the case. The Source of Supply asset measures or reflects the leveraged bargaining, or competitive, advantage that taxpayer had over the small local dairies in its acquisition of raw milk within each market area. The advantage permitted taxpayer to purchase a higher quality product at a lower price than its less-leveraged competitors. The Distribution System asset equally clearly was the organizational advantage taxpayer had over its competitors for the delivery of milk and ice cream at the other end of the processing spectrum. Production Turnkey purported to measure the value of skilled handling of raw milk following its delivery to the acquired dairy. Taxpayer demonstrated, with substantial documentary evidence and testimony, that the ability to acquire high quality milk on a regular schedule was important and would have been a sought after intangible asset, and not acquired as a minor incident in a composite transaction. It is clearly distinguishable from general goodwill and will be recognized as such by the court. *771 See Meredith, 405 F.2d at 1224 ; Miller & Sons, Inc. v. United States, 537 F.2d 446 , 210 Ct.Cl. 431 (1976).

The court is satisfied that taxpayer provided substantial evidence in several acquisitions to overcome the strong presumption of correctness of the Commissioner’s determination that taxpayer did not establish that abandonment occurred, or if an abandonment occurred, the basis of the asset abandoned. The court will therefore attempt to find the fair market value of the asset, where appropriate, upon consideration of all the evidence of record. Helvering v. Taylor, 293 U.S. 507 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935); Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Commissioner v. Riss, 374 F.2d 161, 166 (8th Cir.1967); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968).

Production Turnkey

According to Dr. Knutson when taxpayer began its acquisition program in 1923, milk processing was well into the throes of industrialization. The asset represents the “in-house” procurement of milk, its processing, and distribution as an on-going, efficient process that reflects the value of a trained work force; the premium paid for superior management and labor at an acquired dairy.

Fifty years before, unprocessed milk from large milk cans had been sold directly to consumers, but following the invention of the glass milk bottle in 1878 hundreds of milk plants had sprung up across the country. Initially, plants were bottling facilities where raw milk was cooled and bottled, and glass bottles washed and refilled. By the 1920’s pasteurization was becoming widespread and there was a serious concern with sanitary conditions and quality control. Milk was picked up from producers daily and delivered to the processing plant by railroad car, or truck or horse-drawn wagon, ordinarily in ten gallon cans. It was tested for cleanliness and quality, coded, standardized for desired butterfat content, and put in either storage or pasteurization vats. Certified milk was not pasteurized and was bottled directly from the storage tanks. If pasteurized, the milk was heated for a set period of time at a predetermined temperature to kill the bacteria, and returned to the cooling vats. The milk was then bottled in freshly washed and sterilized glass bottles. The typical milk processing plant contained an array of equipment including milk coolers, pasteurizers, bottling and capping machines, bottle washers and sterilizers, and a maze of piping and valves. Dr. Knutson testified that at each stage in the process trained personnel were needed to perform testing functions, monitor, load and unload the machines, scour, and maintain all equipment. According to Dr. Knutson “a trained high quality work force” was “absolutely critical.” A dairy needed managers who understood that the product was “a very, very highly perishable, very fragile, product.” The processes of pasteurization and certification were “highly technical phenomena” and had to be controlled by “a sophisticated set of managers.” Trained labor was also needed. Skilled employees were needed to analyze the product as it came into the plant for its bacteria count in order to separate out spoiled milk and identify producers who delivered poor quality raw milk. Quality control required that the dairy be cleaned daily; to do so the equipment had to be completely dismantled and washed, including all of the piping and valves from the various vats, pasteurizers, coolers, bottling units, and other equipment.

The advent of the brine freezer in 1902 eliminated the dependence of the ice cream maker on natural ice and made possible the production of large quantities of ice cream in a much shorter time than the old crank method. Ice cream plants in the 1920’s required extensive capital investment in compressors and freezers, as well as a well-trained work force to tend the massive engine rooms, maintain and monitor the freezers and mixers, and hand-package the finished product. Ice cream novelties were developing into a major business in the 1920’s, and fancy molds, coloring and special packaging all required painstaking “hand” work.

Dr. Knutson testified that the expertise required to operate a milk or ice cream plant in an effective coordinated manner took time and money to develop. Buying a successful *772 plant already in operation saved taxpayer those costs. The Production Turnkey asset represents the profits that taxpayer would have foregone had it been required to assemble and train a new work force. By acquiring a trained management and employee work force with the tangible assets of a dairy, taxpayer’s start-up costs were less, which would lead axiomatically, according to Dr. Knutson, to increased profits.

Taxpayer did not capitalize the Production Turnkey asset to determine its value. Instead, Dr. Knutson stated that studies made during the 1920’s and 1930’s demonstrated that the Production Turnkey asset could be properly valued as a variable percentage of the acquisition price with the variable dependent upon profit. He testified that he valued the asset at two percent of the acquisition price for plants with a relatively low profit level, and five percent of the acquisition price for plants with a relatively high profit level. 21 For those dairies that produced both milk and ice cream, Dr. Knutson allocated value between the two product lines on the basis of relative profits generated by each. His allocation reflected the fact that ice cream and milk were processed in separate, specialized facilities.

Dr. Knutson admitted to having difficulty valuing the Production Turnkey asset because of the lack of “solid information.” It was apparent to the court that he was unsure of his testimony at trial. He testified that he would have preferred to have studied specific start-up costs for milk and ice cream plants at the time but could not locate contemporaneous studies of dairy start-up costs. Accordingly, he was left to an analysis of the complexity of each acquired plant, including the number of retail and wholesale routes, processing costs, and volume as an overall indicator of plant efficiency. Just “who” the managers and other key employees were would make a difference in efficiency; what skills were available to taxpayer post-acquisition would also enter into the equation. For example, if an acquired dairy employed a bacteriologist or a dynamic manager with intimate knowledge of the plant, who became an employee of taxpayer upon acquisition, taxpayer would not have to train or seek out an individual with those skills. All of the work force factors and variables considered by Dr. Knutson had an effect on efficiency, which he correlated directly to profit. However, without knowledge of specific plants and employees Dr. Knutson’s methodology is speculative, at best. Accordingly, the court finds that the methodology used by Dr. Knutson to value the asset is not judicially acceptable.

It is clear from the record that by the time taxpayer began its expansion in 1923 pasteurization was a known art, as was the handling of certified milk, ice cream, and other products from the cow to the consumer. The skills to successfully operate a dairy were not scarce, and as time passed this became even more true. To bring the minimum degree of acceptability to the valuation process, information that Dr. Knutson could not find or develop himself became critically important. “Who” was acquired, and their skills, according to Dr. Knutson’s testimony, made up the value of this asset. Neither taxpayer nor the court has a historical perspective, or access to any records, analysis, or studies from which to find that the managers and employees of acquired dairy stayed to work with taxpayer. Did all of the key workers stay, or a fraction? How long did they stay? If the key managers and employees who allegedly constitute the value of this asset left shortly after the acquisition, was the asset actually acquired, or did the value disappear? If so, the asset would not be a severable intangible asset that would entitle taxpayer to a deduction in the suit years. The court has no information that any, all, or none of taxpayer’s dairies reduced their work force during the Great Depression. From the record we know that taxpayer thrived during that tragic period but how it did so is a complete unknown. In the context of this asset, the value of which was dependant upon the existence of skilled managers, workers, *773 and craftsmen, taxpayer offered no proof that any acquired dairy was staffed with skilled, competent persons.

The court recognizes a general relationship between efficiency and profit but the relationship is tenuous and was not developed by taxpayer to a point to permit the court to find that the only, or even a significant, factor affecting profit was efficiency. There are too many other unknown inchoate factors that affected any acquired dairy’s profit factor, especially during the heyday of national expansion of the dairy industry sixty years ago, coupled with the economic conditions of the time. Profit is not a proper factor by which to measure the value of the asset.

Moreover, within reason taxpayer can identify and “name” intangible assets as it sees fit. It cannot, however, rename generally recognized assets in tax accounting and GAAP, so as to create confusion. In its review of the applicable law the court found no reference to an intangible asset under the name “Production Turnkey.” Dr. Knutson’s short definition of Production Turnkey was that it measured the value of skilled handling of milk in the plant. However, Dr. Knutson also repeatedly defined Production Turnkey to fit the accepted and recognized intangible asset called “going-concern.” Massey-Ferguson v. United States, 59 T.C. at 230 , citing to the Appraisal Terminology & Handbook 85 (4th ed. 1961), defined “going-concern” as “[t]he value existing in a proven operating property, considered as an entity with business established, above that of a property complete and ready to operate but without business.” VGS Corp. v. Commissioner, 68 T.C. 563, 591 , 1977 WL 3758 (1977), acq., 1979- 2 C.B. 2 , held that going-concern, a nondepreciable intangible asset, is “the additional element of value which attaches to property by reason of its existence as an integral part of a going concern.” It is manifested by “the ability of the acquired business to continue generating sales without interruption during and after acquisition.” Solitron Devices, Inc. v. Commissioner, 80 T.C. 1, 20 , 1983 WL 14785 (1983), aff'd, without op., 744 F.2d 95 (11th Cir.1984); Los Angeles Gas & Electric Corp. v. Ry. Comm. of Cal, et al., 289 U.S. 287 , 53 S.Ct. 637 , 77 L.Ed. 1180 (1933). Taxpayer’s entire case is premised on the statement that it sought out and acquired core dairies that were proven operating properties with established businesses.

In United States Alcohol Co. v. Helvering, 137 F.2d 511, 513 (2d Cir.1943), supporting the Commissioner’s contention, the court stated:

[in] such an industry — for that matter — in any industry continuity of sales is a condition of continued existence; once they stop, it is extremely hard, if not impossible, to start up the business again. Therefore the power to sell over the period immediately after the business is taken over, insuring as it does against such a break, has a value quite independent of any profit that may be got from those particular sales.

By acquiring core plants in full operation taxpayer saved the considerable costs of hiring, assembling, and training a new work force to operate newly built or inoperative plants. In Dr. Knutson’s premise, it is axiomatic that if taxpayer were to construct a new plant, or purchase a plant without business, it would not be in operation on the day taxpayer took possession and there would be no issue of the existence of a Production Turnkey asset because it would not be a going-concern. Had taxpayer built its own core dairies, a dairy upon completion would have been a property complete and ready to operate but with no business. Constructing its own dairy, or acquiring a non-operating dairy would have been counter to taxpayer’s single avowed goal of acquiring operating dairies with business possessing the intangible assets in issue here. If the intangible asset taxpayer called Production Turnkey is in reality the asset “going-concern,” and no other reasonable conclusion can be drawn from the record and the law, the values of the Customer Base and Distribution System assets must be severed from “going-concern,” otherwise neither Production Turnkey, Customer Base, nor Distribution System can be valued as a severable intangible asset justifying separate favorable tax treatment. Production Turnkey by its very definition *774 includes Customer Base, and that asset includes the asset Distribution System. Taxpayer did not address the overlap of Customer Base and Distribution System with Production Turnkey, nor did it provide the court with evidence, or suggested a methodology by which it could sever and separately value the assets. In the absence of customers the “power to sell” factor described in United States Alcohol Co., 137 F.2d at 513 , cannot exist. In the face of this failure of proof the court must find that taxpayer did not offer substantial evidence to overcome the presumption of correctness of the determination of the Commissioner, that a Production Turnkey asset severable from generalized goodwill was not abandoned, or if abandoned, properly valued, see Helvering v. Taylor, 293 U.S. 507 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935); Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Commissioner v. Riss, 374 F.2d 161, 166 (8th Cir.1967); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968), much less proved by a preponderance of the evidence the value of the Production Turnkey intangible asset apart from its constituent assets; Customer Base and Distribution System.

In its analysis of each market the court will not consider Production Turnkey as an intangible asset to which taxpayer is entitled to a deduction for abandonment. Even had taxpayer proved that it acquired and abandoned the asset, the court, placing itself in the time frame of the acquisition and viewing it as would an informed and reasonable buyer and seller, would find that the evidence presented lacked any meaningful relationship to the value of the Production Turnkey asset to permit it to determine the fair market value of the asset. Cf. Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976).

Customer Base

Dr. Knutson’s starting point for valuation of the Customer Base asset was an analysis of non-core dairy data. He testified that a non-core dairy had no value to taxpayer other than the value of its customers. “It was the only [asset] that really had the potential to generate profit.” Dr. Knutson determined the Customer Base asset value by capitalizing the weighted average of the profit per point earned by non-core dairies in the market area and multiplying the result by the number of points retained after acquisition. As part of his valuation formula Dr. Knutson applied a discount factor to the total points sold for retail milk, wholesale milk, and ice cream. 22 If individual dairy records showed significant fluctuation in the pre-ac-quisition period, Dr. Knutson testified that he used an average of two or even three years’ profits and sales; otherwise, his calculations were based on financial data for the year preceding acquisition.

For both core and non-core dairies, a five percent discount factor was applied to home service milk points sold to reflect the fact that, in Dr. Knutson’s opinion, five percent of home delivery customer volume was typically lost at the time of acquisition. Dr. Knutson used the same discount factor for core and non-core dairies because the profitability of the home delivery milk business was so great that a considerable effort was made to retain both core and non-core home delivery milk customers. If core dairy home delivery service was known to be superior to that provided by a non-core dairy, former non-core customers could be expected to welcome the arrival of the new core dairy routeman. After a core dairy was acquired by taxpayer, the core dairy routemen typically continued to serve their former customers in addition to the new, former non-core dairy customers. Logic dictated to Dr. Knutson that a good existing customer/routeman relationship resulted in low customer loss but taxpayer did not address the possibility that the home delivery routeman from a non-core dairy might have had a better relationship with his customers than did the core dairy routeman and that the former non-core home delivery customers might not have seen the change as favorably as did he. The court does not accept as a given, as did taxpayer, that core dairies were in all instances more popular *775 with home delivery customers than were the non-core dairies. Dr. Knutson did not include a factor in his valuation for that probability. Without exception he viewed the core dairy routemen as existing in Dr. Pangloss’ “best of all possible worlds.”

In contrast with home delivery milk customers, wholesale milk and ice cream customers almost exclusively purchased dairy products on the basis of price. Hence, customer attrition would be greater. “[I]f you offered a wholesale customer a little bit lower price, you could lure [him or her] away. So, the risk was much higher of losing a wholesale customer. And that’s reflected in my points retained. It is also reflected in the capitalization rate in this particular case.” In fact, Dr. Knutson testified that the risk of losing wholesale milk or ice cream customers “was at least double the risk of losing home delivery milk points.” For this reason he applied a twenty percent discount factor to core dairy wholesale milk and ice cream points, and a discount factor of thirty-five percent for non-core dairy wholesale and ice cream customers. In virtually the same breath Dr. Knutson testified that he applied the lower discount factor to core dairy wholesale milk and ice cream customers to reflect the relatively greater market power of a top quality product or a well-known brand name in the highly competitive wholesale milk and ice cream business, despite his oft-repeated testimony that wholesale customers were driven exclusively by price. Dr. Knutson stated that the wholesale discount factor was based on “his knowledge of the industry and what was reasonable.” Dr. Knutson’s inconsistent testimony on this critical point detracted from the credibility given his general expertise and knowledge of the history of the dairy industry.

In addition to the immediate loss of customers on acquisition, taxpayer knew it would experience a secondary customer loss in the years following the acquisition. The secondary attrition would be greater for wholesale milk and ice cream customers than for home delivery milk customers. Once again, this was because wholesale customers (whether milk or ice cream) dealt with the producer offering the lowest prices. In computing the capitalized value of profit per point, Dr. Knutson used a twelve percent capitalization rate for ice cream and wholesale milk and a six percent capitalization rate for home delivery milk. He chose to use six percent in the case of home delivery milk because “[o]nce you got [the points] transferred, you didn’t have much risk associated with it.” Dr. Knutson attributed the difference in capitalization rates to the greater likelihood of losing ice cream and wholesale milk customers in the year(s) following acquisition, as well as the greater risks associated with the wholesale milk business where profit margins were slim, and the ice cream business where the selling season was shorter and production risks greater.

To determine the weighted average profit per point for each non-core dairy, Dr. Knut-son found it necessary to derive quart sales and profit data for home service milk, wholesale milk, and ice cream. He encountered two obstacles in calculating the weighted average profit per point for home delivery and wholesale milk that he claimed could be surmounted only because the milk industry in the 1920’s and 1930’s had been the focal point of extensive study by university agricultural economists. The first obstacle was that dairy records did not allocate total milk sales volume between home delivery and wholesale routes. The second was that dairy accounting systems had not advanced sufficiently in the 1920’s and 1930’s to separate profits earned on wholesale and home delivery sales. Such a separation required the use of sophisticated economic-engineering procedures that were just being developed at major universities. Dr. Knutson referred specifically to Cornell University agricultural economists who had studied the problem in the early 1930’s at the request of the New York Legislature. See P.A. Pitcher, et al., Report of the Joint Legislative Committee to Investigate the Milk Industry. 23 Dr. Knutson used data identified in Table No. 58, page 204, of the Pitcher Report to separate wholesale and home delivery profits in a manner that per *776 mitted him to determine, through “a simple algebraic calculation,” which came to be known at trial as the “Knutson formula,” that home delivery profit per quart was 9.849 greater than wholesale profit per quart.

Table No. 58 of the Pitcher Report depicted the distribution costs, volumes, and net profit of grades of milk and milk products at retail and wholesale for distributors of milk •in the New York City Metropolitan area. 24 However, the heading of Table No. 58 stated that it did not include data from “larger distributors.” That phrase was neither defined in the report, nor in Dr. Knutson’s testimony. Dr. Knutson used some, but not all, of the data reported for 1930 from Table No. 58. Taxpayer identified what data Dr. Knutson did use, and his results, in Exhibit 208, to wit:

Table IV

Retail Wholesale

Profit/Qt. Volume Profit Profit/Qt. Volume Profit Grade A Milk 0.0311 343,000 $10,667.30 0.0007 351,000 $ 245.70 Grade B Milk 0.0100 1,217,000 12,170.00 (0.0059) 1,494,000 (8,814.6) Bulk Wholesale 0.0014 10,002,000 1,002.800 Cream 0.0263 150,000 3,945.00 0.0081 3,680,000 29,808.00 Bulk Cream 0.0008 13,363,000 10,690.40 Total 0.01566 1,710,000 26,782.3 0.00159 28,890,000 45,932.30

The row entitled, “Total,” was not taken from Table No. 58. The “Total” figure in the retail and wholesale columns for “Profit/qt” is the weighted average profit per quart [or point] calculated by Dr. Knutson from the other numbers in the table. The “Total” numbers in the other columns are simply the mathematical sums of the columns. Dr. Knutson explained that the key number that he sought in this phase of his valuation was the weighted average profits per quart for retail and wholesale milk, though he did not explain how they were weighted either in his testimony or Expert Technical Report. The court, however, was able to determine how Dr. Knutson arrived at the weighted average profits per quart and verify, to the extent they were based upon Table No. 58 of the Pitcher Report, and Exhibit 208, that they were accurate. 25 Dr. Knutson then determined that the profit per quart for retail milk was 9.849 times the profit per quart for wholesale milk by simply dividing the weighted average profit per quart for wholesale milk of $0.00159 into the weighted average profit per quart for retail milk of $0.01566. He applied the 9.849:1 ratio to each acquired core and non-core dairy to determine the value of the Customer Base asset, and as a factor in his determination of the value of the Distribution System asset, infra, using the following formula:

*777 9.849X2Vi + X2V2 = Y Home Delivery Profit + Wholesale Profit = Total Profit

Where:

X2 = Wholesale Profit per Quart Vi = Home Delivery Volume V2 = Wholesale Volume Y = Total Profit on Milk

The expression 9.849X2 = Xj can be derived from the relationship between the weighted average profits per quart of retail and wholesale milk.

Dr. Knutson explained that 9.849X2 was equal to home delivery profit per quart because home delivery profit per quart (Xi) is 9.849 times as large as wholesale profit per quart. If all terms are known except X2 (wholesale profit per quart), X2 can be calculated. If X2 is known, Xi can be calculated; ie., home delivery profit per quart is found by multiplying 9.849 by X2 (wholesale profit per quart) and wholesale profit per quart is found by dividing Xi (home delivery profit per quart) by 9.849.

Dr. Knutson testified that he was aware of no other sources that reported the same historical data as did the Pitcher Report. Even though Table No. 58 identified data only from the New York City Metropolitan area market, Dr. Knutson concluded that in his opinion the data was without question consistent with competitive market and political forces, and cost conditions, operating throughout the milk industry in the 1920’s and 1930’s, and that the 9.849:1 ratio was applicable nationwide.

An example of the critical importance of the “Knutson formula” to taxpayer’s claims is found in Dr. Knutson’s discussion of the Zimmerman Dairy Company, a non-core dairy acquired in the Peoria market. Dr. Knutson testified that he obtained useful data about the Zimmerman Dairy Company from a Price, Waterhouse & Co. audit, a New York Stock Exchange Listing Application, taxpayer’s contemporaneous Accounting Acquisition Card, the closing balance sheet, the Brown Report, 26 and “those types of sources.” Using this data Dr. Knutson was able to arrive at several conclusions about the Zimmerman Dairy Company.

The rest of the computation ... is basically a derivation of profits per quart and profits per point, returns on investment, and that type of information. I might say that the profit per quart is derived from the Knutson formula as taken from the Pitcher Report. So that is a crucial calculation in the process that was utilized [,] and utilized uniformly across the dairies unless there was other information available.

Because the weighted average profit per point of retail and wholesale milk and ice cream played such an important role in Dr. Knutson’s valuation of the Customer Base asset the court must address the data contained in Table No. 58. The Pitcher Report evolved from a study created by the New York State Legislature to

investigate the causes of the decline of the price of milk to producers and the resultant effect of the low prices upon the dairy industry and the future supply of milk to the cities of the State; to investigate the cost of distribution of milk and its relation to prices paid to milk producers, to the end that the consumer may be assured of an adequate supply of milk at a reasonable price, both to producer and consumer.

Pitcher Report, supra, at 9. The Pitcher Report encompassed the “New York milkshed” which included the states of New York, New Jersey, Pennsylvania, Maryland, Massachusetts, Vermont, and Connecticut, though its only interest lay in bringing a sound milk industry back to the State of New York. The committee that conducted the study reviewed more than 100 detailed reports from milk distributors, heard testimony from 254 witnesses, and studied over 1,300 retail food stores in New York City.

The Pitcher Report found it “clear that in these abnormal times (1933) the economic law of supply and demand cannot be relied upon to ... insure the consumers of a eontin- *778 uous and adequate supply of milk----” The study determined that the prices farmers received for their milk in 1932 were much below the costs of production. “After other costs were paid the producers had practically nothing left for their labor. The price received for milk in January, 1933, was little more than half the cost of production.” Moreover, the demand for milk in New York was shrinking yearly because of the reduced purchasing power of consumers. The court notes in other market areas such as Peoria, the record shows significant yearly increases in milk and ice cream sales, and profits.

The court recognized Dr. Knutson’s expertise as an economist and historian of the exceedingly complex milk industry, and the struggles encountered by the “super dairies,” as they emerged in the first third of this century. However, as the court undertook its analysis of the record addressing taxpayer’s valuation of the Customer Base asset it made a few discoveries that vitiated the weight the court might have given his testimony. Foremost is that the data used by Dr. Knutson from Table No. 58 of the Pitcher Report, included in Exhibit 208, and used in the “Knutson formula,” cannot reasonably be construed to represent conditions in milk markets elsewhere in the United States, or even within the New York City Metropolitan area. It is true that the Pitcher Report was a detailed study of the milk market in New York State, rich with anecdotal stories and complex analyses of a very troubled industry crying for help from its elected and appointed government officials. Nonetheless, the data used by Dr. Knutson was only for the New York City Metropolitan area; it did not include data gathered from dairies statewide, from other New York State cities, and from the larger NYC Metropolitan area dairies. The failure to include data from the larger dairies is significant. The Pitcher Report found that in 1931 about seventy-six percent of the milk “distributed in New York City was distributed by ten companies and their subsidiary or closely affiliated companies. The other 24 per cent of the business was divided among a large number of competing distributors.... ” Pitcher Report, supra, at 165. The Report found that less than two years later

[t]here [was] much less competition in the retail distribution than in the wholesale trade. Based on the data directly accumulated in the research program of this committee, it appears that more than 95 per cent of the retail sales of milk in the New York Metropolitan Area are made by five companies. A very high percentage of this retail volume is controlled by two companies and their affiliates: namely, Borden’s Farm Products Company and the Sheffield Farms Company. 27

Table No. 58 is included within the section of the Pitcher Report entitled “The Situation in the New York Metropolitan Area.” 28 The section covering the New York Metropolitan area made passing reference to the purchase of raw milk, transportation, and other related activities outside of the Metropolitan area but the cost, price, and volume data reported in Table No. 58 referred only to dairies within the Metropolitan area of New York City. 29

The very language of the Pitcher Report supports the court’s conclusion that the New York Metropolitan area data does not reflect *779 the economic conditions of other milk markets. For example,

ne of the factors causing higher costs of distribution in New York [City], as compared with other cities, is the physical layout of the market, necessitating the transfer of the major part of the milk from railway terminals to city pasteurizing plants in some cases a distance of several miles through dense traffic, and across the river by ferry.

Pitcher Report, supra, at 20.

Dr. H.A. Ross, of Cornell University, cited by Dr. Knutson as representing one institution that contributed to his analysis, was quoted by the committee as saying:

f production exceeds the fluid milk demand the surplus is manufactured into less perishable products that find ready sale in world markets. The price obtained for this surplus milk, however, is usually less than that paid for fluid milk in city markets. This is particularly true in New York, where butter, cheese, and condensed milk produced under conditions of high cost, must compete in the open market with the same products from the cheaper producing regions of the mid-west.

Dr. Ross’ publication referred to the New York State market but his comments support the conclusion that the Pitcher Report was not typical of the milk market in other geographic areas of the nation. 30 Further doubt is thrown upon the validity of the data reported in Table No. 58 in the section entitled “Channels of Distribution in New York.”

In the New York [Metropolitan area] market, less than half of the milk is distributed by the traditional method of house to house delivery. In 1930, more than one-fourth of the milk supply of this market was distributed through grocery stores, dairy stores and other retail food shops. From a fifth to a fourth of the total was used in restaurants, soda fountains, public institutions and the like, where milk is consumed on the premises. (Table 37).

Table 37. Estimated Daily Quantities of Bottled Milk and Bulk Milk Distributed Through Various Channels in the New York Metropolitan Area, 1930.

Total Percent Quarts of Total Bottled, Retail Bottled, Wholesale $1,764,378 46.9 (Mostly To Stores) 282,150 7.5 Bulk, To Stores 885,951 23.6 Bulk, To Restaurants 829,951 22.0

The data reported in Table No. 37 is inconsistent with that in Table No. 58. Table No. 58 shows that 1,710,000 quarts of milk and cream were sold at retail in the New York Metropolitan area, and 28,890,000 at wholesale. Retail sales only amounted to six percent of the total volume sales. Table No. 37 shows that retail sales accounted for slightly less than fifty percent of the volume sold. If the volumes reported in Table No. 37 were used to determine the weighted average profit per point ratio, using Table No. 58 figures, the “Knutson formula” ratio would be 7.121:1, not 9.849:1, a significant difference considering the large numbers of points acquired by taxpayer during its buying spree.

The foregoing proves the extremely tenuous nature of the “Knutson formula.” As the numbers change so does the validity of the formula. Because the expression 9.849X2 = Xi is derived from the relationship between the weighted average profits per quart of retail and wholesale milk, Dr. Knutson’s formula, 9.849X2Vi + X2V2 = Y, is accurate only as long as the weights given to individual product lines remain the same; i.e., individual products continue to make the same contributions to total volume and total profit. If the profit margin or the share of total volume of an individual product line is different, the weight given to that product in determining the weighted average profit per quart changes significantly. The greater the change of any one element, the greater the change in the weighted average profit per quart, and thus, the profit per point ratio. Any change in the weight given an individual product line results in a different weighted average thereby changing the relationship, or ratio, between the weighted average profit *780 per quart of retail and wholesale milk. Even within the State of New York vastly different reported product sale figures render the efficacy of the Knutson formula meaningless. For example, in Rochester, New York, nearly three-quarters of the bottled milk sold was home delivery milk and only twenty-five percent wholesale; vastly different from the retail and wholesale volumes reported in Table Nos. 58, and even 37, for the NYC Metropolitan area.

A more egregious example involved the Youngstown, Ohio market. Dr. Knutson found data in the Price, Waterhouse & Co. audit report that permitted him to determine that the profit per point ratio for a core dairy, Youngstown Sanitary Milk Company, was approximately 2:1. In his Expert Report Dr. Knutson valued the intangible assets using the 2:1 ratio of retail to wholesale sales even though he had professed serious doubts about the validity of the data. He testified that the audit data was, at the least flawed, and at best unique to that market and could not be extended to other market areas, including nearby markets also in the Northeastern Ohio area served by the same plants and under common management. 31

Dr. Knutson provided the court with no specific facts or reasoning to súpport his conclusory statements that the conditions in New York City were expressive of all other markets in this litigation; not even one of the most obvious criterion, population densities, reportedly a factor of critical importance in planning distribution routes and sales. No traits common to any of the markets were identified. See Gravley v. United States, 44 B.T.A. 722, 727 , 1941 WL 361 (1941). Accordingly, the court finds no support for, and rejects, Dr. Knutson’s unsupported conclusion that the New York City milk market sales and conditions existed in any of the other market areas so as to validate the Knutson formula that distilled the weighted average profit per point ratio for application nationwide.

For all of the reasons stated above, the court found that the Pitcher Report identified no data from which taxpayer could reasonably extract a weighted average profit per quart ratio applicable to the other market areas in this litigation, or even the New York City Metropolitan area itself. Dr. Knutson’s formula was based upon suspicious data for the New York City Metropolitan area that was confusing and inconsistent, even within that area, thus rendering his weighted average profit per quart ratio inappropriate for application nationwide.

Based upon the partial nature of Dr. Knutson’s testimony, his use of inaccurate data to prove this key element of taxpayer’s claim, and the nature of the evidence of record, the court finds that Dr. Knutson’s methodology by which he hoped to determine taxpayer’s weighted average profit per quart of retail to wholesale milk ratio, to find the value of the Customer Base asset, lacked credibility. Thus, the court gave his testimony and Expert Report on this issue little weight. See, Fed.R.Evid.P. 702, and Notes of the Advisory Committee, citing 7 Wigmore § 1918, “[w]hen [expert] opinions are excluded, it is because they are unhelpful and therefore superfluous and a waste of time.” See Publix Supermarkets, Inc. v. United States, 26 Cl.Ct. 161 (1992) (citing Piggly-Wiggly Southern v. C.I.R., 84 T.C. 739 , 1985 WL 15341 aff'd, 803 F.2d 1572 (11th Cir.1986), nonacq., 1988- 2 C.B. 1 ; Albertson’s, Inc. v. Commissioner, 57 Tax Ct.Mem. (P-H) para. 88,582, 1988 WL 137121 (1988)). In those cases expert witnesses were found not to be credible and their testimony given little or no weight by the trier of fact. In the absence of a valid weighted average profit per quart ratio, or any other methodology, the court finds that the values of the core and non-core dairy Customer Base assets suggested by Dr. Knutson were not determined by a judicially acceptable standard. Cf. Massey-Ferguson v. United States, 59 T.C. 220 , 1972 WL 2496 (1972), acq., 1973- 2 C.B. 2 .

*781 A Customer Base clearly can be a severa-ble element of goodwill with an asset value of its own, Commissioner v. Seaboard Fin. Co., 367 F.2d 646 (9th Cir.1966), but for the reasons stated above taxpayer failed to overcome the strong presumption of correctness of the determination of the Commissioner that taxpayer did not establish that abandonment occurred, or if abandonment occurred the basis of the asset abandoned within the fairly liberal confines of judicially acceptable methodology. Cf. Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976); Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968). Moreover, in its discussion of taxpayer’s methodology to suggest a value for the Production Turnkey asset, supra, the court found that taxpayer did not sever or separately value the Customer Base and Production Turnkey assets so as to justify favorable tax treatment for the Customer Base.

In its analysis of the individual claims the court will not consider loss of the Customer Base as an intangible asset for which taxpayer is entitled to a refund pursuant to I.R.C. § 165. See Helvering v. Taylor, 293 U.S. 507 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935); Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Commissioner v. Riss, 374 F.2d 161, 166 (8th Cir.1967); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969); Commissioner v. Riss, 374 F.2d 161 (8th Cir.1967). Distribution System

Once milk or ice cream is processed or packaged, it has to be transported from the cooling or hardening room to the ultimate consumer. In the 1920’s, ice cream was primarily sold in 2$ gallon packages to small retail stores and ice cream shops, while milk was delivered daily in quart or pint glass bottles on home delivery routes. In most market areas, separate wholesale milk routes served commercial or institutional customers such as bakeries, hospitals, schools and restaurants, although it was not unusual for smaller dairies to serve wholesale customers from retail milk routes.

If a large core dairy processed both milk and ice cream, it had essentially three separate delivery systems: home delivery milk, wholesale milk and ice cream. Each type of distribution system had its own characteristics and profit profile. Wholesale customers bought on the basis of price and received price concessions because they purchased in bulk. Costs on wholesale milk routes were higher than on the home delivery routes due to high packaging costs, high product losses due to spoilage, and special service costs such as refrigeration cases for product storage. As a result, profitability on wholesale milk routes was low in comparison with profitability on retail milk routes.

In contrast with wholesale milk sales, a good ice cream distribution system was a pathway to profit. In the 1920’s ice cream trucks and store freezers were in their infancy and relatively few dairies had mastered the art of keeping ice cream in a firm, frozen state from the dairy hardening room to the consumer. A core dairy with a modern fleet of vehicles and refrigeration equipment that could hold ice cream in its frozen state from freezer to consumer had a substantial competitive advantage and could enjoy higher profits because of decreased transportation costs, less waste, and a high level of consumer acceptance.

Profitability for any dairy acquired by taxpayer was defined by Dr. Knutson as capitalized profit per point multiplied by annual points retained after acquisition. For these reasons, Dr. Knutson found the value of a particular core dairy’s home delivery milk, wholesale milk and ice cream distribution system to taxpayer to be best expressed as the excess of the core dairy’s profitability for that product over the average profitability for that product of all non-core dairies acquired by taxpayer in the same market area. In determining values he used a weighted average of the profitability of all non-core dairies acquired by taxpayer for market areas where more than one non-core dairy was acquired by taxpayer. For market areas where taxpayer acquired a core dairy, but no non-core dairy, his analysis used profitability data from non-core dairies located in market areas with “comparable” demographic and competitive conditions. In all cases, the value of the Distribution System asset is defined as the excess of capitalized profit per product *782 point for the core dairy over capitalized average profit per product point for non-core dairies, multiplied by total product points retained by taxpayer after acquisition of the core dairy.

Dr. Knutson defined “points retained” as “points before acquisition” minus the customer volume that the dairy could normally expect to lose immediately after- acquisition. As in the discussion of the Customer Base asset, he found that industry experience indicated an acquired core dairy could expect to lose 5 percent of its home delivery milk customer volume and 20 percent of its wholesale milk and ice cream customer volume. A non-core dairy could expect to lose 5 percent of its home delivery milk customer volume and 35 percent of its wholesale milk and ice cream customer volume.

After the adjustment for loss of customers on acquisition, Dr. Knutson applied a capitalization rate of 6 percent to home delivery milk profit per point and a capitalization rate of 12 percent to wholesale milk and ice cream profit per point. He used different capitalization rates to reflect the greater risks and long-term customer attrition inherent in the wholesale milk and ice cream business.

As defined, the Distribution System asset overlaps with the Customer Base and Production Turnkey assets. Dr. Knutson recognized .the overlap with the Customer Base asset and attempted to separate the two in order to find the adjusted fair market values of each by subtracting the value of the Customer Base asset in each acquisition from that of the Distribution System asset. However, because taxpayer failed to prove the fair market values of the Customer Base assets, it could not perform this calculation.

Moreover, profit may have a role in determining the fair market value of an asset but the role is far from self-explanatory and was not addressed by taxpayer so as to permit the court to find that it was a factor affecting the value of the Distribution System asset. There are too many other unknown inchoate factors that affected any acquired dairy’s profit factor, especially during the heyday of national expansion of the dairy industry sixty years ago, coupled with the economic conditions of the time. In these circumstances profit is not a proper factor by which to measure the value of the asset.

The court must conclude that taxpayer’s methodology was deficient. A Distribution System may be a severable element of goodwill with an asset value of its own, Commissioner v. Seaboard Fin. Co., 367 F.2d 646 (9th Cir.1966), but for the reasons stated above taxpayer failed to overcome the strong presumption of correctness of the determination of the Commissioner that it did not establish that abandonment occurred, or if an abandonment occurred the basis of the asset abandoned within the fairly liberal confines of judicially acceptable methodology. Cf. Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976); Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968). Neither did taxpayer even attempt to sever the Production Turnkey asset, supra, from the Distribution System.

In its analysis of the individual claims the court will not consider loss of the Distribution System as an intangible asset to which taxpayer is entitled to a refund pursuant to I.R.C. § 165. See Helvering v. Taylor, 293 U.S. 507 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935); Welch v. Helvering, 290 U.S. 111, 115 , 54 S.Ct. 8, 9 , 78 L.Ed. 212 (1933); Commissioner v. Riss, 374 F.2d 161, 166 (8th Cir.1967); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244 , 187 Ct.Cl. 635 (1969).

Trade Name

Dr. Knutson testified that the core dairies acquired by taxpayer had spent years building reputations as reliable suppliers of high quality milk products and that their Trade Names and Trademarks were severable assets and had separate values from the other intangible assets. 32 Company names were painted on delivery trucks or wagons, stitched on the route man’s uniform, displayed on retail ice cream cabinets, and printed on ice cream wrappers and milk bot- *783 ties. Consumers identified the dairy’s milk or ice cream with the name of the dairy. Dr. Knutson acknowledged that some customer loyalty to the core dairy names persisted into the 1940’s. Even so, his analysis suggested that a well-established dominant market share contributed more to profitability than name identity. Taxpayer argued that “[t]he name intangible assets, which Dr. Knutson valued in the pre-acquisition context, [were] generally somewhat local organizations with local product distribution and not nationally known.” Dairies, before being acquired by taxpayer, arguably spent relatively little for advertising. What advertising there was, was naturally local because their product was only sold locally. Accordingly, “Trade Names were the least valuable of the allegedly acquired intangible assets.”

According to Dr. Knutson and other knowledgeable witnesses for taxpayer, there were no national dairy trade names in the 1920’s and 1930’s and taxpayer could not market or advertise a product nationally “until a name like Sealtest was adopted.” Taxpayer’s witnesses testified repeatedly that taxpayer’s paramount, even sole, purpose was to develop national recognition

because what you were interested in doing was developing an integrated system on a multi-market basis, with nationwide name recognition brought about, at the least in part, by national advertising. That was the whole concept of National Dairy Products and Bordens and Carnation and Beatrice ... to get a national system going in the dairy industry.

For purposes of his analysis Dr. Knutson determined that the pre-acquisition advertising budgets of each dairy were “very small,” though he did not know whether the amount of advertising was uniform among the acquired dairies. Based upon his expertise and historical knowledge of the industry Dr. Knutson determined that the replacement cost of duplicating the intangible value created by each dairy’s minimal advertising would not have been substantial in relation to the other intangible assets acquired. Accordingly, he valued the Trade Name asset át a flat two percent of the total acquisition cost of each dairy. He asked the court to find his valuation methodology judicially acceptable because it was based upon his demonstrated knowledge of the core dairy acquisitions, and the history and economics of the dairy industry in the 1920’s.

Defendant argued that a flat two percent valuation for all Trade Names was patently unreasonable because different acquired dairies spent widely divergent amounts on advertising their local milk products. Defendant elicited testimony that the acquired Trade Names may have been worth considerably more in some markets than the minimal values ascribed to them by Dr. Knutson. Moreover, while trade names generally were abandoned soon after acquisition, in a few instances taxpayer used some of the Trade Names acquired from core dairies for decades, but abandoned or otherwise disposed of them in non-suit years. The principal thrust of defendant’s argument was that taxpayer did not, and could not, have proved the adjusted fair market value of the Trade Name asset which may have had great value to one dairy, but not another, by evaluating all at a flat two percent of the acquisition price.

Taxpayer did not present a cohesive or persuasive case that tradenames were of any significant value to it. While trade names and trademarks created by taxpayer such as Sealtest, Kraft, Brookstone, and Sugar Creek had great value, they are not in issue here, “[a]nd that does not establish material value for the Trade Names acquired by plaintiff in the 1920’s and abandoned shortly thereafter in favor of plaintiffs noted ‘Sealtest’ brand name.” Taxpayer did not specifically identify what acquired trade names it used and maintained, though it is clear from the record that as late as 1945 at least some of the Trade Names of taxpayer’s core dairies were still in use; Breyer’s is in use to this day.

The court is of the opinion that neither party reached the real issue and that taxpayer did not argue the correct rule of law. Taxpayer bears the substantial burden of proving the Commissioner’s determination that the alleged Trade Name asset was not abandoned, and if it were, the valuation was correct, and unsubstantiated conclusions will not suffice for the absence of proof. Moreover, the use of other dairy Trade Names *784 runs totally counter to taxpayer’s single-minded goal of creating a national name and business. The parties fussed about eight dairies that were left in their acquired corporate shells, at a few instances for decades, but there was no proof whether all, some, or none of the Trade Names associated with those acquisitions were maintained, or also abandoned in non-suit years with other trade names. Dr. Knutson testified that the Trade Name asset was of value only in the transition period between acquisition and the time when “a national Sealtest Trademark could be established[,] and that the names were abandoned at that point in time and was not used anymore.” He concluded that “the local names vanished from the scenes very rapidly” because taxpayer wanted to promptly “establish a national brand.” Taxpayer’s briefs and testimony infer that some were used, but, again, inferences are no substitute for proof.

Notwithstanding taxpayer’s arguments, it is exceedingly clear from the record that taxpayer abandoned all acquired trade names and trademarks in 1956 in favor of its Seal-test trade name and trademark — the long sought “national” goal. Taxpayer, in its Objections to Defendant’s Requested Findings of Fact 31 stated:

Substantially all the trade names and trademarks purchased by NDPC which are the subject of this case were abandoned by plaintiff long before its abandonment of the other intangible assets here in suit.

In short, taxpayer has presented no evidence that it sought to acquire Trade Names. Even though taxpayer argued that the Trade Names it acquired had some intrinsic value, that value was nonexistent to taxpayer. The court finds that taxpayer had no interest in acquiring Trade Names because their use would not have brought taxpayer any closer to its goal of creating a national brand name. Taxpayer did use some Trade Names until it could liquidate the acquired dairies but that use was, for all practical purposes, forced upon taxpayer by the exigencies of each situation, and does not obviate the finding that taxpayer was never interested in, or sought out, Trade Names for use post-acquisition. The fact that a trade name or trademark may have been included in the assets acquired from a core dairy is a matter of the form of the acquisition. In substance, taxpayer never sought to purchase Trade Names because it had no use for those names and marks.

In some circumstances a purchased Trade Name can be a valuable asset but here, Mr. Mclnnerney and his successors were driven to eliminate local businesses and move swiftly to a national, and ultimately international, company, selling products under well-advertised trade names and trademarks that it invented [or acquired but never abandoned]. In these circumstances the court finds that taxpayer never intended to perpetuate local names thereby depriving itself of the ability to grow into a large and powerful unified dairy, advertised to consumers as a source of high quality milk products. Dr. Knutson was incorrect in stating that taxpayer “had to acquire trade names in order to achieve its goals.” Taxpayer was not interested in, and did not intend to acquire trade names and Trademarks from the dairies at issue here. See Gravley v. Commissioner, 44 B.T.A. 722, 27 , 1941 WL 361 (1941).

There was even less proof that Trademarks were acquired or used after acquisition. Trademarks are not perpetual; they must be registered and renewed periodically, and actually used, or the owner loses its exclusive right to the trademark and it becomes valueless.

It is actual use of a symbol as a ‘trademark’ in the sale of goods which creates and builds up rights in a mark. Therefore, lack of actual usage of a symbol as a ‘trademark’ can result in a loss of legal rights. The loss is known as ‘abandonment.’ Trademark rights can be abandoned through a period of nonuse, from which the inference of intent to abandon can be made.

McCarthy, Trademarks and Unfair Competition, § 17.6, 2d Ed. Taxpayer proffered no proof that acquired trademarks were ever registered, timely renewed, or regularly used; or, if used, for how long, though it is clear that all allegedly acquired trademarks *785 disappeared in 1956 with the allegedly acquired trade names.

It is clear from the record that trade names and trademarks that taxpayer acquired from the core dairies it purchased were acquired as a minor incident in a composite transaction. Domestic Management Bureau, Inc. v. United States, 38 B.T.A. 640 , 1938 WL 87 (1938). There is clear evidence that tradenames acquired in the mid-1920’s to 1930’s were abandoned or otherwise surrendered prior to 1957, in non-suit years, thereby depriving taxpayer of favorable tax treatment for abandonment at this time. Id.; Treas.Reg. § 1.165-l(d). The court finds no intent by taxpayer to acquire or preserve the asset. Cf. Hazeltine Corp. v. United States, 145 Ct.Cl. 138 (1959).

A Trade Name or Trademark may be a severable element of goodwill with an asset value of its own, Commissioner v. Seaboard Fin. Co., 367 F.2d 646 (9th Cir. 1966), but for the reasons stated above taxpayer failed to prove by a preponderance of the evidence that it acquired the claimed Trade Names, Koppers Coal Co. v. Commissioner, 6 T.C. 1209 , 1946 WL 265 (1946), and a fortiori, to overcome the strong presumption of correctness of the determination of the Commissioner that it did not establish that abandonment occurred. Cf. Union Pac. v. United States, 524 F.2d 1343, 1383 , 208 Ct.Cl. 1 (1976); Meredith Broadcasting Co. v. United States, 405 F.2d 1214 , 186 Ct.Cl. 1 (1968). “A taxpayer ‘seeking a deduction must be able to point to an applicable statute and show that he comes within its terms.’ ” New Colonial Ice Co. v. Helvering, 292 U.S. 435 , 54 S.Ct. 788 , 78 L.Ed. 1348 (1934); Gravley v. Commissioner, 44 B.T.A. 722 , 1941 WL 361 (1941). Taxpayer has failed to do so here and in its following analysis of the core dairies the court will not consider the Trade Name asset as an intangible asset to which taxpayer is entitled to an abandonment loss deduction pursuant to I.R.C. § 165 in this litigation.

ABANDONMENT

Abandonment of an asset in tax law is defined as a permanent disposition, not sold, never to be used again and not retrieved for sale, exchange, or other disposition. Treas. Reg. §§ 1.167 (a)-1.168(a)(4). It does not have to mean that real or personal tangible property is simply closed or left to fall into disrepair, and never disposed of by sale or exchanged for some form of consideration. Whether a property is abandoned is a question of fact that must be determined by the trier of fact from a review of the record to find the taxpayer’s intent. Substance governs the ultimate finding, not form and taxpayer’s intent must be evident from all the available facts and circumstances. Commissioner v. Ashland Oil & Ref. Co., 99 F.2d 588 (6th Cir.1938), cert. denied, 306 U.S. 661 , 59 S.Ct. 786 , 83 L.Ed. 1057 (1939); American Potash & Chem. Corp. v. United States, 399 F.2d 194 , 185 Ct.Cl. 161 (1968); Kimbell-Diamond Milling Co. v. Commissioner, 14 T.C. 74 , 1950 WL 118 (1950), aff'd, 187 F.2d 718 (5th Cir.1951), cert. denied, 342 U.S. 827 , 72 S.Ct. 50 , 96 L.Ed. 626 (1951).

Defendant argued that taxpayer sold rather than abandoned certain intangible assets in nine market areas. As evidence of taxpayer’s intent, defendant urged the court to fi

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