Tax Legal Services · Primary-source case analysis

Newark Morning Ledger: A Customer-Based Intangible Could Be Depreciated with Sufficient Proof

By Aneeta Mishra and Timothy Chan

Published August 15, 2026

Newark Morning Ledger Co. v. United States concerned a newspaper acquisition in which the buyer allocated basis to the projected profit from identified paid subscribers and claimed depreciation deductions.

The buyer valued an existing subscriber relationship asset

The taxpayer used actuarial evidence to estimate future profits and attrition for subscribers on the acquisition date, assigning a finite useful life and substantial value to that identified cohort.

Goodwill labels did not create an absolute bar

The Court rejected a rule making every expectancy-of-patronage asset nondepreciable. The statutory question was whether the taxpayer could prove value and a determinable useful life.

The taxpayer carried a demanding factual burden

The government did not successfully displace the valuation methodology or useful-life evidence on the developed record. The Court therefore reinstated the refund judgment.

Section 197 now governs many acquired intangibles

Congress later enacted a standardized fifteen-year amortization regime for specified acquired intangibles, including goodwill and customer-based assets. Current acquisitions must begin with section 197 and its anti-churning and allocation rules.

Key takeaways

• Identify the acquired intangible and distinguish it from the overall business.
• Support value and useful life with defensible contemporaneous evidence.
• Apply section 197 before relying on older depreciation doctrine.
• Reconcile purchase-price allocation across tax, accounting, and deal documents.