Q & A Roger J. Grabowski, a partner with Price Waterhouse, has spent 18 years fixing values to almost everything -- from the mundane (real estate and machinery) to the exotic (motion picture and recording libraries).

As national director of Price Waterhouse Valuation Services, he served as an expert witness in the Newark Morning Ledger case, a dispute over the value of newspaper subscription lists that had important tax implications for bank core deposits.

In a recent interview with assistant WashingTon bureau chief Robert M. Garsson, he explained how a career he began by puzzling over the value of board games like Monopoly for Parker Brothers led him to questions about the value of bank deposits.

American Banker: How did you. fix a value to Monopoly?

Roger Grabowski: The basic principles on which investors buy any sort of business are based on their income-generating capacity. So we needed to determine, for the portfolio of games, how long you would expect the income to last. It's not much different than when you value core deposits for banks or saving and loans, as to how long the depositors will remain. You do a study on the useful life of the depositors, just as we did a study on the useful life of games.

Now it turns out that there are some games that had sort of an indefinite or indeterminate life. That may be the same as some of the core deposits. The District of Columbia deposits money in a bank, and it's not likely it's ever going to move.

AB: How did the Newark Morning Ledger case affect banks?

RG: The case dealt with an intangible asset, the value of which was based not on a contractual relationship but a predictable pattern. People buy and sell businesses on that basis every day. The question is whether there is an acceptable way of differentiating that asset from this nebulous pot called goodwill, which is nondepreciable.

The court said all you need is a two-pronged test: a determinable useful life and a value. So the court adopted more of a businessman's approach. It recognized the economics of what people were willing to pay for. Banks are bought every day on the basis of the regularity of the deposits, even though the depositors aren't contractually obligated to stay. But you can reasonably determine what the pattern of those deposits are.

AB: How?

RG: Every bank in every community is different, and you have to do some testing. The Supreme Court does still say it is a heavy burden of proof on the taxpayer.

AB: Is their any likelihood that the IRS will simply reject each case?

RG: The House Ways and Means report [on the pending tax bill] strongly urges the IRS to settle existing cases with taxpayers in light of the Newark decision and in light of Congress' intention that this be settled. Up until now, they have stonewalled the taxpayers. Now they can't.

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