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Court Orders IRS To Let Newspaper Co. Depreciate Subscriber Lists

April 9, 1990

NEWARK, N.J. (AP) - A newspaper company can depreciate paid subscriber lists acquired through the purchase of other publishing interests, a federal judged ruled April 3.

The ruling paves the way for the Newhouse family-owned Morning Ledger Co. of Newark to depreciate $71 million on amended tax returns, said Donald A. Robinson, the Newark attorney who represented the Newhouse family.

Robinson said the company also will collect an undetermined amount of interest from the Internal Revenue Service on the previously disallowed depreciation deductions.

The Newark Morning Ledger Co., owner of The Star-Ledger of Newark, sued the IRS after the agency refused to let the company depreciate subscriber lists for eight Michigan papers it acquired in 1977. Depreciating the lists would decrease the company’s taxable income.

During the hearing, Morning Ledger attorneys argued that subscriber lists should be treated like tangible - and hence depreciable - assets because they are used in the taxpayer’s business for a limited period of time.

U.S. District Judge H. Lee Sarokin agreed with the plaintiffs that paid subscriber lists are of limited value because subscribers die, move and cancel subscriptions.

Sarokin found that even if the circulation of a newspaper remains constant, the publisher spends a substantial amount of time and money in advertising and subscription drives to replace lost customers.

The government argued that subscriber lists are an intangible asset that cannot be separated from the company’s ″goodwill.″

If the company were given the depreciation allowance, any business with paying customers could claim depreciation by saying the customers have a limited useful life, Gregory Hrebiniak, a lawyer with the Justice Department’s tax division, argued.

The Morning Ledger company acquired Booth Newspapers, Inc., of Ann Arbor, Mich., in 1977. The group was worth about $314 million and had a combined circulation of 460,000, according to the legal opinion.

Booth’s eight newspapers in Michigan were The Ann Arbor News, The Bay City Times, The Flint Journal, The Grand Rapids Press, Jackson Citizen Patriot, Kalamazoo Gazette, The Muskegon Chronicle and Saginaw News.

The Morning Ledger’s parent company is Advance Publications Inc., a publishing company owned by the Newhouse family. Times Herald Editor, in Court, Denounces ‘Features Grab’ by Rival

HOUSTON (AP) - The editor of the Dallas Times Herald said April 6 his counterpart at the rival Dallas Morning News ″stalked for years″ the features that have become the center of a $33 million antitrust suit.

″The features were extremely important but it was the act itself that was deplorable,″ Times Herald Editor Roy Bode said of a ″features grab″ by the Morning News and its editor, Burl Osborne. Bode’s remarks drew immediate objections from Morning News attorneys. Osborne denied the characterization.

″I have no recollection of ever aggressively pursuing their package,″ he said during testimony as a hostile witness called by Times Herald attorneys.

The Times Herald is seeking the $33 million and unspecified punitive damages from the Morning News and parent company A.H. Belo Corp.

A joint venture between Belo and Universal Press Syndicate Inc. left the Times Herald without comics and columns that included Dear Abby, Erma Bombeck and Doonesbury - all distributed by Kansas City-based UPS.

Belo and Universal Press announced their venture, Universal Belo, to develop syndicate features for television use. Osborne said the shift of the entire UPS package to his newspaper was a condition required by the syndicate.

The Times Herald alleges the venture and the transfer of the features violated antitrust laws and was an attempt to create a monopoly and drive the Times Herald out of business.

The trial began April 2 and is expected to last at least a month. Monthly N.J. Sports Tabloid To Debut

BYRAM TOWNSHIP, N.J. (AP) - A monthly tabloid covering amateur sports in New Jersey is scheduled to debut by the end of April, its publisher said.

Sports in New Jersey will cover over-30 softball, road races, junior wrestling, the Garden State Games and high school and college sports, publisher Jan Michael Pero said April 2.

″Basically, if it’s non-professional, we’ll cover it,″ Pero said. ″Our research showed there’s a real market for this kind of news.″

The newspaper and its editorial staff of four will rely heavily on story contributions from private contractors. Pero said he hopes to publish 10,000 copies of the first issue. Subscriptions will cost $18 a year.

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