Company Contests Denial Of $7 Million In Amortization Deductions For Intangible Assets.

SIMUNICO, INC. AND SUBSIDIARIES,

====== SUMMARY ======

Simunico Inc. of Rutherford, N.J., is contesting the denial of more than $7 million in amortization deductions for certain intangible assets, which it claims have limited useful lives and are separate and distinct from goodwill.

Simcorp Inc., a wholly-owned subsidiary of Simunico, was merged with and into Simmons Juvenile Products Co. Inc., which owned all of the issued and outstanding stock of Bloomcraft Inc., Century Curtain Co. Inc., Hausted Inc., Simmons Healthcare Inc., and Little Folks Inc.

Simuncio claims that the assets of Simmons were deemed purchased for $79,364,000, and that the fair market value of the identifiable tangible assets was approximately $45,500,000. It claims that the identifiable intangible assets of assembled work force, customer lists, product lines, engineering drawings, and computer software totaled $23,810,000, and that $10,000,000 was assigned to goodwill.

Simuncio claims that the indentifiable intangible assets are all wasting assets, separate and distinct from goodwill, with ascertainable values and limited useful lives, the duration of which can be ascertained with reasonable accuracy.

Periods and Amount at Issue: 1988 through 1991 -- $2,538,053

Applicable Code Sections: 167

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PETITION

Petitioners hereby petition for a redetermination of the deficiencies set forth by the Commissioner of Internal Revenue (the "Commissioner") in his Notice of Deficiency bearing the symbols A:NWK:GF:GT:90D and dated November 18, 1993. As the basis for their case Petitioners allege as follows:

1. Petitioner Simunico, Inc. (22-2846869) ("Simunico") whose legal address is 301 Route 17 North, Rutherford, New Jersey 07070, is the parent of a consolidated group that filed consolidated federal income tax returns for the 1988, 1989, 1990 and 1991 taxable years with the Internal Revenue Service Center in Holtsville, New York.

2. Petitioners Simmons Juvenile Products Company, Inc. (06-1012789), BLC Liquidating Corp., formerly Bloomcraft, Inc. (06-1012786), CCC Liquidating Corp., formerly Century Curtain Co., Inc. (13-2661223), Hausted, Inc. (06-1012791) and SHC Liquidating Corp. formerly Simmons Healthcare, Inc. (13-1967779), whose legal address is 301 Route 17 North, Rutherford, New Jersey 07070, are, directly and indirectly, wholly-owned subsidiaries of Simunico and joined in the filing of the consolidated return with Simunico.

3. The statutory Notice of Deficiency (a copy of which is attached hereto and marked Exhibit "A") that was mailed to Petitioners was dated November 18, 1993 and was issued by the Office of the Internal Revenue Service in Newark, New Jersey.

4. The income tax deficiencies for the taxable years ending July 31, 1988, July 31, 1989, July 31, 1990 and July 31, 1991 as determined by the Commissioner and all of which are in dispute, are as follows:

      Taxable            Increase

     TOTAL              $2,538,053

5. The Notice of Deficiency also assessed interest on the deficiencies at an increased rate, computed under section 6621(c) of the Internal Revenue Code of 1986 (the "Code"), which assessment is also in dispute.

6. The determinations of tax and interest set forth in the Notice of Deficiency is based on the following erroneous determinations:

(a) The Commissioner erred in disallowing deductions for

(b) The Commissioner erred in determining that it has not

(c) The Commissioner erred in determining that the alleged

7. The facts upon which Petitioners rely as the basis for their case are as follows:

(a) Simunico and Simcorp, Inc., a wholly-owned subsidiary,

(b) On August 5, 1987 Simcorp, Inc. was merged with and

(c) At the time of the merger, Simmons owned all of the

(d) Simunico and Wickes & Co., the former owner of Simmons,

(e) Pursuant to section 338 of the Code, Petitioners'

(f) Petitioners engaged an independent public accounting

(g) The fair market value of the identifiable tangible

(h) The fair market value of the identifiable intangible

     assembled work force     -     $   448,000

(i) Under the residual allocation method, the excess of the

(j) The Identifiable Intangible Assets are all wasting

(k) The remaining useful lives of the Identifiable

     assembled work force     -     10 years

(l) The statutory notice of deficiency was dated November

(m) Petitioners were never given an opportunity for

8. Petitioners further assert that, in the event they should make any payment to Respondent of the deficiency set forth in the Notice of Deficiency (or any portion thereof) and it is subsequently determined they are not liable for the portion of the deficiency paid, Petitioners will then be entitled to a refund of the overpayment together with interest thereon as provided by law.

WHEREFORE, Petitioners pray that this Court try the case and:

1. Determine that there are no deficiencies in income tax for the years in issue.

2. Determine that Petitioners are not subject to the provisions of section 6621(c) of the Code with respect to large corporate underpayments.

3. Grant Petitioners such other and further relief to which they may be entitled.

DATED: January 26, 1994

Stuart L. Rosow