Can the parties under a simple formulaic adjustment clause have eliminated the possibility of the IRS producing a taxable US gain by prevailing on a valuation argument? This report will consider the foregoing question and some related questions, all having to do with clauses that attempt, by formula, to solve what would otherwise be an income tax problem or eliminate what would otherwise be a tax risk. First, however, it is useful to detour through an area of estate and gift taxation in which those clauses have been used and, on varying facts, upheld and disregarded. The detour will be lengthy, not because estate and gift taxation is a topic of this report, but because that is where the law is. The discussion will then cover some of the issues that are raised by the applicable law and apply also in the income tax world. Finally, this report will cover the possible application of formula clauses in several specific income tax areas.