11 B.T.A. 700 | B.T.A. | 1928
Lead Opinion
After consideration of the record in this case we find no error in respondent’s determination.
The sand and gravel-bearing lands were bought by petitioner in 1908 and 1909 for approximately $32,000 with the purpose of producing therefrom and selling sand and gravel for use in making concrete. For whatever reason, this use proved unprofitable and petitioner turned to the production of sand for steel molding and sand-blast purposes. Petitioner remodeled its plant for the new production and in 1912 in furtherance of this program attempted
In the face of the above and other facts to the same effect contained. in the record, petitioner contends that its gravel deposits had a fair market value on March 1, 1913, of at least $2,000,000. In support of this contention petitioner offered no evidence of sales of comparable property nor did it offer opinion evidence. It relied solely on an analytical appraisal based on discounted estimated future earnings. By use of the same method respondent arrived at a value of $300,000. The wide divergence in amounts is attributable to the use of different estimates and factors in the computations.
The determination of fair market value is largely a matter of judgment and the various theories of valuation are useful only in so far as they support a result that comports with sound judgment. The valuation proposed by petitioner does not satisfy this test.
Without here going into the intricate mathematical processes employed by counsel for petitioner in his brief, it is sufficient to say that in our opinion many of the estimated factors used are wholly unjustified by the record in the case and by the actual experience of the company. While in the absence of better evidence of value resort may properly be had to an analytical appraisal of estimated future earnings, the varying computations made by counsel for both parties in their briefs amply demonstrate the danger of a strict adherence to a theory of valuation in which estimated factors play such a prominent part.
In its computations petitioner has capitalized its hopes of future production rather than expectations reasonably sure of realization. To approve the value asked would require us to shut our eyes not only to the reasonable probability but the actual experience of the company, both before and after March 1, 1913. When evidence of subsequent experience is before us which conclusively demonstrates the unsoundness of a theoretical computation of value as of an antecedent date, it is unreasonable to expect that such evidence will be disregarded and full approval given to the theoretical calculation.
We are of the opinion that petitioner has failed to demonstrate that respondent’s determination was in error, and the same is approved.
There being no deficiency determined for the year 1919, the appeal is dismissed so far as relates to that year. Cornelius Cotton Mills, 4 B. T. A. 255. No testimony was adduced on the issue of special assessment and it is .accordingly denied.
Reviewed by the Board.
Judgment mil be entered for the respondent.
Dissenting Opinion
dissenting: I am unable to agree with the valuation fixed by the prevailing opinion. I feel that the proof introduced establishes a valuation much higher than that determined by the respondent.