1937 BTA LEXIS 900 | B.T.A. | 1937
Lead Opinion
1. The petitioner seeks a determination in this proceeding that it is free from any “personal liability” which might be asserted under the Eevised Statutes, § 3467,
2. The first and principal matter in controversy is the amount to be included in the gross estate under the Revenue Act of 1926, section 302, as the value at the time of death of property consisting of shares of stock in four corporations, namely, 35,966 shares of Atlantic. Coast Line Railroad Co., 104,663 shares of Atlantic Coast Line Cov of Connecticut, 1,000 shares of Safe Deposit & Trust Co. of Baltimore, and 3,000 shares of Wilmington Savings & Trust Co. As to the Wilmington Savings & Trust Co. shares, the record is without evidence as to their value, and for this reason, as petitioner in its proposed findings admits, no finding can be made that the value of these shares is other than $105,000, as the Commissioner determined.
(a) The petitioner, in its return, included in the gross estate, as the value of the 35,966 Railroad Co. shares, $1,078,980, which was arrived at upon a unit valuation of $30 per share. The Commissioner, after audit and negotiation, determined the value of these shares at date of death to be $1,582,504, a unit value of $44 per share. The issue is whether, from the evidence in this record upon this question of fact, it is established that the Commissioner’s determination is in error, and, if so, what the preponderance of, the evidence establishes as the correct value of the shares.
The Commissioner’s determination was based upon the fact that on the date of death the shares wrere listed on the New York Stock
The evidence demonstrates to a reasonable assurance that the Commissioner’s method, while it has the administrative advantage of certainty, does not, as to this block of shares, result in a figure
On November 30, 1931, the history of the Eailroad showed steadily declining earnings, from the end of 1929 at about $15 per share, to less than $10 on the date of death. The stock prices had been going through a general decline, with occasional short spurts upward, since the middle of 1931, when in July it was in the 90’s, in September in the 70’s, in October in the 60’s and 50’s, until at the date of death it was, as has been seen, 43-45. Since, as the evidence shows, this performance was embedded in the general economic depression which was at that time well known and widely felt, there was no reason for belief that the downward trend had reached its end, so that stocks which could only be sold piecemeal over a substantial period would continue to command the price of that day. With the information at hand on that day which is present in this record, one could not reasonably have expected to realize for the entire 35,966 shares to be sold during the forthcoming months an average price reflected by a curve projected in any other than the general downward direction which it had taken in the recent past.
In our opinion, the value of the 35,966 shares of Atlantic Coast Line Railroad Co. stock on November 30, 1931, was not more than $35 per share, or $1,258,810, and this value has been found as a fact.
This conclusion has not been arrived at by any dogmatic recognition or nonrecognition of any so-called “blockage” rule, i. e., that a large block of shares of one kind is ipso facto to be valued with or without relation to the value of one share in a smaller block. “Blockage” is not a law of economics, a principle of law, or a rule of evidence. If j the value of a given number of shares is influenced by the size of the / block, this is a matter of evidence and not of doctrinaire assumption.^ See James Couzens, 11 B. T. A. 1040, 1161; T. B. Hoffer, 24 B. T. A. 22; Laird v. Commissioner, 85 Fed. (2d) 598; Rogers v. Strong, 72 Fed. (2d) 455; William S. Gordon, Trustee, 33 B. T. A. 460; St. Louis Union Trust Co. et al., Trustees, 30 B. T. A. 370, 381; Frank
(b) The gross estate included 104,663 shares of Atlantic Coast Line Co. of Connecticut, which was an investment corporation the greater part of the assets of which consisted of securities of the Atlantic Coast Line Railroad Co. Its shares were listed on the Baltimore and Richmond Exchanges, but were dealt in very infrequently. On the Baltimore Exchange the price was “pegged” from September 25,1931, to February 2, 1932, at the September 25 price of 68. There was a sale on the Richmond Exchange of 27 shares on November 24, 1931 (6 days before the death of decedent), at 44, and there was a sale of 8 shares on December 7 (7 days after death), at 30. Since the regulations, article 13, prescribe that the price at the nearest date be used, the Commissioner took $44 as the unit price and thus determined a value of $4,605,172. The petitioner, in its return, used a unit price of $30 and a total of $3,139,890. Both sides, it will thus be seen, have used the same unit figure per share for the Connecticut Co. shares as for the Railroad Co. shares. There is testimony and argument on the subject of the relation between the two, but it seems to elude satisfactory rationalization. There is in the record evidence enough to show that the parity of values which both sides have adopted is fair and reasonable. Thus the finding has been made of a total value of the 104,663 Connecticut Co. shares of $3,663,205, at the same unit figure of $35 as has been used for the Railroad shares. This unit figure also reflects, apart from any relation with the Railroad shares figure, a reasonable point in the downward trend of the value of the Connecticut Co. shares which one might be expected to consider in arriving at a price.
(c) The gross estate included 1,000 shares of Safe Deposit & Trust Co. stock, the value of which the petitioner included in its return at a rate of $550 and the Commissioner determined at a rate of $635 per share. The shares were not listed, and actual transactions had occurred in small lots at prices -which were gradually declining from $695 early in October to $590 and $600 shortly after the death. No early rise was then reasonably in prospect. Both sides agree that as to this sort of stock book value is not significant. Upon all the evidence in the record, the finding has been made that the value at the date of death was at the rate of $600 per share, or an aggregate value of $600,000.
(3) The subject of deductibility, as claims against the estate, of outstanding amounts of subscriptions made by a decedent during his
Beviewed by the Board.
Judgment will be entered under Rule 50.
Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the united States from such person or estate, shall become answerable in his own person and estate for the debts so due to the united States, or for so much thereof as may remain due and unpaid.
If the executor makes written application to the Commissioner for determination of the amount of the tax and discharge from personal liability therefor, the Commissioner