Groff v. Munford
Citation | 150 F.2d 825 |
Decision Date | 19 July 1945 |
Docket Number | No. 283.,283. |
Parties | GROFF v. MUNFORD. |
Court | U.S. Court of Appeals — Second Circuit |
Samuel O. Clark, Asst. Atty. Gen., Sewall Key, Helen R. Carloss, and William B. Waldo, Sp. Assts. to Atty. Gen., and Robert P. Butler, U. S. Atty., and Edward J. Lonergan, Asst. U. S. Atty., both of Hartford, Conn., for defendant-appellant.
Alfred H. Phillips, of New York City (Richard C. Hunt and Alfred H. Phillips, both of New York City, of counsel), for plaintiff-appellee-appellant.
Before L. HAND, AUGUSTUS N. HAND and FRANK, Circuit Judges.
The question to be determined on this appeal is whether the average mean selling price of $23.375 per share on the Montreal Stock Exchange for November 10 and 12, 1936 (November 11 being a holiday) should be taken as the value of stock of Electrolux Corporation in assessing the gift tax on 14,000 shares given by Charles G. Groft to his wife on November 11. On November 10, only 145 shares were sold on the Montreal Exchange and on November 12, 250 shares. During the whole of November 5,861 shares were sold on that Exchange; during December 5,927 shares; during January, 1937, 3,692 shares; during February 5,715 shares, and during March 3,550 shares. The mean average price between high and low during December was $23.75; during January $22.94; during February $21.75 and during March $18.75.
The parties stipulated for the trial that a member of the Montreal Exchange who was an expert familiar with trading in Electrolux stock, would testify that if the 14,000 shares had been added to the supply they could not have been sold within a week of November 11, 1936, for more than $17.25 per share and that $17.25 per share represented the fair market value of the block of stock on November 11, 1936. It was also stipulated that a member of a firm of brokers active on the Montreal Exchange would testify that there was no over-the-counter trading in this stock, that the trading in it on the Exchange was extremely small and that a broker could not have sold the 14,000 shares of stock at a higher price than $17.25 per share had he taken a period of not more than several months to complete the transaction. A broker named Grace testified that as large a block of Electrolux stock as 14,000 shares, would in his opinion have been worth between $16 and $18 per share as of November 11, 1936, if "peddled advantageously and without pressure on the market" over a period of from four to six months. Finally, Robert Horner, a dealer in securities, testified that the block of 14,000 shares testified that the block of 14,000 shares could have been sold on the Montreal Exchange at $17 or $18 per share, if disposed of within from four to eight months after November 11, but that such a block of stock might have been distributed in the American Market at $23 to $24 per share in a so-called "best efforts" deal by organizing a group of brokers to create interest in the stock and make a market, though their charges would have amounted to $3 per share. Under such an arrangement a dealer would contract to buy the stock at $23 or $24 per share and to take and pay for it over a period of a number of months. Horner gave as an example of a "best efforts" deal a purchase by himself of a block of some 20,000 shares of this very Electrolux stock in the year 1938 under an arrangement in which he had an option to purchase at the last sales price on the Montreal Exchange less a broker's fee of $2 per share. The court below regarded the reason for a fee of $2, rather than one of $3 per share, to be that the dealer who had charged $2 had only exercised an option and had not undertaken an absolute obligation to purchase.
Upon the foregoing record Judge Hincks held that He made the specific findings set forth below.1
The issue in the appeal by the administrator of the Collector is whether the sales price per share of the Electrolux stock on the Montreal Stock Exchange on or about the date of the gift is controlling as to the value of the gift.
Section 506 of the Revenue Act of 1932, c. 209, 47 Stat. 169, 26 U.S.C.A. Int.Rev. Code, § 1005, which dealt with gifts in property and was in force in November 1936, provided that: "If the gift is made in property, the value thereof at the date of the gift shall be considered the amount of the gift."
There was a relevant Treasury Regulation — Regulation 79, Article 19 (1936 Ed.), dealing with valuations for gift tax purposes as follows:
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