Rogers v. Helvering

• Decision Date: 06 November 1939
• Docket Number: No. 4-6.,4-6.
• Parties: ROGERS v. HELVERING, Commissioner. TUTHILL v. SAME. THRALL v. SAME.
• Court: U.S. Court of Appeals — Second Circuit

107 F.2d 394 (1939)

ROGERS v. HELVERING, Commissioner. TUTHILL v. SAME. THRALL v. SAME.

Nos. 4-6.

Circuit Court of Appeals, Second Circuit.

November 6, 1939.

Hugh Satterlee, of Washington, D. C., I. Herman Sher, of New York City (Satterlee & Green, of New York City, of counsel), for petitioners.

James W. Morris, Asst. Atty. Gen., and Sewall Key and Joseph M. Jones, Sp. Assts. to Atty. Gen., for respondent.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

PER CURIAM.

This appeal presents only one question, and that, one of fact: did the Board correctly appraise at $344 the "basis" on Sept. 1, 1929, of certain shares of stock, sold by the taxpayers in 1925? The evidence took a wide range, including on the one hand, much lower estimates put upon the shares by the taxpayers themselves for estate tax purposes, the sale-prices of small blocks, and brokers' quotations. On the other hand were a valuation of $465 as of March 1, 1913, found by the Commissioner himself, a number of elaborate calculations of experts, based upon the company's books and upon independent appraisals, and the fact that the shares, after being multiplied three-fold, were sold in 1925 for $500. If it were our duty, instead of the Board's, to appraise the shares, perhaps we should have made a larger allowance; but concededly it is not, we are confined to inquiring whether there was substantial support for the Board's finding. Phillips v. Commissioner, 283 U.S. 589, 600, 51 S.Ct. 608, 75 L.Ed. 1289; Helvering v. Rankin, 295 U.S. 123, 131, 55 S.Ct. 732, 79 L.Ed. 1343; Helvering v. Tex-Penn Oil Co., 300 U.S. 481, 490, 57 S. Ct. 569, 81 L.Ed. 755. The book value of the net tangible assets as of September 1, 1919, was in the neighborhood of $5,500,000, ignoring a "write-up" of $2,500,000, made by professional appraisers in August, 1919, by which the Board was certainly not bound. The book value of the goodwill was about $300,000, so that the shares had a book value of about $423. That is one approach. Another is to use one of the accredited formulas, based upon earnings, in order to appraise good-will. For example, one might select six per cent for the proper return on net tangibles, as the taxpayers do in their brief. In that case the average income for the five years before Sept. 1, 1919 — about $485,000 — would leave the sum of $155,000, as the income from good-will. This, capitalized at ten per cent, gives a total of about $7,000,000 of assets, and a value for the shares of something like $546. If, on the other hand, one takes nine per cent for the income on tangibles, nothing is left for good-will. Such computations are no doubt useful, but they are certainly not compelling. At best they are the opinions of experts, which the Board was not obliged to accept. Dayton P. & L. Co. v. Public Utilities Comm., 292 U.S. 290, 292, 54 S.Ct. 647, 78 L.Ed. 1267; Uncasville Mfg. Co. v. Commissioner, 2 Cir., 55 F.2d 893, 897. Moreover, even if we had an absolutely reliable appraisal of the value of the assets, which we have not, although it would be a factor in appraising the shares (Ray...