Wiget v. Becker

• Decision Date: 27 July 1936
• Docket Number: No. 10487.,10487.
• Citation: 84 F.2d 706
• Parties: WIGET v. BECKER, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Eighth Circuit

84 F.2d 706 (1936)

WIGET v. BECKER, Collector of Internal Revenue.

No. 10487.

Circuit Court of Appeals, Eighth Circuit.

July 27, 1936.

Chase Morsey, of St. Louis, Mo., for appellant.

Warren F. Wattles, Atty., Tax Division, Department of Justice, of Washington, D. C. (Robert H. Jackson, Asst. Atty. Gen., Sewall Key, John MacC. Hudson, and J. W. Wideman, Sp. Assts. to Atty. Gen., and Harry C. Blanton, U. S. Atty., of Sikeston, Mo., on the brief), for appellee.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

In this case, appellant, as plaintiff, brought suit to recover $7,341.29 collected from her as additional income tax for the taxable year 1928. In 1928 she sold 448 shares of the capital stock of the Farmers & Merchants Trust Company, engaged in the banking business at St. Louis, Mo., at $400 per share. She claims to have realized a taxable gain in the transaction of $101,573.96. She acquired the stock at different times by gift, by purchase, or as stock dividend, as follows:

                                                             Number
                                                               of
                       Date          How acquired           shares
                  Jan. 23, 1913  By gift ..................    28
                  Apr. 30, 1915  By purchase ..............     2
                  Dec. 22, 1917  By stock dividend ........    30
                  Dec. 24, 1920  By gift ..................   164
                  June 13, 1923  By stock dividend ........   224
                                                              ___
                                                              448
                

The stock received as stock dividends amounted in all to 254 shares. It had no cost basis, and the two shares purchased in 1915 had a cost basis of $210 per share. There is, therefore, no dispute as to the cost of these 256 shares, and the only disagreement between the parties is as to the value of the 28 shares acquired by gift January 23, 1913, and the value of the 164 shares acquired by gift December 24, 1920. Appellant contends that the March 1, 1913, value of the 28 shares received by her was $335.55 per share, and that the value of the 164 shares acquired by her December 24, 1920, was $414.26 per share. The commissioner fixed the March 1, 1913, value of the 28 shares at $160 per share, and the value of the 164 shares on December 24, 1920, at $140 per share. The difference between the value as so fixed by the commissioner and the amount received by appellant on sale of the stock was taken as the capital gain upon which the additional income tax was levied.

The action was tried to the court without a jury upon written stipulation of the parties. Appellant requested special findings and declarations of law and judgment in her favor. These were denied and proper exception allowed, and the court entered findings and conclusions, which, so far as here material, are as follows:

"9. That prior to March 1, 1913, plaintiff acquired by gift 28 shares of such capital stock of Farmers & Merchants Trust Company which stock on March 1, 1913, had a fair market value not in excess of $160.00 per share.

"10. That on December 24, 1920, plaintiff acquired by gift 164 shares of such capital stock of said Farmers & Merchants Trust Company, which stock on December 24, 1920, had a fair market value not in excess of $140.00 per share."

As conclusions of law, the court declared:

"1. That no substantial evidence has been introduced which will support a judgment for the plaintiff.

"2. That plaintiff has failed to sustain the burden of proof resting upon her to establish the illegality of the collection by the defendant of the tax sought to be recovered.

"3. That plaintiff has failed to overcome the prima facie case as established by the assessment duly made by the Commissioner of Internal Revenue.

"4. Under the evidence introduced by plaintiff the defendant is entitled to judgment.

"5. Under the uncontradicted evidence the defendant is entitled to judgment.

"6. That plaintiff is not entitled to recover any amount in this action."

Judgment was thereupon entered, dismissing plaintiff's action, and this appeal has brought the matter to this court. The questions presented, as stated by counsel for appellee in their brief, are:

"1. What was the fair market value as of March 1, 1913, of 28 shares of the capital stock of the Farmers and Merchants' Trust Company?

"2. What was the fair market value as of December 24, 1920, of 164 shares of the capital stock of the Farmers and Merchants' Trust Company?"

No question is raised as to the sufficiency of the proceedings had and taken in the lower court to entitle the appellant to a review of these questions.

It is apparent from the conclusions of law entered by the lower court that great stress was placed upon the presumption of correctness of the determination by the commissioner; in fact, counsel for appellee, in their brief, say: "What the court actually did was to accept as correct the value fixed and determined by the commissioner." It is accepted law that the commissioner's finding of value is entitled to a presumption of correctness. An assessment which he makes is prima facie correct, and the burden is on the taxpayer to overcome the presumption of its correctness. Old Mission Portland Cement Co. v. Helvering, 293 U.S. 289, 55 S.Ct. 158, 79 L.Ed. 367; Public Opinion Pub. Co. v. Jensen (C.C.A.8) 76 F.(2d) 494. The presumption, however, is a rebuttable one, and will only support a finding in the absence of any substantial evidence to the contrary. St. Louis Union Trust Co. v. Becker (C. C.A.8) 76 F.(2d) 851, affirmed 296 U.S. 48, 56 S.Ct. 78, 80 L.Ed. 35. Where the act of the commissioner is reviewed judicially, his findings of fact in making an assessment, as distinguished from his determination involving administrative discretion, constitute only "prima facie evidence." Williamsport Wire Rope Co. v. United States, 277 U.S. 551, 48 S.Ct. 587, 589, 72 L.Ed. 985; Wickwire v. Reinecke, 275 U.S. 101, 48 S.Ct. 43, 72 L.Ed. 184.

The presumption of correctness is in the class of the "burden of proof presumption." Morrison v. People of California, 291 U. S. 82, 54 S.Ct. 281, 78 L.Ed. 664; Casey v. United States, 276 U.S. 413, 48 S.Ct. 373, 72 L.Ed. 632. The party against whom it is invoked must fail if he does not produce evidence against it. It is often referred to in the books as the true presumption. "A true presumption is not evidence, though it supplies its place and requires the other party to proceed with the negative. Unless he does, he loses; when he does, the presumption is out of the case, and the issue is open." United States ex rel. v. Pulver (C.C.A.2) 54 F.(2d) 261, 263. See, also, United States v. Le Duc (C.C.A.8) 48 F.(2d) 789; Fidelity & Cas. Co. v. Niemann (C.C.A.8) 47 F.(2d) 1056; Del Vecchio v. Bowers, 296 U.S. 280, 56 S.Ct. 190, 193, 80 L.Ed. 229.

In considering the effect of a presumption created by statute, the Supreme Court in Del Vecchio v. Bowers, supra, reversed the lower court, saying: "The act under consideration, however, does not leave the matter to be determined by the general principles of law, but announces its own rule, to the effect that the claimant, in the absence of substantial evidence to the contrary, shall have the benefit of the presumption of accidental death. The employer must rebut this prima facie. The statement in the act that the evidence to overcome the effect of the presumption must be substantial adds nothing to the well-understood principle that a finding must be supported by evidence. Once the employer has carried his burden by offering testimony sufficient to justify a finding of suicide, the presumption falls out of the case. It never had and cannot acquire the attribute of evidence in the claimant's favor. Its only office is to control the result where there is an entire lack of competent evidence. If the employer alone adduces evidence which tends to support the theory of suicide, the case must be decided upon that evidence. Where the claimant offers substantial evidence in opposition, as was the case here, the issue must be resolved upon the whole body of proof pro and con."

The conclusions of law in the instant case show that the lower court gave to the presumption of correctness of the commissioner's finding "the attribute of evidence in the claimant's favor." Here, both parties submitted substantial evidence on the issue before the court, and in that state of the record the presumption passed out of the case.

A Mr. Wiget, who had been connected with the Farmers & Merchants Trust Company as vice president and director at the time of its organization, and who became its president in 1924 and remained such until 1928, testified as to the value of this stock. He gave the amount of the capital stock in March, 1913, its surplus and undivided profits, its total deposits, and its earnings from 1911 to 1915, inclusive. He showed that during these years, the capital remained at $100,000; in 1917 it was increased to $200,000 by a declaration of 100 per cent. stock dividend declared from the earnings; that there was another 100 per cent. stock dividend declared from earnings in 1923. He gave a description of the location of the bank, the value of its real estate, the steady growth of its business, and stated that in 1920 the deposits had increased to $4,365,460; that its capital surplus and undivided profits were $290,000. He gave all the detailed facts with reference to the bank's assets, its business, its prospects, its earnings, and its good will. From all the facts produced, he expressed the opinion that in 1920 the stock was worth $400 per share, and in 1913 it was worth $350 per share.

Mr. Joseph L. Rehme, who had been engaged in the banking business in St. Louis since 1907, testified that he was familiar with the Farmers & Merchants Trust Company from the time of its organization and watched its history very closely. He testified that in 1928, the Lafayette South Side Bank, of which he was an officer,...