Simmons v. Commissioner ( 1926 )

APPEAL OF ESTATE OF WARREN H. SIMMONS.

Simmons v. Commissioner

Docket No. 3885.

United States Board of Tax Appeals

3 B.T.A. 1360; 1926 BTA LEXIS 2420;

April 20, 1926, Decided Submitted March 2, 1926.

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Mark H. Miller, Esq., for the taxpayer.

J. S. Halstead, Esq., for the Commissioner.

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Before ARUNDELL and LANSDON.

The Commissioner has determined a deficiency in estate tax in the amount of $7,425.79. The petitioner alleges that such deficiency results from an erroneous overvaluation of certain shares of common stock owned by the decedent at the date of his death.

FINDINGS OF FACT.

Warren H. Simmons, the decedent, died testate on April 15, 1922. Among other assets disposed of by will were 1,731 shares of the common stock of the Bemis Brothers Bag Co. of the par value of $100 per share.

The Bemis Brothers Bag Co. is a corporation engaged in the manufacture of bags from paper, cotton, jute, and other suitable materials. It has factories located at different points throughout the country. Its stock is rather closely held and is not listed on any stock exchange. It made no sales of stock in the year 1921, and, in the same year, only small amounts of the stock were sold by individual owners at prices not disclosed by the record.

During the year 1920 the Bemis Brothers Bag Co. sustained losses in the operation of its business in the amount of $23.34 for each share of outstanding common stock, and, in 1921, it earned a profit of $5.27 per share on such stock. It paid no dividends in 1921 and a 2 per cent dividend on January 31, 1922. Its balance sheet at December 31, 1921, was as follows:

Assets.
Current:
Cash	$2,203,243.94
Notes and accounts receivable	3,029,389.88
Inventories	10,640,630.92
Stocks and bonds of other companies	48,658.63
Cash and advances to affiliated companies	19,396.12
Fixed:
Land and buildings	6,544,106.38
Machinery and tools	3,210,785.79
Miscellaneous:
Unexpired insurance and other prepaid items	244,875.52
Total	25,941,087.18
Liabilities.
Current:
Notes payable	$1,181,062.50
Accounts payable	83,230.42
Due to stockholders and employees	638,387.30
Reserves for taxes	226,459.38
Reserve pension fund	21,071.96
Three-year notes	650,000.00
Fixed:
Common stock	11,085,000.00
Preferred stock	1,954,900.00
Surplus	10,100,975.62
Total	25,941,087.18

The common stock of the Bemis Brothers Bag Co. had a fair market value of $150 a share at April 15, 1922.

Order of redetermination will be entered on 15 days' notice, under Rule 50.