Anthracite Trust Co. v. Commissioner ( 1926 )

APPEAL OF THE ANTHRACITE TRUST CO., ADMINISTRATOR, ESTATE OF JOHN JOSEPH BROWN, DECEASED.

Anthracite Trust Co. v. Commissioner

Docket No. 4947.

United States Board of Tax Appeals

3 B.T.A. 486; 1926 BTA LEXIS 2643;

January 28, 1926, Decided Submitted December 12, 1925.

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L. E. Renard, Esq., for the taxpayer.

Frank T. Horner, Esq., for the Commissioner.

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Before LITTLETON, SMITH, and TRUSSELL.

This is an appeal from the determination of a deficiency of $3,888.78 in estate tax, of which $2,622.50 is in controversy. The tax in controversy arises from the action of the Commissioner in increasing the value of 250 shares of stock of the Pittston Coal Mining Co., owned by the decedent at the time of his death, from $230 a share, as now claimed by the administrator, to $500 a share.

FINDINGS OF FACT.

The Anthracite Trust Co. is the qualified and acting administrator of the estate of John Joseph Brown, deceased. At the time of his death the decedent was the owner of 250 shares of the capital stock of the Pittston Coal Mining Co., located near Scranton, Pa., the remaining 750 shares of said stock being owned by M. W. O'Boyle. The stock had always been closely held, and was not listed on any exchange; it was not quoted by any local brokers, and there had been no sales thereof prior to the decedent's death on March 20, 1923. Soon after the decedent's death the administrator asked for bids from local brokers and others for the stock, but it did not receive what it regarded as a substantial bid until January, 1924, when a bid of $110 a share was received. The administrator thereupon caused an investigation to be made to determine the fairness of the offer of $110 a share, and was furnished a balance sheet by the Pittston Coal Mining Co., showing the stock to have a value of $110 a share, whereupon the offer of the persons in control of the Pittston Coal Mining Co. to purchase 150 shares at $110 a share was accepted by the administrator, the remaining 100 shares being sold to the heirs of the decedent at $110 a share. On April 30, 1924, the administrator came into possession of facts indicating that the information furnished it concerning the value of the stock of the Pittston Coal Mining Co. was incorrect, and took steps to have the purchasers of the stock pay an additional amount per share for the stock, based upon a correct statement of the assets and liabilities, as shown by the books on March 20, 1923, as follows:

ASSETS.
Cash	$89,290.89
Due from Pittston Coal Sales Co	134,335.57
Due from M. W. O'Boyle	44,090.22
Automatic Telephone Co. bonds	60,000.00
Liberty bonds	121,800.00
Machinery and equipment	69,141.32
Total	518,658.00
LIABILITIES.
Bills payable	$30,833.33
Capital	100,000.00
Surplus	387,824.67
Total	518,658.00

As a result the purchasers of the 150 shares and the 100 shares, at $110 a share, paid to the administrator in January, 1925, an additional sum of $120 a share. On May 2, 1925, the purchaser of 100 shares of the stock from the administrator sold the same for $230 a share. The net profits of the Pittston Coal Mining Co. for the years 1918 to 1923, inclusive, were as follows:

1918	$55,070.04
1919	96,604.16
1920	142,914.32
1921	75,455.08
1922 (when there was a strike for 6 months of the year)	34,036.95
1923	118,207.77

As of March 20, 1923, the Pittston Coal Mining Co. had almost exhausted its recoverable coal.

The administrator filed an estate-tax return on March 13, 1924, and included the 250 shares of stock of the Pittston Coal Mining Co. at a valuation of $27,500, or $110 a share. The Commissioner fixed its value at $500 a share. The value of the 250 shares of stock at the time of the decedent's death was $400 a share.

DECISION.

The deficiency should be computed in accordance with the foregoing findings of fact. Final determination will be settled on 10 days' notice, under Rule 50.