GAIN OR LOSS-Continued. 26. Id. Commissioner's determination of cost of stock soid approved on ground that evidence of taxpayer as to cost was conflicting and contradictory. David S. Goldstein_.. 27. Id. Stock Acquired Through Stock Dividend. In computing cost of shares of stock, some of which were acquired by purchase and others by way of stock dividend, cost of each share, either before or after distribution of stock dividend, must be found by dividing cost of all by whole number of shares involved. D. W. Cowden.... 28. Id. Average Cost Per Share. Where taxpayer acquired several parcels of certain stock at different prices and thereafter sold some of stock and it was impossible to identify shares sold with any particular shares acquired, some of them having been acquired through exercise of stock rights, gain or loss on shares sold computed on basis of average cost per share of all stock acquired. V. J. Bulleit _ 29. Evidence of 1913 Value. Fair market price or value on Mar. 1, 1913, must be proven by evidence. Wallis Tractor Co... 30. Id. Statutory test for determining 1913 value of assets is not what it would cost to replace them in their worn condition at that time but what price could be obtained for them in a fair market. R. H. Soaper 31. Id. Par Value of Stock issued in payment for property is not conclusive evidence as to fair market price or value of such property. Wallis Tractor Co.. 32. Id. Intangibles. Finding made that, in disposing of business, taxpayer sold not only tangibles, but also good will, secret processes, and other intangibles, and 1913 value of intangibles sold determined. George S. Mepham.. 33. Id. Cemetery Lots. In considering price received for cemetery lots sold at or about Mar. 1, 1913, as evidence of value of lots remaining unsold on that date, such price may not be reduced by percentage thereof placed in reserve fund for perpetual care. Springdale Cemetery Assn_ - - 34. Id. Good Will; Expert Testimony. Value of good will of banking business determined upon testimony of bankers familiar with methods of valuing good will of banks in locality. Fidelity Trust Co-- 35. Id. Patents and Drawings. Par value of stock issued for patents, drawings, etc., held not a proper measure of value, where part of stock was intended to be and was immediately transferred by owner of patents and drawings to another in consideration of cash and an agreement to subscribe for additional stock of corporation which issued stock and to finance it in other ways. Wallis Tractor Co____ 36. Id. Real Estate. Baumhoff Reuben Rosenberg- Finding made as to 1913 value. George W. 37. Id. Appraisal. Opinion by appraiser given in 1925 as to value of real estate in 1913 held not determinative of 1913 value, where sales of similar property in vicinity in 1906 and 1913 indicated decline in values during those years. Max D. Steuer _ . 38. Id. Expert Testimony. Value in 1913 determined upon basis of testimony of members of local real estate board and reputable business men. J. Hudson McKnight__ 39. Id. Real Estate and Sales Contracts. Market value in 1913 of interest of taxpayer in lots and contracts for sale thereof, acquired under contract for purchase of land at specified price payable over period of years and reserving title in vendor until payment of final installment, determined. Arthur B. Grover _ _ 40. Id. Stock. Finding made as to 1913 value. George W. Todd_ George W. Baumhoff.. 41. Id. Purchase Price; Presumption. While value established by price paid for stock at time of purchase may be presumed to obtain at later date, presumption may be rebutted by other evidence. W. C. Arthurs42. Id. Insolvency. Proof of cost of stock and testimony of taxpayer that he had no reason to believe it was worth less in 1913 than cost, held insufficient to establish 1913 value, where, in 1913, corporation was involved in bankruptcy proceedings or had ceased to operate as going concern. Id. Page 425 816 631 981 701 981 549 223 292 981 392 901 489 1060 508 327 392 374 GAIN OR LOSS-Continued. 43. Id. Assets; Appraisal. While appraisal based on total replacement cost of corporate assets on Mar. 1, 1913, less accrued depreciation, may have many legitimate uses, it is of little weight in determining market value of stock on that date where business in which corporation was engaged was in depressed condition on that date and had so continued for several years. R. H. Soaper- 44. Id. Assets or Opinion Testimony. Value of stock in 1913 determined on basis of actual cost of real estate acquired by corporation shortly before Mar. 1, 1913, rather than on basis of opinion testimony. Mattie Cowell__ 45. Id. Appreciation in value of real estate, upon basis of which taxpayer determined sale price of stock, held to have occurred subsequent to Mar. 1, 1913, rather than between date of acquisition and Mar. 1, 1913. Id. 46. Id. Assets and Earnings. Value of stock in 1913 determined upon basis of assets of corporation and earnings over period of years, where stock was closely held and there was no evidence of actual sales. Arthurs. W. C. 47. Id. Book Value and Earnings. There is no discrepancy between valuation of stock at $150 per share as of Mar. 1, 1913, at which time earning capacity was impaired by reason of business depression and book value, exclusive of value attributable to good will and appreciation, was $119 per share, and sale price of $300 in 1920, when stock had book value of $212 and corporation had exceptional earnings during years immediately preceding sale. R. H. Soaper.. 48. Id. Sales; Par Value; Opinion Testimony. Where all sales of stock at or about Mar. 1, 1913, as well as for many years before that date, were made at par, 1913 value in excess of par can not be established by testimony that vendor of some of shares believed them to be worth more than par, there being no evidence of existence of any legal bar against sale by any stockholder at any price agreed to between himself and a willing purchaser. D. W. Cowden____ 49. Id. Sales and Earnings. Analysis of earnings to determine value of stock is helpful only in absence of better evidence, and can not be relied upon solely and with complete disregard of price at which sales have been made. Id. 50. Id. Actual sales reflect fair market price or value, and this can not be ignored, even if application of formula, theoretical at least, would result in higher figure. Id. (3) Sale Price. George W. Todd.. 51. Bonds. Finding made as to sale price. 52. Cemetery Lots; Reserve; Perpetual Care Where cemetery association by informal corporate action set up, as reserve for perpetual care, percentage of price received for lots sold, and there was a contract obligation for upkeep of lots sold but no trust was created in favor of lot owners, sum appropriated to reserve fund may not be subtracted from sale price in ascertaining gain upon sale. Springdale Cemetery Assn... 53. Corporate Assets; Income to Corporation or Stockholders; Agency. A corporation is not an agent for distribution to stockholders of consideration received upon sale of its own assets; and where entire assets are sold under contract providing that part of purchase price shall be consideration for assignment of its lease, building, and equipment and balance shall be consideration for good will, as represented by capital stock of corporation purchased by vendee and assigned by him to corporation for retirement in liquidation of corporation, and that such balance shall be paid to corporation as agent for stockholders, entire consideration constitutes income to corporation. Strand Amusement Co.... Difference between 54. Stock. Finding made as to sale price. George W. Todd.. 55. Id. Actual Price or Newspaper Quotations. actual sale price and amount of offers reported in newspapers prior to sale is not deductible as a loss. Walter Neustadt.... Page 701 432 374 701 816 327 223 770 327 491 (4) Depreciation. 56. Evidence of Useful Life; Oil Leases. Commissioner's determination of depreciation on oil leases and physical property used in connection therewith not disturbed in absence of evidence of term of leases or remaining useful life of leases and physical property. J. H. McDermott Oil Co.. 689 GAIN OR LOSS-Continued. 57. Prior Year Deductions; Trusts; Buildings. Value of building on Mar. 1, 1913, determined, and depreciation at 3 per cent from that date to date of sale approved, where returns of fiduciary for prior years showed no taxable income against which deduction for depreciation of trust property could have been taken. Emily N. Vanderpoel Trust.- 58. Reasonable Rate; Furniture and Fixtures. Finding made that depreciation rate of 10 per cent, in computing gain on sale of bank furniture and fixtures, was excessive. Fidelity Trust Co.. III. INVOLUNTARY CONVERSION. 1. Sec. 234 (a) (14), Act 1921, is a relief provision by which taxpayer may postpone taxation of so much of gain derived from involuntary con-. version as he uses in replacement. International Boiler Works Co. 2. Separate Transactions. Where separate properties, separately insured, are destroyed by fire and settlement is made under policies, insured may treat gain under one policy as subject to sec. 234 (a) (14) and loss under other policy as a deduction. Id. 3. Use-and-Occupancy Insurance. Amounts accrued under policy insuring against loss of net profits on business prevented by fire are not proceeds of involuntary conversion of property expended in replacement, and are not deductible from gross income. Id. 4. Id. Proceeds of policy covering prevention of use and occupancy of business property due to destruction by fire, etc., and fixing liability in advance on basis of average daily value of use and occupancy, held to be proceeds from involuntary conversion, within sec. 234 (a) (14), Act 1921, and, when immediately used in replacing property destroyed, may be deducted from gain derived from such insurance. Piedmont-Mt. Airy Guano Co. - GEORGIA. See ESTATE TAX, II, 6; TAXES, III, 4. GIFTS. See DEPRECIATION, II, 5; Estate Tax, II (2); Gain or Loss, I, Bonuses. See EXPENSES, IV, 19, 21. Contributions. See CONTRIBUTIONS; EXPENSES, V. Donated property. See INVESTED CAPITAL, VIII. Transfers in contemplation of death. See ESTATE TAX, I (3). Page 372 292 283 1009 1. Definition. A gift is a valid transfer of property from one to another without consideration or compensation therefor. Estate of David R. Daly 1042 2. Elements are intention to give, transfer of title or delivery, and acceptance by donee. Id. 3. Compensation or Gift. Whether payment by corporation was intended as a gift or as additional compensation may be ascertained from resolutions authorizing payment and manner in which payment was treated in corporation's books and returns. Id. 4. Id. Payments by corporation to stockholder and director, made pursuant to resolutions specifically designating them as gifts and not treated on books or deducted in returns as expense, held to be gifts. Id. 5. Id. Payment to taxpayer for bringing manufacturer in contact with parties from whom it secured material at advantageous price, held compensation for services and not a gift. Ira A. Kip, Jr... 6. Id. Bonuses paid employees at Christmas time held deductible. GOOD WILL. See CAPITAL EXPENDITURES, II, 7; DEPRECIATION, V, 1. Value; Question of Fact. Value of good will is a question of fact. 2. Earnings; Capitalization. Fair rate of return on tangibles must be ascertained from facts in each case before average net earnings attributable to intangibles are capitalized to determine value of good will, and what is a fair return is itself a question of fact. Grant Trust & Savings Co. 50 684 470 1026 GOOD WILL Continued. 3. Id. Number of Years Purchase to be used in determining value of good will is a question of fact and there is no set years of purchase by which to multiply average profits. Id. 4. Sales and Advertising Expenses. While earnings are one of criteria of existence of good will, good will can not be found to have had actual existence in form of earned surplus merely upon data respecting sales and advertising expenses. Carter Medicine Co............. GOVERNMENT CONTRACTS. See AMORTIZATION. GROSS ESTATE. See ESTATE TAX. GROSS INCOME: For items of gross income and deductions in computing net income, see particular titles. GROSS SALES. See INVENTORIES, III. HOTELS. See DEPRECIATION, III, 11; IV, 11, 41; V, 4.6. HUSBAND AND WIFE. See COMPENSATION, 13; ESTATE TAX, I, 2, 29, Transfers Inter Sese. Where surrounding circumstances and subsequent transactions indicate that a gift or sale between husband and wife is a mere subterfuge to avoid tax liability, transaction will be held invalid. Robert Jemison, Jr.. ICE PLANT. See DEPRECIATION, IV, 12. IMPAIRMENT OF INVESTED CAPITAL. See INVESTED CAPITAL, IMPROVEMENTS. See CAPITAL EXPENDITURES, II, 8, 14, 15, 25-33; IMPROVEMENT BONDS. See CONTRACTS, II, 2. INADMISSIBLE ASSETS. See INVESTED CAPITAL, I; XII, 25, 26. For items of income and deductions in computing net income, see par- For items of income and deductions in computing net income, see particular titles. INFORMATION RETURNS. INHERITANCE. See RETURNS, 4, 5. See ESTATE TAX; ESTATES AND TRUSTS; GAIN OR Loss, II, 3; TAXES, III, 6-8. INSOLVENCY. See BAD DEBTS, III, 4-6; GAIN OR Loss, II, 42; 1. Act 1926; Initial Payment of 25%; Partnership Interest. Sale held not an installment sale, within secs. 212 (d) and 1208, Act 1926, where initial payment exceeded 25% of purchase price. Anton M. Meyer----- Page 212 780 1329 INSTALLMENT SALES-Continued. 2. Id. Stock. Sale held not an installment sale, within secs. 212 (d) and 1208, Act 1926, where payments received during taxable year in which sale was made exceeded 25% of purchase price. George Antonoplos___. 3. Id. Initial cash payment received by taxpayer upon sale of stock held not to constitute 25% of purchase price, where part of cash payment was received by him as initial payment on stock of another included in sale by taxpayer, acting as agent of such other person in sale of his stock; held, further, that sale was an installment sale. H. J. Kelly-----INSURANCE. See CAPITAL EXPENDITURES, II, 15; COMPENSATION, 13; EXPENSES, II, 5-7; III, 3; VI; GAIN OR Loss, II, 14; III, 2-4; INVESTED CAPITAL, V, 3. Agents. See PERSONAL SERVICE CORPORATIONS, 10-13, 16. 1. Life and Health Associations; Exemption. Nonfraternal, mutual assessment, life and health insurance association, having no capital stock and not organized for profit, whose members consisted principally of laborers, held not a labor organization, a fraternal beneficiary association, or a "like organization" to farmers' or other mutual hail, cyclone, or fire insurance companies, etc., within sec. 231, Act 1918. Workingmen's Cooperative Assn _ _. 2. Use and Occupancy is a property right inhering in ownership of physical property and may be the subject of insurance. Piedmont-Mt. Airy Guano Co-- 3. Id. Accrual of Proceeds. Taxpayer insured its factory against actual loss of net profits on business prevented by fire, loss to be measured by fixed amount per day for number of days of suspension of business; factory was destroyed by fire in July, 1919; taxpayer's fiscal year ended Sept. 30, at which time business was still suspended, and amount of useand-occupancy insurance was agreed upon Nov. 13 and was paid Nov. 26. Held, proceeds constituted accrued income to extent only of amount of insurance payable, at per diem rate, for number of days within fiscal year during which business was suspended. International Boiler Works Co.... 4. Id. Income or Return of Capital. Money received in substitution for profits, under use-and-occupancy policy expressly covering loss of net profits on business prevented by fire, is not a conversion into cash of right to earn profits, but constitutes taxable income. Id. 5. Id. Involuntary Conversion. Amounts accrued under such policy are not proceeds of involuntary conversion of property expended in replacement, within sec. 234 (a) (14), Act 1921, and are not deductible from gross income. Id. 6. Id. Proceeds of policy covering prevention of use and occupancy of business property due to destruction by fire, etc., and fixing liability in advance on basis of average daily value of use and occupancy, held to be proceeds from involuntary conversion, within sec. 234 (a) (14), Act 1921 and, when immediately used in replacing property destroyed, may be deducted from gain derived from such insurance. Piedmont-Mt. Airy Guano Co... 7. Id. Separate Application of Loss and Conversion Provisions. Where separate properties, separately insured, are destroyed by fire and settlement is made under policies, insured may treat gain under one policy as subject to sec. 234 (a) (14) and loss under other policy as a deduction. International Boiler Works Co----- INTANGIBLE PROPERTY. See DEPRECIATION, I; INVESTED CAPITAL, INTENT. See CONTRACTS, I, 1; EVIDENCE, V; PENALTIES, 2. INTEREST. See DISCOUNT. Carrying charges. See CAPITAL EXPENDITURES, II, 15; INVESTED CAPI- I. GENERALLY. Definition. Interest is compensation allowed by law, or fixed by parties, for use or forbearance of money, or as damages for its detention. Joseph W. Bettendorf - II. INCOME. 1. Loans. Accumulated interest received in tax year on loan made in previous year constitutes income National Bank of Baltimore_ _ _ _ Page 1236 257 1352 1009 283 1009 283 378 1038 |