OFFICE OF THE AlTORNEY GENERAL OF TEXAS 

AUSTIN 

gonorablo Ii. Pat gdwlrda 

cirll Dlrtrlat Attornty 

lM1l.m county 

prma, Telm 

Attention: Mr. Allen Idelton 

tax purpo808 of 

in the procerr OS 

ions rllovanoe of 

Ion for federal 

ad by taxpayer. 

1943, December 13, 

our opinion on l 

r epor ted AII inventory 

t At $155,872.18. Thlr 

Yith rrrpeat to thi8 8ituatlon you h8re inquired rub8tAntiAlly a8 fO11OW8 : 

(1) Uhothcr Zttma ot labor, overhead and generr1 admiairtratlvb rxpe~es 8ro to be laoluded a8 

items of 888tt8 ia rrrlving At the taxable T81U8 Of 

the per8OMl property Of t bU8ioe88 tllteI’@8b, vhert 
p&ablt 8. P8t &tdYICd8, plg8 2 

8U8h proparty L8 in t&o procs88 OS h b r lc r tlo n l u3 

vhrrr tht forego- itaM hare born l ~a d.d in aoamotloo ulth 8UOh frbrloatlon. 

(2) Uhethor the tarprpr 8hOUld bo pormlttod 

to deduct the amount Ov8d for red0wi lnoome oad txtt88 JS'Ofit8 t&X88 fiw it8 8OOOWt8 8lAd bill8 rtorivaok. 

HO 8~Oii10 pOV181OM in the 8trtUtt8 Of thlr St8te 

drrl vlth the valuation of good8 in tht proar88 of irbrlo~tloa. 

IDytver, the gonorrl rtrtutorf porl8loM vlth re8peot to the 

& u8t:Oli Of &bW8OlUl pOmrtr M O l 8 iO11OV8: 

"Arti 7174 . . ..Ptl.‘8olul ~OptrtJ Of l VOry dt88rljation &All be valued at it8 true aad full valua 

in aonty. 

"Art101t 7149.... The terr @true and full value', 

vherever urtd rhtll ba hold to U88n the fair market 

V81U8, la oMh, at th8 phOt vhtrt th8 pl'owrty to 

vhioh the tor8 18 applied 8bll be at the tirr OS @Ire88mettt, being the prloe uhiah OOUld ba obtelaed 

thertfol, tt &dV8tt 8t10, 8nd Wt 8t fOr8td OF 8Uot1oo 8alt.F 

Yloreovtr , “narlret va1~8~ or *farir) urket valuog hrr 

bea deftned a8 "tht amount of roat~ thAt t per8013 d88irbg to 

8011, but lrat bo\ab to do 80, Could, vlthin l rra8oMbh tire, 

pooure foV 8uah prOprtJ tl'O8l l pr8W uho dO8tit8 Bad i8 able 

to buy, but l8 not bound to gUl’Oht8t the prowrty. ft 18 the 

mount that eould~bo obtalaod at priv&te 8tlt Aad not 8 ioroed 

or auct$oa 8tiO.' 40 To%. J\P. 150. 

Vhrrt trublr prOptHy w88t88.~; X0 Fklt V81U8, th8 

tU&8lJO88OF W8t 888088 8UOh &WOmrtt 8t it8 ma1 Or ilitria8i.o 

Artlole 7211. & Id, l 8 18 Uid ia 40 ‘IltX. J(P. 149, 

"IO& FatrLarlO V8lU0 18 aOt mentlOMd in the 8tatUte (R. S., 

ht. 7206) that d~tfirre8 tht 

(but only in 

rith rtrgeot to 

tht l 88t88Or, 

Iatrlnrlo worth; but thl8 18 done on17 when l d lf it rppe858 

t&t the property la qutrtioa brr no wrkrt value." 
worrblt 8. ht Rdvrrdr, page 3 

Tha qUO8tiUlI of vhothor t&88 gOOd8 all be 881d to 

urkot value fror vhleh thtlr true @ad full valw am 

-?r 8088 l 

4et0FmiIWd 18 l qU08tIOa Of ftOt upoa vhloh thl8 dopartmtnt 

u got oompetont to pall. 

m80, .t al*, @ s. w. 

ut8t %X&8 &to1 co. v. citr 0r El 

(26) 772 777 (OrrOP di8mi88td). tit 

01 oooy of bus O~IaIon No. 0-2kO l oolored hrrcovlth. COn88- 

,~&tl~, V8 OF. urublr to 8tatm uhethrr th8 groptrt7 Ia QUt8- 

ason rhotid bo l 88088.d at It8 nrktt valw or at It8 real or 

~trln810 Vallu. Eovev8r, you are r~rpotrull~ l dVI8@6 that if 

th# QUalifItd OffiOkl8 dtt.rtiM tht thI8 WOgdrtr m88088d 

8 -tit valw On J8IMr7 1, 8UOh PPOpWtr 8hOtid be taxtd at 

it8 sarkrt valw aooordlng to th8 above formuhe. 

On the other brad, ii it rhould be deolded th8t thlr 

popertf pot8t8804 no market- value on JUWPJ 1, the property 

&ould be ~rrrred and taxed at it8 “rul or latrln8lo value." 

11 ua8t Tax48 Rot01 CO. 1. City Of El P880, 8U l , the El PI80 

Court Of Civil 4&W818 qqrored 8 Chtl'gt by t r OVtr oourt to the 

effect that; 

'thr Peal or lntrln8lo value of property 18 rtprorented br that 8Um Of ronty vhloh 18 l fair 8qUiVl ltnt of ruch property. Tht proptr determlnatlon of 

of among the tlawntr th8t may b8 trken into oonrlberrtion 18 the location, 008t alrd ohrrotor 0r iXpOV8- 

uat8, rent81 hirtory, ir any, locrtlon a8 to Suture 

grovth of the Cltr, rale8 of l djaorat property, If 

Any, the U808 to vhloh tht 

it 18 iWa8OolblY 8U8009tibl 

mrtr 18 DUt or of vhleh 

0. (Eaplmsl8 added) 

COr tart pUFpo888, thi8 18 the Only judiliil def%nltlon 

of the torn 'ro81 or l.ntrln8lc value" vhloh vt htvo found in the. 

8888 hV Of thi8 St8t,, Uhilr thlr deSl.nltloa ~88 rormulated 

vith rompret to tht vrluatlcm oi real woptrty, ve think that 

vwh oi the lragwge of thr oourt, and pmtlO5rlJ th# portion 

above underlined, rr proper17 br wtd 88 8 guide by thr t8x 80- 

1088OP and tht bOtrd Of 8qWlit@tiOfk in 88Mrt~illi&% the I'881 OC 

latrlnrlo vrlw 0r ptrrontlty. 
MV8rd8, 986t 4 

ynablt to 8af_ to vhrt rxtant,~ir at all, ex- 

- 

diture8 for labor, *to., will, la a prrtioular ca80, enter 

to a 6otar8laatloa either Of wrkrt value or of rob1 or laralw. It 18 pO88ibl0 VI ftti, t0 pO8it 8 8itWtiolr 

u vhloh 8uoh l Xptaditurtr rod4 b8 hl&lr 8i@kifiO@Iit~ eontrar;- 

vita, 000 OAI tt8ill i.M~iM 8 8itWtiOn iB vhioh ruch tXptnd;- 

~~08 would have a n l xtromoly nogli(llbla l rre0t upon the valua- 

(100 of tha truble px-operty, 

pther with the extent to 

~OOrt8btie8 8uOh 88 tb80, tovhlah the VblWtlOll of propertg 18 a 

(U88tlOa 0s snot, prertnt our giviag a more detailed l a8var to 

P~r rirrt iaquirr. 

With rtrpeot to your reoond quartion, Article 7147 definer 'per8onal ptiopert~” for purporrr 0s taxatioa a8 lnoladlng, 

inter 8118: 

II 

. . all rontyr At lntrrrrt, l lthtr vlthln or 

vlthou; the St&t@. du8 the Mr8on. to ba tued over 

8nd &bow What he-pay8 lnt&8t 6r, ~bnd all other 

debt8 due 8uOh 9er8On OVtC 8Bd abott hi8 Illdbebt8dM88." 

4 

lit underrtaad from your ltttrrr that the trxpryer in 

quertlon olalu that it 18 entitled to dtduot the amount Of it8 

fedtral lnoo8e and *xc088 profit8 trxer for tho prectdlrrg par 

f'ro~ it8 l ooount8 8Pd bill8 racelvable la datarmlnlng the usount 

of it8 t8xablr ~r8onal property. If the taxpayer 18 tatltltd 

to thfr deduotlon, it 18 only brcrrwt ruoh tax88 can bo oonslderod 80 "iad.btOdne88' within the MO8lliw Of the &bow quota6 8t8t8t(r. Although oa Jaawrf 1 the fedora1 tura for the prtctdlag 

vu are a llabIllt~ l gaIn8t the taxpayer, and although the 

aorm811~ art a praftrred lI~blllt~, 8UCh tu88 are not the E lad 

Of llablllt~ vhloh our OOlU't8 bad there ia othtr juri8dlOtlOn8 

htr aonrldertd a8 an lndebtednerr. In Aopubllo In8. Go. v. 

E$hland Park 148 ndont Sohool Dl8trlOt of Dallar County, et 

'# 102 9. W. (2d7el&, the Supreu Court rtatrdr 

,' 'Wo do not think taxer are 'deduotlbla a8 a debt 

uhder Art1010 7147, R. 8. 1925. Se* l uthorltio8, 

AbOW Olttd, AId th0 Oalt Of TU Corrri88iOn V. Hat- 

~lonal J4elleablt Carting Cospaa 

144 N. B. 604, 55 A. L R. 1448; :ki :%::io:!” 

IQ a 8Ub8eqUelkt 8Uit bttveen thr 8OY ptrtit8, rt l’tod 18 162 3. Y. (24) (r8Ter8ed on other groundr, 1‘71 3, W. r 24) 
5% 

01~11 Appt818 rtiborated upon ihlr 

Vt aoaoludr that taxer do not oorutltut8 80 

‘lrrd.bt.dat88’ within tht 9UrVl.V Of hPtlOh 7147 

R. 8. ‘A8 the obllgatlon t0 98J tUt8 do88 not Port 

upon any ooatraot rxprarr or Impllrd, or upoa the 

OOa8Wt 0s tht taxpapr, a tu 18 not a debt In thr 

ordlnar~ 8t118t 0s the VOrdJ althoryh it 18 a llabllIt~ 

or obligation, **a.( 61 C. J. Taxation, 9. 70 1 4. 

A998llao~8 tu ro88rvta are therrfore l 88888able until 

exempted b l x9rt88 rrfrroaoo I.8 a debt rtatuta 8uoh 

a8 Art. 71 1 7.’ 

Conrrqu8atlf, in l n8ver to vour rroond quertlon, JOU 

6p8 r88p@OtfUll~ ,bdVl884 that the t8xppr 8hould not bo per- 

&ted to drduot tht amount owed for foderrl lnoome and l xct88 

pafit taxer from it8 boOOUnt8 bti bill8 rroolvablo in dtterdairy the mount 0s it8 taxable ptrronal proprrty. 

Trurtlag that the foregoing 8atl8r8otorlly 8OIV0l’l 

lour lnqulrla8, v8 are 

Ver7 truly 70~8 

e:& T?FG 

c.1. .:-‘::li cl.::’ ,.. ,.I. . 

R. %an Woorhead 

A88irtUkt 

2DNrdb 

Bnolorurr