OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN

***_: GROVER**  **SELLERS**

**ATIORNEI Gs?al?AL** 

Ymfarhbie Ernest Cuba county nttorn6y, Ll Paw county Yl Yaw, Texan 

### Opiaioa sao. o-bebo lie: 

### AMe88wnt

**of 8har68**  of ,acrtloarl

bank abook.

l uoh ohwe am requfred to br bythe 

### 8hareholderelt 

### tlmlr * ,andtoll falne.*

net 

### 6apitfAl

6Q86t8 to WZ'iV6 at th6 V&b8 beok Of tb Ihbal-08." WQ alated in 6 Tex. Jur. 340:

*It fk proper 

### for tbw awewor or the board to eoaeider a11 eAeaumt8 whlab trnd to 

### aompow or 8UgWnt'ti~ VkiUS Of th0 ItOOk in the h~t1ia8 Or the 

### lndlvldualrtookbolder, that is to ray, t&s capital. QUX-&Q, tmdiilded pWrlf8 and 611 other perlonal and mm1 

### property owned by the bank as a eorporation.'tgonorableArnest Culnn, page 2

It ie insoonneotionwith thir method that your problem aris88r The inatitutlon in question has included nn item o? $265.376.23as "Other Liabilitiesv in Its "'Report of Conditions at 

### the Close or Buelnew on Lhmember 30, 19U.w In another stateursnt

of oonditlonmailed to It8 depositors however, this item 18 inoludedwithin an aggregate figure of 4629,827.92,which is entitled, "Heservetv: Interest, Taxes, Contingenoies end Cther Liabilitie8.v The asse8sor is oontending that SuOh fund8 being vBe8ervea*

### are Oapltal fUnd8 

### in the hand8 ~0rthe bank nnd should 

### Ohwdore be oonsideredas auginenting the value of'the stook, The other oontentlonpursuedby the bank 18 that the (225,976.2Spor

### tionOf tha #629,827.92 8hould not be treated a8 oapital fUnd8, but a8 aliabilitfe8* for the 

### rearon that the )265,376.23 Item iemade up **0r** "renerve8mror paynbsnt0r 8peOisl 80000ntsi nsmely, to pay intere8t on saving8 aooount8, oltr taxer, payroll~texer, lntere8ton Oertirioaterof depoalt,Federal DepoosltInmranoe 

### Company

aa8essments, surety bonds, **and** old age a88i8tanoe taxem; and thut eaoh month there la plaoed in these aaoounts an amount that ha8 aoorued in there different 

### iem8.

Your **problem** then lnvolveo the proper interpretationof
a ballking

in8titUtiOn'srin6n0isl 8tetement as on aid in erriring
nt then

ttue value 0r it8 ahares. Neither will the Court8 disturb
sn n88008ment fairly arrived at wr say this drpartment assume the role or sn interpreter0r rlaanoial statirtio8. Value or looalbank **etook,** lika Value oi real estate, I8 arrived at **by** eoneideratioaof raotsmore eu8geptible of determinationby loos1 experta, those iamlliarwith the Looalploture and oapable of giving proper weight to all availabl*, evidenae. The Legislature ha8 thus vested sole discretion in Q:~~luation and equalizationof values of property aubjeat to taxation in the local 

### aasetwaorand board of equelieation~.~hie department is justiried in offering advioe, however,where the railure to ooasider a given faot or the improper considerationgiven a 

### raot may amount to arbitrary action or the abuse or dlsoretlon.

ue therefore advise you thnt reaognleed aooountingpraatloe distinguishessurplus reserves suoh ae for additions, antioip:jted losses, bond sinking fmds, and the like from w-oalled “reserves” set up for contra asset aooounte, euah as accrued liabilities. while aaorued liability “reSerVe0” repreaent runds held by the banknot immediately payable,by their very nature as accrued

tliabilities or debts, little, if any, oonsideration oould be aooorded euoh

### runasam elements tending to oomposeor augment 

### thevalue **0r** th, stook in tiie/ h,mds ot the stoakholder. , hw0~8, ir the raats are found 'to'beam stated by the bank, the assessor and county oom;nieslonerel courts should give appropriate ooneideration to the raot that the $283.376.23portion of the so-called "reserve' fund represents definite accrued liabll1tiesrather than capital funda, eurplue **or** undivided prorita. The assessor or the board of epualizetionmay, of oourse, In ereroising their expert administrativeJudgment, oonalude that 813 amount la escee8 0r that neoessary to meet these liabilitiaa **haa** been eet aside. Any 8uoh exoese should, of oourse,be treated am eurplu8 or undivided **prOrit8.**

It le beliaved that the rationalization suggested in thi8 opinionwill serve to distinguish it **ito3** o-pinion Ho~~tJ072 to which you Invited the attcmntlon or this departnmnt,. opinion lnvo3ved a fund set up ror oontingencle8r#brrr than eoorued llabilitiee and the holdingwa8 that such fund **~618**

‘one of the feotors to be taken into ooneideration bl the board of eQuell%atlon in fixing the value of the stook inr tax purpoOee.w

The principles met forth in thi8 opinion shouldanswer the supplemental questionpresented in the fifth paragraph of your letter of September 28th. In the event they do 

### not,however, kindly met rorth tts r80t8 upon whioh~~#&!hi&&tlon **i8** based, a8 **you** have done the main question pzerrenS+d, and thi8 opinion will be eupplemsntedaooordingly.

Yours very truly