The New York herald., 1922-11-26

reputation built up by his business through
many years. there was general speculation
in stores and offices as to the manner in
which the valuation for his interest in the
good will of his business would be fixed
The general lack of familiarity with the
subject. not only on the part of business
trying to solve the complex questions
caused me 10 make a new study of recent
court decisions on the much discussed point
of how TO determine the value of an un-
listed security. which means one having
no definite rating on a stock exchange. or
how to fix the good VIII value of an in
terest in a successful partnership.
This study developed an interesting line
of authorities bearing on the estates Of
both business and professional men. which
must be considered eventually by the tax
ing officials in fixing good will values
Lawrence W. Scudder, c. p. A.. a specialist
in the appraisal of securities. and 1 have
joined forces for the purpose of preparing
a book which may help TO clear away the
difficulties surrounding the subject of good
VIII valuation. and I present herewith
briefly a part result OF our collaboration
which shows that the potentiality of grow
ing rich beyond the dreams of avarice" is
not an altogether extravagant description
of good viii and the part played by it in
building up fortunes.
Not only are the court decisions re-
viewed for this purpose full of human in
terest but they also reveal the judicial basis
which has been adopted for estimating the
value of an intangible asset regarding the
precise nature of which most people have
only a vague conception. Even the courts
find good will battling. for they have said
there is no object more difficult to value
But it is worth money. Through an in
creased value of corporate stock or of
partnership interest or of the business of
an individual proprietor. good will fire.
quently makes its possessors rich. Not
until business is sold. however. or until
occasion arises to value a part interest,
or until an appraisal is necessary in an
Inheritance or other tax proceeding. is it
usually realized what an important factor
that intangible something" has been in
making a fortune. This is particularly
true with respect to many New York mer-
chants, who are literally good will million
aires. In numerous cases good viii has
been the one factor which enabled them to
make profits while their competitors were
suffering losses Nevertheless. to define IT
has proven a troublesome judicial task.
Courts have defined good will In many
and varied ways. Lord Elton. EngIand's
famous authority. describes it simply as
The probability that the old customers
will resort TO the old place" while Judge
Story of New York says. Good viii may be
properly enough described to be the ad-
vantage or benefit which is acquired by
an establishment. beyond the mere value
Of the capital stock. funds or property en-
ployed therein in consequence OF the gen.
eral public patronage and encouragement
which it receives from constant or habitual
customers on account of it's local position
or common celebrity or reputation for skill
or influence. or punctuality' or from other
accidental circumstances or necessities. or
even from ancient partialities or pref
udices." The business mans conception of
the value OF good will in any particular
case is the amount which he would be will
ing to pay solely for the privilege of con-
tinuing an established business. Good viii
in a business does not appear among it's
tangible assets. yet Is an essential factor
in producing its earnings. The value OF
the good will of particular business may
he described as that amount which it is
necessary TO add to the agreed value Of its
tangible assets to give sum equal 20 the
price which a willing buyer would pay for