Case Name: Mrs. W. M. Bludworth, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-06-23
Citations: 7 B.T.A. 495
Docket Number: Docket Nos. 6285-6292
Parties: Mrs. W. M. Bludworth, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: 
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 495–500

Head Matter:
Mrs. W. M. Bludworth, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket Nos. 6285-6292.
Promulgated June 23, 1927.
J. M. McMillm, Esq., for the petitioners.
George G. Witter, Esq., for the respondent.
Proceedings instituted by the following named petitioners were consolidated with the above-entitled proceeding and are decided herewith : Myrtle B. Watson, No. 6286; P. A. Bywaters, No. 6287; K. Hunter Bywaters, No. 6288; R. S. Bywaters, No. 6280; Claud Morgan, No. 6290; Horace S. High and Margaret High Norment, as sole beneficiaries under the last will and testament of Phoebe High, deceased, No. 6291; Ollie Hunter, No. 6292.

Opinion:
OPINION.
Phillips:
The pleadings raise two questions: (1) The fair market values of certain properties at the date of death of J. K. Bywaters on March 23, 1916, and (2) whether the gain should be reported by the heirs in 1919 or on the installment basis as payments were received. Upon the latter issue the petitioners rely entirely upon section 212(d) of the Bevenue Act of 1926 which, by section 1208 of the same act, is to be retroactively applied in computing income under prior acts. Section 212(d) provides:
(d.) Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. In the case (1) of a casual sale or other casual disposition of personal property for a price exceeding $1,000, or (2) of a sale or other disposition of real property, if in either case the initial payments do not exceed one-fourth of the purchase price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner prescribed in this subdivision. As used in this subdivision the term " initial payments " means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made.
Here the " taxable period in which the sale is made " was the calendar year 1919. The payments received in cash during such period were in excess of one-fourth of the purchase price. Since such payments are expressly included within the term "initial payments," it appears that the petitioners have failed to bring themselves within the provisions permitting the income from a casual sale of personal property or a sale of real property to be returned on the basis described in that subdivision of the statute. We do not understand that petitioners claim that they meet the requirements of the first sentence of the subdivision, as persons " who regularly sell or otherwise dispose of personal property on the installment plan." Therefore, so far as this issue is concerned, we must affirm the determination of the Commissioner that any gain is taxable in 1919.
The uncontradicted evidence fully sustains the petitioners' contention that the 742 acres of land which were sold to E. R. Hunter had a value of $40 per acre at the date of death of J. K. Bywaters. As to the property sold to Shull, no contention is made that the market value determined by the Commissioner is incorrect, the only contention being that the profit should be returned in the years in which payment is made.
It is the contention of the taxpayers that the stock of the City National Bank of Paris, Tex., the First National Bank of Paris, Tex., and the First State Bank of Paris, Tex., had a value of $200 per share at the date of death of J. K. Bywaters. The Commissioner determined a value of $100. To sustain their valuation the petitioners called as witnesses the vice president of the First National Bank of Paris and the cashier of the City National Bank in 1916. Each testified that in his opinion the. value of these stocks at the time of Bywaters' death was $200 per share. It appeared from their testimony that each of these witnesses had acted as appraisers of the estate of Bywaters and that as such appraisers they had valued such stock at $100 per share, executing as a part of their report the following oath:
We the undersigned appraisers do solemnly swear that the foregoing is a full and fair appraisement of the estate of J. K. Bywaters, deceased, produced before us by Edgar Hunter and Graves Shull, Ex'r.
They testified that it was agreed between the appraisers that all of the bank stock should be put in the appraisal at par and that this accounted for the values used. It further developed that two days prior to the death of Bywaters a fire had occurred in Paris, Tex., which destroyed 80 per cent of the business section of the city; that the effect of the fire on business conditions was not then known and that business was unsettled for some time. The appraisal was made within two months after the death of Bywaters and after the fire.
Considering this uncertainty and considering also the double liability attaching to owners of stock in such banks, we are inclined to believe that the appraisal made two months after the decedent's death more accurately reflects the situation than an opinion expressed at the present time. The witnesses attempt to support their opinion by references to sales and to the surplus and undivided profits of the banks but the testimony with reference to both is very unsatisfactory, especially with reference to the dates when such sales took place. The witnesses had not attempted to refresh their recollection respecting sales some ten years past and, except as the opinion might be affected by subsequent events, had no more knowledge of the value of the stock when they testified in this proceeding than they had in 1916 when they made the appraisal. After a consideration of all the testimony we believe that the value placed upon this stock by the witnesses at the hearing was unconsciously affected by the successful recovery of the city and the banks from the fire which had taken place two days before the decedent's death. While the value placed upon the stock in the appraisal made two months after the date of decedent's death may'have been low, and subsequent events may have shown that circumstances which affected that valuation never materialized, it is our opinion that it more nearly reflects the fair market value of the stock at the date of the death of Bywaters than does the opinion now expressed by the witnesses.
Decision will be entered, on W days1 notice, under Rule 50.