Opinion ID: 1488927
Heading Depth: 1
Heading Rank: 1

Heading: The Vick Stock

Text: There was undisputed evidence that on the critical date, December 20, 1935, 400 shares of this stock were sold on the New York Stock Exchange, where it had long been listed, at a high of 43 and a low of 42¼. These prices were not out of line with its price on the said Exchange throughout the year straddling the critical date. These prices ranged from a low of 35 in June, 1935, to a high of 46 in February, 1936. For this same year the average monthly volume of sales on the Exchange was about 4,000 shares. There was no evidence of sales exceeding 400 shares on a single day. For the six months preceding the critical date, the price trend was moderately upward. The valuation placed upon the stock by the Tax Court was $42.625 per share. It cannot be said that this valuation was made without evidence. The bare facts just above recited constitute sufficient evidential support for the valuation. The only open question is whether, as the petitioner maintains, the Tax Court in reaching the indicated result erroneously failed to use correct standards of valuation applicable to the situation which it found. The chief complaint of the petitioner is that the Tax Court failed to take into account the blockage factor: he insists that a block upwards of 12,000 shares which in the aggregate was included in the five gift transfers had a unit value less than $42.625 which was the price at which a small lot of 400 shares was sold on the critical date. The courts, to be sure, take cognizance of the obvious economic fact that a market in which sales of small lots can be accomplished at a specified price may lack the body and breadth necessary to support sales of large blocks of securities at the same unit price. Helvering v. Safe Deposit & Trust Co. of Baltimore, 4 Cir., 95 F.2d 806; Helvering v. Kimberly, 4 Cir., 97 F.2d 433; Page v. Howell, 5 Cir., 116 F.2d 158. However, the tribunal charged with the task of valuation will not lightly deviate from evidence based on actual sales; only when it is convinced by persuasive evidence that at the critical time the market was such that it could not absorb sales in the larger volume at the price level obtaining for small lots will it conclude that such prices must be discounted in arriving at the fair market value of large blocks. Cf. Gamble v. Commissioner of Internal Revenue, 6 Cir., 101 F.2d 565; Mott v. Commissioner of Internal Revenue, 6 Cir., 139 F.2d 317. Moreover, in cases in which evidence as to actual sale prices is the dominant or even the exclusive factor relied upon in making a valuation, nothing in the law or common sense requires the trier to attempt to ascertain what the property in question would have fetched at a sale through a sales effort begun and ended on the critical date. Surely the fair market value of, say, a residence is not measured by the price which the owner could have obtained for it on the very day upon which he first decided to sell. Rather, the measure there, as in the case here, is what a skillful broker could within a reasonable period have realized. Bull v. Smith, 2 Cir., 119 F.2d 490; Mott v. Commissioner, supra. Here, to be sure, there was some evidence from the plaintiff's experts that the contemporary market would not have supported sales for the large, aggregate block involved in these transfers at the Stock Exchange prices for small lots. But there was no evidence from such sources that even the large block in question could not have been disposed of at $42.625 within a period reasonably commensurate with the volume of the transaction by brokers or other financial agents competent to accomplish such a hypothetical transaction. In any event, the opinion of the Tax Court makes it plain that such evidence as it had on this issue failed to persuade it that the block in question could not have been sold at $42.625 within a reasonable period after the critical date. This conclusion, although expressed as an opinion, was essentially a finding in the negative of a subordinate fact. Surely the Tax Court, if not convinced by the evidence, was not obliged to accept the conclusions expressed by the petitioner's experts. Bull v. Smith, supra. Nor are we at liberty to disturb the ultimate finding merely because an independent appraisal of the evidence might have led us to some different finding of the underlying facts and factors. Several of the Commissioner's witnesses were asked for their opinions as to value based upon the hypothesis that on the critical date the demand to buy as well as the offers to sell had been increased by 12,000 shares. We agree with petitioner's counsel that opinions based on that hypothesis were not relevant. The issue here was as to the existence of such a demand,  or a potential demand which could be aroused by appropriate sales activities. It contributes nothing to a solution to assume the fact which is the main point at issue. On the other hand, the testimony of the petitioner's experts did not carry far. They were not asked what one skilled in the liquidation of large blocks would have been expected to realize from a liquidation begun on the critical date (when the prior price trend was upward) and prosecuted by the most appropriate methods over the period believed reasonably necessary to accomplish a liquidation on the most favorable terms. Instead, their only expressed opinions were based upon the results to be expected from a liquidation to be accomplished in the last ten days of December either on the New York Stock Exchange in the ordinary routine or through private sales off the Exchange without any specified activity to develop the market for the block. Such testimony even if accepted at its face value might well have failed to convince the trier that the entire block could not have been liquidated at the value found. We conclude that the petitioner's dissatisfaction with the result reached is plainly traceable to deficiencies in the proofs,  not to the application of erroneous or superseded standards.