Court Opinion

ID: 4490694
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:02:29.744747+00
Date Added: 2024-06-11T15:02:47.775206
License: Public Domain

*354OPINION.
Ivins:
The market value of the stock of the Farmers Bank was $200 per share, as is evidenced by the fact that the taxpayer paid to others than Sauter and Kingsbury $200 per share for 499 shares. The taxpayer in its income-tax returns attempted to amortize $72.40 of the price paid for every share bought from Sauter and Kings-bury, and further to amortize the same amount for every share bought from every other stockholder, upon the theory that this amount was being paid Sauter and Kingsbury for refraining from competition for ten years, altho'ugh only Sauter and Kingsbury were agreeing to refrain from competition and thejr were only selling 501/1000 of the stock. If the taxpayer is to be permitted to do this, or if it were even to be permitted to amortize the part of the purchase price paid for the stock of Sauter and Kingsbury attributed by it to the agreement to refrain from competition, on the sole ground that the written option contained the language it does, there would be no reason why a taxpayer making a similar purchase could not arbitrarily attribute 99 per cent of the purchase price to such an agreement to refrain from competition and thus be in a position to amortize its capital for purposes of taxation at the same time that it actually retained it intact.
The taxpayer urges that, since the book value of the stock was considerably less than the price paid, the difference is properly attributable to something and the only thing acquired was the agreement of Sauter and Kingsbury not to compete. But the market value of bank stocks is frequently higher than book value, the difference representing good will. No evidence has been presented to us to show that the market value of the stock of the Farmers Bank of Boonville was less than $200 per share. On the contrary, the fact that the taxpayer gave $200 a share for 499 shares of it to persons who had nothing to transfer except the stock itself constitutes at least prima facie evidence that the stock had a market value of $200 per share.
*355Tlie stock being worth $200 a share, we can not see how any part of the purchase price can be reasonably attributed to the agreement of Sauter and Kingsbury not to compete, and this makes it unnecessary for us to go into the question of whether consideration paid for such an agreement can be amortized over the period of the agreement. We regard the difference between book value and the purchase price as having been paid for the good will of the Farmers Bank of Boonville.