Court Opinion

ID: 4591306
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:05:30.665689+00
Date Added: 2024-06-11T07:50:38.339629
License: Public Domain

HORACE H. RACKHAM, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Rackham v. CommissionerDocket No. 10825.United States Board of Tax Appeals12 B.T.A. 1085; 1928 BTA LEXIS 3399; July 3, 1928, Promulgated *3399  1.  The Commissioner was authorized to determine the value of petitioner's stock in the Ford Motor Co. James Couzens,11 B.T.A. 1040">11 B.T.A. 1040, followed.  2.  The fair market price or value of such stock determined.  Joseph E. Davies, Esq., John W. Davis, Esq., Arthur J. Lacy, Esq., Clarence E. Wilcox, Esq., Franklin D. Jones, Esq., Sidney T. Miller, Esq., Herbert Pope, Esq., E. Barrett Prettyman, Esq., Lewis H. Paddock, Esq., Raymond H. Berry, Esq., Montgomery B. Angell, Esq., Luman W. Goodenough, Esq., and Russell A. McNair, Esq., for the petitioner.  A. W. Gregg, Esq., W. Hall Trigg, Esq., Floyd F. Toomey, Esq., E. C. Lake, Esq., and J. F. Greaney, Esq., for the respondent.  STERNHAGEN *1085  BEFORE STERNHAGEN, MARQUETTE, AND VAN FOSSAN.  This is one of nine proceedings, of which that of James Couzens, Docket No. 10438, was decided May 5, 1928, . As to this petitioner, the respondent made a jeopardy assessment under section 274(d) as he did in the Couzens case.  The petitioner duly filed a claim in abatement and gave the required bond.  This claim was rejected in the amount of $4,337,295*3400  and the case is here on the assessment and rejected claim.  The proceeding presents the same issues considered in the Couzens case - (1) the authority of the respondent to make a determination of the value on March 1, 1913, of the petitioner's stock in the Ford Motor Co., and whether that value is open for redetermination here, and (2) the fair market price or value of such stock.  FINDINGS OF FACT.  1.  The petitioner is a resident of the City of Detroit, Wayne County, Mich., and his address is 1715 Dime Bank Building, Detroit, Mich.  2.  On March 1, 1913, and prior thereto, and until July 17, 1919, the petitioner was the owner of 1,000 shares of the stock of the Ford Motor Co., a Michigan corporation, out of a total of 20,000 shares of such stock outstanding.  3.  Shortly before April 15, 1919, Henry Ford and Edsel Ford, who were then the owners of approximately 58 1/2 per cent of the capital stock of the Ford Motor Co., desired to purchase the remaining 41 1/2 per cent of the stock owned by the minority stockholders including *1086  that owned by the petitioner.  They engaged the services of the Old Colony Trust Co., of Boston and its representatives to purchase*3401  the stock for them as undisclosed principals.  Pursuant to such arrangement and immediately prior to April 15, 1919, Stuart W. Webb, then an officer of and acting for the trust company and the undisclosed principals, accompanied by other representatives of the company, went to Detroit, Mich., to negotiate for the purchase of the stock of all the minority stockholders of the Ford Company, including the 1,000 shares thereof then owned by the petitioner.  4.  Webb went to the office of the petitioner.  He informed petitioner that he represented the Old Colony Trust Co. of Boston and that his business in Detroit was to see the minority stockholders of the Ford Company, and to purchase their stock.  He also informed petitioner that Ford had told him that so far as petitioner was concerned he might say frankly that Ford was the purchaser and not the Old Colony Trust Co.5.  Webb stated the price to be paid for the stock.  Petitioner stated, "I won't even make any note of the price, I must know definitely the amount I am to receive net to me." Webb replied that he understood a determination would be made of the value of the stock as of March, 1913, which would enable petitioner to know*3402  just what he was to receive.  6-30.  These findings of fact are respectively identifiable with findings of fact P4 to P28, inclusive, in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  31.  Some time later Webb again went to the office of the petitioner and informed him of the determination of the value of the stock.  The petitioner saw a copy of the letter from Commissioner Roper to Ballantine on or before June 17, 1919.  32.  Under date of June 17, 1919, the following agreement was executed by Webb and the Detroit Trust Co.: JUNE 17, 1919.  AGREEMENT between STUART W. WEBB and HORACE H. RACKHAM the owner of 1000 shares of the capital stock of the Ford Motor Company of Michigan, being hereinafter called the "depositor" or "owner" and the Detroit Trust Company which is to act as depositary hereunder.  I.  Said Webb offers to purchase all, but not less than all, of the said shares of said Ford Motor Company, in accordance with the terms hereof.  II.  The said owner may accept said offer by depositing said stock free of incumbrance with the depositary on or before July 17, 1919, with transfers in blank*3403  properly executed, and accompanied also by written direction, waiver and power of attorney in substantially the following form: JUNE 17, 1919.  To the Detroit Trust Company, depositary under agreement, dated June 17, 1919, executed between Stuart W. Webb, of Boston, and said Depositary, providing *1087  for purchase by said Webb from the undersigned of (1000) one thousand shares of the stock of the Ford Motor Company of Michigan.  The undersigned hereby deposits with the depositary for sale under the terms of said agreement 1000 shares of the stock of said Ford Motor Company, being all the stock of said Company owned by the undersigned, and directs the depositary to deal with the same in accordance with the terms of said agreement, to which the undersigned herewith becomes party.  The undersigned waives any provision of the said Company's by-laws relating to notice by one stockholder to other stockholders of a proposed sale of stock, and his right to purchase stock proposed to be sold, and grants to said Webb power of attorney irrevocable with full power of substitution to give in the name and behalf of the undersigned, to any other stockholders of said Company such notice*3404  of the sale proposed in said agreement as may be required or appropriate by reason of such by-laws of the Company.  (stockholders; signature) (Address for purpose of agreement) III.  The price for the stock is Twelve Thousand, five Hundred ($12,500.00) Dollars per share.  Said Webb has paid to the depositary on account of said price a sum amounting to One Hundred Twenty-five (125) Dollars per share for the shares mentioned, which sum is to be forfeited and paid to the depositor, if said Webb within ten days after written notice of default on the part of said Webb filed by the depositor with the depositary, fails to make payment of any installment of the balance of the purchase price.  Said Webb's liability is limited to forfeiture as aforesaid.  If the provisions of Articles I and II are not complied with, the said sum deposited on account is to be restored to said Webb.  If said Webb fails to make payment of any installment after notice of default as herein provided, the deposited stock shall be returned to the depositor.  IV.  The stock is purchased and sold ex the dividend to be declared in the suit now pending between John F. Dodge et al. vs. Ford Motor Company.  If, for*3405  any reason, said dividend is not declared and paid prior to the payment of the final balance of the purchase price, said Webb shall purchase said dividend at the rate of Nine Hundred Sixty-three Dollars and Seventy-seven Cents ($963.77) per share, plus interest at the rate of five (5%) per cent per annum from December 5, 1917, and shall deposit the money for purchase of said dividend with the depositary.  Such payment shall operate as a transfer of the right to receive said dividend and the interest thereon, but the depositor shall upon request forthwith execute any instruments necessary or proper, to effectuate the collection by said Webb of said dividend and interest.  The depositor shall have the option to be exercised by written notice to the depositary at any time before final payment by said Webb to instruct and authorize said Webb, in place of purchasing the depositor's Dodge suit dividend as above specified, to collect said dividend for account of said depositor and said Webb shall thereupon file with the depositary for delivery to such depositor, an agreement executed by himself and Old Colony Trust Company in the following from: "The undersigned Stuart W. Webb, has executed*3406  an agreement with the Detroit Trust Company, depositary, dated June 17, 1919, providing for the purchase by him of one thousand (1000) shares of the Ford Motor Company.  *1088 Said Webb has been authorized by Horace H. Rackham, owner, and depositor of said stock, under said agreement, to collect from the Ford Motor Company, the Dodge suit dividend therein referred to, and the interest thereon, to which said shares are entitled, such collection to be made for account of said owner, the owner of such dividend, and said Webb agrees forthwith upon the collection of said dividend and interest, to pay the same forthwith to said owner in full, without deduction and the Old Colony Trust Company guarantees the performance of this agreement by said Webb." The execution and filing of the foregoing form of agreement by said Webb, shall operate as a substitute for the purchase by him from such depositor of the Dodge suit dividend to which said depositor is entitled, and said agreement shall be delivered to the depositor by the depositary at the time fixed for distribution of the final payment of the purchase price for the stock.  Said Webb upon final payment as herein provided, shall*3407  be entitled to all dividends, if any, other than the aforesaid Dodge suit dividend, which may hereafter be declared upon said stock.  Dividends, if any, to which said Webb would be entitled under the foregoing provision, shall be paid to the depositary and applied towards the succeeding installments of the purchase price, but if, by reason of default, the stock is returned to the depositor, such dividends shall be paid by the depositary to the depositor.  V.  Within thirty days from June 17, 1919, an additional sum amounting to Three Thousand (300) Dollars for each share deposited hereunder shall be paid on account of the purchase price by said Webb to the depositary, which, together with the amount first deposited, shall be forthwith paid pro rata to the depositor.  The balance of the price (together with such sum as said Webb may under the provisions of Article IV be required to pay for the purchase of the Dodge suit dividend if not declared and paid) shall be paid within sixty days from June 17, 1919.  Upon payment of the final balance, (including the amount required for purchase of the Dodge suit dividend, if this is to be purchased), the stock deposited shall be delivered*3408  to said Webb, or his nominee, and the balance of the purchase price at that time paid (and the price paid for said Dodge suit dividend if purchased) shall be forthwith paid pro rata by the depositary to the depositor, except that said Webb may be written notice to the depositary require that a special written assignment be made to him by the depositing owner of the dividend purchased, before payment by the depositary to the depositor of the purchase price of such dividend.  Said Webb reserves the right to make payment in full and to receive the stock (and the dividends, if any, to which he is entitled) at any time within the sixty day period.  VI.  This agreement shall be binding upon the heirs; executors and administrators of said Webb and of the depositor.  The interest of said Webb hereunder shall be assignable, and his assignee, or any subsequent assignee, shall succeed to the rights and be bound by the obligations of said Webb.  Said Webb may at his option prior to deposit of said stock, extend the time for deposit of stock hereunder for not exceeding fifteen (15) days in the aggregate by written notice, or notices, to the depositary and the time limits for the making of payments*3409  by said Webb shall automatically be correspondingly extended.  VII.  Said Webb has filed with the depositary the original of a letter from Daniel C. Roper, Commissioner of Internal Revenue, to the Old Colony Trust Company of Boston, dated May 19, 1919, expressing the views of the department as to the fair valuation of the stock of the Company as of March 1st, 1913, and the valuation which should be used in computing any profits made by the sale contemplated.  This letter as well as the original of this agreement of *1089  deposit, are open to the inspection of the depositor.  The following is a copy of the letter referred to: TREASURY DEPARTMENT Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue and Refer to IT:T PST WASHINGTON, May 19, 1919.Mr. ARTHUR A. BALLENTINE, 84 State St., Boston, Mass.SIR: This office is in receipt of your letter of the 29th ultimo requesting, on behalf of the Old Colony Trust Company of Boston, which proposes to buy all of the 41% of the stock of the Ford Motor Company of Detroit not held by the Ford interests, what valuation the Bureau places upon the stock of the Ford Motor*3410  Company as of March 1st, 1913, in order that the parties at interest may have some definite idea as to the amount of taxes they will be required to pay upon the profits made through such sale.  You state that it is believed that the purchase, if consummated, will tend to promote the interest of one of the largest concerns in the country, and that the purchase cannot be effected unless it is possible first to ascertain the judgment of the Bureau of Internal Revenue as to the value of the stock on March 1st, 1913.  In reply, you are advised that while ordinarily it is not the practice of the Bureau to determine such questions in advance of actual transactions, in view of all of the particular circumstances surrounding this case, the Bureau feels justified in departing from that practice and you are accordingly informed that upon consideration of the figures shown by the books and returns of the company, it is disposed to regard $9,489.34 as a fair valuation of the stock on March 1st, 1913, and one which should be used in computing any profits made by the sale.  DANIEL C. ROPER, Commissioner.VIII.  The depositary accepts the trust and duties imposed upon it by this instrument, *3411  but upon the express understanding that it shall not be liable for any action taken in good faith and believed to be within the discretion or power conferred upon it, or be responsible for any but its own acts and not for those of any person employed and selected with reasonable care, nor for any loss unless the same shall happen through its own wilful default.  The depositary shall have the right in its discretion to employ counsel.  Said Webb agrees to reimburse the depositary for expenses hereunder and to pay its reasonable compensation.  Distributions provided for herein shall, if the owner or depositor be more than one person, be made pro rata to the number of shares deposited.  IN TESTIMONY HEREOF said Webb and the depositary have hereunto affixed their names.  STUART W. WEBB, DETROIT TRUST COMPANY, By RALPH STONE, President.*1090  33.  Under date of June 17, 1919, the petitioner signed the following written instrument: JUNE 17, 1919.  AGREEMENT between STUART W. WEBB and HORACE H. RACKHAM the owner of One thousand (1000) shares of the Capital Stock of the Ford Motor Company of Michigan, being hereinafter called the "Depositor" or "Owner", and the Detroit*3412  Trust Company, which is to act as depositary hereunder.  I.  Said Webb offers to purchase all, but not less than all, of the said shares of said Ford Motor Company, in accordance with the terms hereof.  II.  The said Owner may accept said offer by depositing said stock free of incumbrance with the depositary on or before July 17 with transfers in blank properly executed, and accompanied also by written direction, waiver and power of attorney in substantially the following form: JUNE 17 1919.  To the Detroit Trust Company, depositary under agreement dated June 17, 1919, executed between Stuart W. Webb of Boston and said Depositary, providing for purchase by said Webb from the undersigned of One thousand (1000) shares of the stock of the Ford Motor Company of Michigan.  The undersigned hereby deposits with the Depositary for sale under the terms of said agreement, one thousand (1000) shares of the stock of said Ford Motor Company, being all the stock of said Company owned by the undersigned, and directs the depositary to deal with the same in accordance with the terms of said agreement, to which the undersigned herewith becomes party.  The undersigned waives any provision*3413  of the said Company's by-laws relating to notice by one stockholder to other stockholders of a proposed sale of stock, and his right to purchase stock proposed to be sold, and grants to said Webb power of attorney irrevocable with full power of substitution to give in the name and behalf of the undersigned, to any other stockholders of said Company, such notice of the sale proposed in said agreement as may be required or appropriate by reason of such by-laws of the Company.  HORACE H. RACKHAM (Stockholder's Signature) (Address for purpose of agreement) 34.  The petitioner and Henry Ford were neighbors for many years and their relations were friendly and intimate.  He believed that Ford was the logical purchaser of the stock.  He desired to receive for his stock only an amount which would be somewhere near right and fair between his neighbor and himself.  He made no inquiry about and gave no consideration to the value of the stock in 1919.  he figured out what he would receive at the price agreed upon and it amounted to a sum which was all he cared to have, or be responsible for, or manage.  He would not have sold to any one else at that time for the same price.  35.  On or*3414  about July 17, 1919, the petitioner concluded a sale of and transferred his 1,000 shares of stock in the Ford Motor Co. to Edsel Ford for the sum of $12,500,000, or at the rate of $12,500 a share, pursuant to the agreement of June 17, 1919.  36.  In making the sale the petitioner relied implicitly on what he considered to be the Government's determination, as set forth in the letter from Commissioner Roper to Ballantine, and would not have sold his stock but for such determination.  *1091  37.  On July 10, 1919, the petitioner received from the Ford Motor Co. a dividend of $963,769.30 and $76,837.50 interest thereon to July 10, 1919, pursuant to the court decree in the case of John F. and Horace Dodge v. Ford Motor Co. et al. He thereafter filed an amended return for 1917, reporting this dividend therein as 1917 income taxable at 1916 rates on the ground that such dividend constituted income set apart out of earnings accumulated in 1916.  He reported the interest in his 1919 income-tax return as 1919 income.  38.  On March 15, 1920, the petitioner filed in the office of the collector of internal revenue at Detroit, Mich., his individual income-tax return for the*3415  calendar year 1919, and in that return included in income the sum of $3,010,660 as the profit derived from the sale of the Ford Co. stock, this amount being the difference between the sale price of $12,500,000 and the March 1, 1913, value of the stock, $9,489,340, computed on the basis of $9,489.34 a share, in accordance with the letter of Commissioner Roper to Ballantine.  This return reported his total charitable contributions for 1919 to have been $55,425.  This return was received in Washington, D.C., by the Bureau of Internal Revenue on May 11, 1920.  39.  The total purchase price which the petitioner paid for the 1,000 shares of stock was less than the March 1, 1913, fair market price or value thereof.  He acquired the stock as follows: On June 18, 1903, as one of the original incorporators of the Ford Motor Co. of Michigan he subscribed for 50 shares of stock for the price of $5,000, which was paid $3,500 in cash and $1,500 on open account.  On or about October 22, 1908, he received a stock dividend of 1,900 per cent, or 950 shares.  This made a total of 1,000 shares then owned by him and sold as aforesaid.  40.  Commissioner Roper went out of office on March 21, 1920, and*3416  was immediately succeeded by Commissioner William M. Williams.  41.  Under date of May 22, 1920, the following letter was sent to the petitioner: TREASURY DEPARTMENT Washington Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue and Refer to IT:AD:P ESS MAY 22, 1920.  Mr. HORACE H. RACKHAM, 44 Edison Ave., Detroit, Michigan.SIR: Your amended income tax returns voluntarily filed for the year 1917 with the Collector of Internal Revenue for your District have been received *1092  in this office and the amount of additional taxes shown thereby to be due has been assessed pro forma.These returns will receive an intensive audit by this office and it may be necessary to request additional information from you in order to complete the audit.  If the amounts of tax shown to be due upon your amended returns are found to be in excess of true tax liability you will be notified to file a claim for abatement or refund, as the case may be, of such additional taxes assessed.  Respectfully, G. V. NEWTON, Deputy Commissioner,By T. F. LANGLEY Chief of Section.42.  On June 8, 1920, Commissioner*3417  Williams assessed against petitioner an income tax for 1919 of $2,383,286.06, being the amount of income-tax liability shown by the return, and this was paid by petitioner as follows: March 15, 1920$595,821.52June 15, 1920579,675.57Sept. 15, 1920595,821.51Dec. 15, 1920595,821.51June 29, 1923, credit of overpayment for 191615,504.05July 10, 1923, credit of overpayment641.902,383,286.0643-47.  These findings of fact are respectively identical with findings of fact P39 to P43, inclusive, in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  48.  In the latter part of 1920 the return of James Couzens was referred to I. I. Phillips, Chief of Subsection No. 8, Personal Audit Section, for superficial audit.  He made an examination of the return, found that the basis of the computation of the gain on the sale of the stock was not set forth therein, and prepared the following letter which was sent to Couzens: TREASURY DEPARTMENT Washington Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue and Refer to IT:G:P-8 IIP DECEMBER 30, 1920. *3418  Mr. JAMES COUZENS, 2239 Dime Bank Bldg., Detroit, Michigan.SIR: Reference is made to your income tax return, Form 1040, filed for the year 1919.  *1093  It is requested that you inform this office as to the manner in which you arrived at the profit of $8,622,096.70 from the sale of the stock held by you in the Ford Motor Co.  It is important this letter receive your prompt attention and that reference be made in your reply to the symbols at the beginning of this letter.  Respectfully, G. V. NEWTON, Deputy Commissioner.By I. I. PHILLIPS, For Chief of Section.49-50.  These findings of fact are respectively identical with findings of fact P45 and P46 in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  51.  On or before January 10, 1921, petitioner's 1919 return was reviewed by auditors of the Income Tax Unit.  52.  Under date of January 10, 1921, the following letter was sent to petitioner: TREASURY DEPARTMENT Washington Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue and Refer to IT:G:P-8 WHB-DU-801 JANUARY 10, 1921. *3419  Mr. H. H. RACKHAM, 1715 Dime Bank Bldg., Detroit, Mich.SIR: It is disclosed that the dividend of $963,769.30, received by you through court decree on July 10, 1919 from the Ford Motor Company was reported in your amended income tax return for 1917 and was taxed on such return at the 1916 rates, on the ground that such dividend constituted income set apart out of earnings accumulated in the year 1916.  Inasmuch as the Revenue Act of 1918 provides that dividends are income and are taxed at the rates for the year in which paid, regardless of when the earnings or profits out of which they were paid were accumulated, your net income for 1919 has been increased by the amount of this dividend.  Credit for the amount of additional tax assessed on your amended income tax return for 1917 on account of the inclusion of the dividend item has been allowed against the further tax disclosed through the adjustments made on your 1919 return.  The contribution of $100.00 made to the Roosevelt Memorial Fund, claimed in Block I, has been disallowed, inasmuch as it is not shown that this contribution was made to a corporation or association organized and operated exclusively for religious, *3420  charitable, educational, or scientific purposes.  *1094  The following is a synopsis of your 1919 return as corrected, disclosing a further tax liability of $525,218.58: Adjusted net income on which normal tax at 1919 rates is to be computed, Item J$3,046,291.37Less personal exemption2,000.00Balance3,044,291.37Amount subject to 4% normal tax4,000.00Amount subject to 8% normal tax3,040,291.37Normal tax at 4%160.00Normal tax at 8%243,223.31Surtax at 1918-19 rates:Net income, Item J$3,046,291.37Dividends reported342,941.68Dividend adjustment963,769.30Taxable income on United States obligations5,906.60Total net income subject to surtax at 1918-19 rates4,358,908.952,766,800.82Total tax liability3,010,184.13Tax paid at source$375.02Previously assessed on 1919 return2,383,286.062,383,661.08Further tax due626,523.05Less amount of additional tax assessed on amended 1917 return due to the inclusion of dividend in question101,304.47Further tax525,218.58Assessment of this amount will be entered on the next list.  The Collector of Internal Revenue for your*3421  district will notify you as to the time and manner of making payment of this tax.  Respectfully, G. V. NEWTON Deputy Commissioner.53.  On February 16, 1921, counsel for petitioner wrote a letter to the Commissioner asking for a hearing on the Ford-Dodge dividend question before the making of an assessment.  On February 28, 1921, Deputy Commissioner Newton, in reply to the letter of February 16, stated no reason could be seen for deferring the assessment.  54.  On March 7, 1921, Commissioner Williams assessed against petitioner additional tax for 1919 of $525,218.58.  On demand by the collector of internal revenue at Detroit the petitioner on March 31, 1921, paid the tax under written protest.  55.  The "assessment stamp" on the petitioner's return was filled in as follows: Assessment Tax $525,218.58Penalty $ Basis Sup. Audit Jan. 10/20 [sic] I.I.P.Date Feb., 1921Page 7 Line 2*1095  "Sup. Audit" signified superficial audit.  The date on the lower portion of the stamp and the page and line numbers are the means of identifying the assessment on a particular assessment list.  56.  Shortly prior to February 26, 1921, Internal*3422  Revenue Agent T. G. Thurston made a field investigation concerning the income-tax liability of the petitioner for 1919, and certain adjustments for 1916 and 1917.  On February 26, 1921, he made his written report thereof to C. M. Justice, Internal Revenue Agent in Charge, Detroit, Mich., who duly transmitted it to the Commissioner.  The report was received by the Bureau of Internal Revenue in Washington on April 21, 1921.  On April 4, 1921, Justice transmitted a copy of the report to the petitioner for his information.  Thurston reported that no important adjustments were found necessary for 1919, and with reference to the profit derived by petitioner from the sale of his 1,000 shares of stock in the Ford Motor Co. in 1919, stated as follows: Block D. Market value as at Mar. 1, 1913 of stock of Ford Motor Co. taken as $9,489.34 a share in accordance with value set by the Department as shown in letter dated May 19, 1919 to Arthur A. Ballentine, 84 State St., Boston, Mass. (Reference, IT:T:PST.) Sale Price, 1000 shares at $12,500.00 a share.  57.  Commencing on February 1, 1921, Internal Revenue Agents Thurston and J. L. Chatterton, continuing until February 17 and February 3, respectively, *3423  had made an investigation concerning the income-tax liability of James Couzens for 1916, 1917, 1918, and 1919.  Thurston was concerned, among other things, with the March 1, 1913, value of the Ford Motor Co. stock sold by Couzens.  58-63.  These findings of fact are respectively identical with findings of fact P60, P50, P54, P55, P56, and P61 in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  64.  On or about March 31, 1921, petitioner had filed out of order his claim for the abatement of said assessment of $525,218.58.  On appeals by other stockholders likewise assessed on account of the Ford-Dodge dividends a hearing was had on that question before the *1096  Committee on Appeals and Review on June 20, 1921.  On December 6, 1921, the petitioner filed with the collector of internal revenue his claim for refund of the additional tax of $525,218.58.  Under date of April 24, 1922, the Commissioner advised the petitioner that the Committee on Appeals and Review had held that the so-called Ford-Dodge dividends constituted income to the stockholders, including the petitioner, for 1919 and were subject to the*3424  rates of tax in effect for that year.  65-72.  These findings of fact are respectively identical with findings of fact P67 to P74, inclusive, in James Couzens, Docket No. 10438, and such findings are by reference, incorporated herein and made part hereof.  73.  Under date of February 23, 1923, Deputy Commissioner E. W. Chatterton sent to the petitioner a form letter notifying him that an examination of his individual tax returns for 1916 and 1919 and of his books of account and records had been made, which disclosed an additional tax liability for 1919 of $455.94 and an overassessment for 1916 of $15,959.99.  Thereafter the petitioner received from the Commissioner a certificate of overassessment for $15,959.99.  74-97.  These findings of fact are respectively identical with findings of fact P92 to P115, inclusive, in James Couzens, Docket No. 10438, and such findings are by reference, incorporated herein and made part hereof.  98.  On March 12, 1925, Acting Commissioner of Internal Revenue Nash, without prior notice to the petitioner, made an assessment against the petitioner of income and profits tax of $5,004,398.20 for 1919.  99.  This assessment appeared on a*3425  special list for March, 1925, which contains the following certificate in the usual form: I hereby certify that I have made inquiries, determinations, and assessments of taxes, penalties, etc., of the above classification specified in these lists, and find that the amounts of taxes, penalties, etc., stated as corrected and as specified in the supplementary pages of this list made by me are due from the individuals, firms, and corporations opposite whose names such amounts are placed, and that the amount chargeable to the collector is as above.  This certificate was signed "C. R. Nash, Acting Commissioner of Internal Revenue." 100.  Commissioner Blair was not in Washington when this assessment was made.  101-105.  These findings of fact are respectively identical with findings of fact P122, P124, P125, P126, and P127, in James Couzens, Docket No. 10438, and such findings are by reference incorporated herein and made part hereof.  106.  Under date of March 12, 1925, Deputy Commissioner James G. Bright sent the following letter to the petitioner: *1097  Form NP-3 TREASURY DEPARTMENT Washington Office of Commissioner of Internal Revenue Address Reply to*3426  Commissioner of Internal Revenue and Refer to IT:PA-5 IIP MAR. 12, 1925.  Mr. H. H. RACKHAM, 1715 Dime Bank Building, Detroit, Michigan.SIR: In accordance with the provisions of Section 274(d) of the Revenue Act of 1924, there has been assessed against you an income and profits tax amounting to $5,004,398.20 for the taxable year 1919, the details of which are set forth in the attached statements.  Under the provisions of Section 279(a) of the Act you have the right to file with the Collector of Internal Revenue, within ten days after notice and demand for payment, a claim for abatement of this tax or any part thereof.  The claim should have attached to it all evidence and data upon which you rely in support thereof, and should be accompanied by a bond not exceeding double the amount of the claim, with such sureties as the Collector deems necessary.  When the claim is received by the Collector it will be transmitted to the Commissioner of Internal Revenue, Washington, D.C., who will notify you of the action taken.  Respectfully, J. G. BRIGHT, Deputy Commissioner.Inclosures: Statements.  107.  Attached to this letter was the following statement: *3427  STATEMENT IT:PA-5 IIP In re: Mr. H. H. Rackham, 1715 Dime Bank Building, Detroit, Michigan.  1919 Deficiency in tax $5,004,398.20 A reexamination of your 1919 individual income tax return in connection with information furnished this office discloses the above deficiency, which is computed as follows: Block D as reported: 1,000 shares Ford Motor Company stock -Sale price$12,500,000March 1, 1913, value9,489,340Profit3,010,660March 1, 1913, value reported$9,489,340March 1, 1913, value corrected2,634,000Profit understated6,855,340Normal and surtax at 73%.Additional tax5,004,398.20*1098  This assessment is in addition to all other outstanding and unpaid assessments appearing upon the collector's lists.  Payment should not be made until a bill is received from the Collector of Internal Revenue for your district and remittance should then be made to him.  108.  The additional assessment of $5,004,398.20 was based on the reduction of the March 1, 1913, value of the Ford stock from $9,489.34 per share, as returned by petitioner, to $2,634 per share.  109.  Demand was thereafter made upon petitioner by*3428  the collector of internal revenue at Detroit that he pay the tax so assessed.  Thereafter within 10 days the petitioner filed in the office of the collector of internal revenue at Detroit a claim for the abatement of the assessment and filed therewith his bond in the sum of $6,000,000.  110.  There are no notes, memoranda or letters of an interdepartmental character with reference to the memorandum submitted to the Secretary of the Treasury by Thompson.  The only consideration it received is indicated in a letter dated March 7, 1925, delivered to James Couzens by Commissioner Blair.  This letter, to which was attached a copy of the memorandum submitted to Secretary Mellon by Thompson, is as follows: MARCH 7, 1925.  Hon. JAMES COUZENS, United States Senate.MY DEAR SENATOR COUZENS: I enclose herewith a copy of a memorandum which has been received in the Treasury Department in connection with your 1919 income taxes.  An examination of your return for that year shows that the figure mentioned in the memorandum as the March 1, 1913, market value of the stock for taxation purposes approximates the value upon which the tax was originally assessed, but there appears nothing*3429  in the files of the Bureau to sustain the correctness of this value.  The memorandum, on the other hand, makes out a prima facie case of too low a March 1, 1913, value.  Being put upon notice the Bureau necessarily must take action to establish the correct value.  The Bureau records show that your return for 1919 was filed on March 13, 1920; the statute of limitation will, therefore, run on March 13, 1925, less than a week from today.  In order that the Bureau may have time to investigate the information contained in the memorandum and that you may have an opportunity to present to the Bureau evidence tending to justify the figure taken for the March 1, 1913, value, it is suggested that you sign and return to me the enclosed waiver upon receipt of which you will be given ample opportunity to present your case to the Bureau.  In the event, however, that the Bureau does not receive the waiver promptly, in order to protect the United States it will be necessary to assess against you an additional tax based upon the information now available to the Bureau.  Under the practice in force hearing to review such an assessment may be had in the Solicitor's Office, and in the event the*3430  assessment is there confirmed you will, of course, have your appeal to the Board of Tax Appeals.  Very truly yours, D. H. BLAIR, Commissioner.111.  At the time of delivering this letter to Couzens, it was not clear in Commissioner Blair's mind that a tax was due.  *1099  112.  Under date of April 20, 1925, petitioner's attorney in a letter to the Commissioner requested a hearing on the claim for abatement and asked for information as to the basis and method by which the March 1, 1913, value was fixed at $2,634 a share and further requested permission to examine the files of the Ford Motor Co. in the Bureau up to the date of the sale of the stock.  By letters dated May 16, 1925, and telegrams dated June 15, 1925, petitioner's attorney renewed these requests and asked for confirmation of a refusal to petitioner to examine the Ford files.  113-115.  These findings of fact are respectively identical with findings of fact P133, P134, and P135 in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  116.  Under date of November 19, 1925, the Commissioner sent to the petitioner the following letter, which*3431  letter forms the basis of this proceeding: TREASURY DEPARTMENT Washington Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue and Refer to IT:PA-3 LWB-307 Nov. 19, 1925.  Mr. HORACE H. RACKHAM, 1715 Dime Bank Building, Detroit, Michgan.SIR: Your claim for the abatement of $5,004,398.20 additional individual income tax for 1919 has been examined and will be allowed for $667,103.20.  The details relative to the examination of your return for 1919 are set forth in the attached statement.  In accordance with the provisions of Section 279(b) of the Revenue Act of 1924, you are allowed 60 days from the date of this letter within which to file an appeal to the Board of Tax Appeals contesting in whole or in part the correctness of this determination.  If you acquiesce in this determination and do not desire to file an appeal, you are requested to sign the enclosed agreement consenting to the assessment of the deficiency and forward it to the Commissioner of Internal Revenue, Washington, D.C., for the attention of IT:PA-3/LWB-307.  In the event that you acquiesce in a part of the determination, the agreement should*3432  be executed with respect to the items agreed to.  Respectfully, D. H. BLAIR, Commissioner.By C. R. NASH Assistant to the Commissioner.Enclosures: Statements, Agreement - Form B.  *1100  117.  Attached to this letter was the following statement: STATEMENT IT:PA:3 LWB:307 Inre: Mr. Horace H. Rackham, 1715 Dime Bank Building, Detroit, Michigan.  1919 Overassessment $667,103.20 Deficiency assessed$5,004,398.20Reduction allowed667,103.20Balance due4,337,295.00A reaudit of your return for 1919 discloses the profit understated from the sale of 1,000 shares of Ford Motor Company stock to be $5,941,500.00, instead of $6,855,340.00, as stated in office letter dated March 12, 1925.  The decrease in the profit is due to the fact that the March 1, 1913, value of the said stock has been determined to be $3,547.84 a share instead of $2,634.00 a share as considered by the former audit dated March 12, 1925.  The total tax liability on the corrected net income is $7,247,255.58.  The records of this office disclose the total tax assessed to be $7,913,358.78.  The adjustment of these items discloses an overassessment of $667,103.20. *3433  The overassessment shown herein will be made the subject of a certificate of overassessment which will reach you in due course through the office of the Collector of Internal Revenue for your district.  If the tax in question has not been paid, the amount will be abated by the Collector.  If the tax has been paid, the amount of overpayment will first be credited against unpaid income tax for another year or years, and the balance, if any, will be refunded to you by check of the Treasury Department.  It will thus be seen that the overassessment does not indicate the amount which will be credited or refunded since a portion may be an assessment which has been entered but not paid.  118.  The March 1, 1913, value of $3,547.84 for each share of stock of the Ford Motor Co. was determined as follows: By the application of the method outlined in a memorandum of the Committee on Appeals and Review (A.R.M. 34, (third method), ) to the results of operations of the Ford Motor Company during the period January 1, 1909 to February 28, 1913.  The factors and figures taken into account are as follows: Average annual earnings$7,882,133.27Deduct: 8% on average net tangibles of $7,704,973.94616,397.92Excess earnings attributable to intangibles7,265,735.35Intangibles - excess earnings capitalized at 15%48,438,235.67Add: net tangibles on March 1, 191322,518,635.02Total value of 20,000 shares70,956,870.69Value of each share3,547.84*3434  119.  Stock in the Ford Motor Co. was also sold in 1919 by James Couzens, John F. Dodge, Horace E. Dodge, John W. Anderson, Rosetta V. Hauss, Paul R. Gray, David Gray, and Philip H. Gray, and the gain derived by each of these taxpayers from such sale as shown by his income-tax return was computed upon the basis of a value on *1101  March 1, 1913, of $9,489.34 per share.  These returns were for various purposes examined and audited, and investigations in respect thereof made by officers of the Bureau of Internal Revenue at various times and no determination of a value different from the so-called Roper valuation figure of $9,489.34 was made in respect of any of such taxpayers until 1925, after the receipt of the Thompson memorandum.  In March, 1925, jeopardy assessments were made against Couzens, Anderson, and the Grays and a notice of deficiency was sent to Mrs. Hauss.  In April, 1925, notices of deficiency were sent to the executors of the estates of Horace E. Dodge and John F. Dodge.  In these assessments and notices of deficiency the March 1, 1913, value of the stock, the basis for the computation of the tax, was changed to $2,634 a share.  Subsequently, after hearings within*3435 the Bureau, the March 1, 1913, value was changed to $3,547.84 a share.  Claims for abatement of the jeopardy assessments were in part allowed on that basis, a revised deficiency notice on the changed basis was sent to Mrs. Hauss, and the revised value was stated in answers to petitions filed with the Board by the executors of the Dodge Estates.  120.  Since 1919 the petitioner, believing that the matter of his tax liability had been closed and finally settled, has made substantial contributions for the public.  Included among these was land purchased in the vicinity of Detroit and the construction of a golf course thereon, at a total cost of $432,000.  He has made no contributions of any substantial amount since receiving notice of the assessment against him.  121-313.  These findings of fact are respectively identical with findings of fact P141 to P333, inclusive, in James Couzens, Docket No. 10438, and such findings are, by reference, incorporated herein and made part hereof.  314.  The fair market price or value on March 1, 1913, of the 1,000 shares of stock in the Ford Motor Co. which were owned by the petitioner on that date and sold by him on July 17, 1919, was $10,000,000. *3436  OPINION.  STERNHAGEN: The issues in this proceeding are the same as those decided in . While there are some differences in the facts, they do not involve essential distinctions and do not require a conclusion in any respect different.  The respondent was authorized to consider and determine the fair market price or value on March 1, 1913, of the petitioner's stock in the Ford Motor Co. and to make a jeopardy assessment of the correct deficiency.  From the evidence we have found that the fair market price *1102  or value on March 1, 1913, of the petitioner's stock was at the rate of $10,000 a share.  Reviewed by the Board.  Judgment will be entered under Rule 50.SMITH, MORRIS, ARUNDELL, AND MILLIKEN did not participate in the consideration or decision of this proceeding.