Court Opinion

ID: 4618503
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:38:46.579656+00
Date Added: 2024-06-11T07:55:29.011504
License: Public Domain

JOHN MORGAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Morgan v. CommissionerDocket No. 10978.United States Board of Tax Appeals10 B.T.A. 1138; 1928 BTA LEXIS 3959; March 1, 1928, Promulgated 1928 BTA LEXIS 3959">*3959  March 1, 1913, value of undeveloped coal lands determined.  Fred A. Woodis, Esq., for the petitioner.  L. A. Luce, Esq., for the respondent.  ARUNDELL10 B.T.A. 1138">*1138  This proceeding is for the redetermination of a deficiency in income tax for the year 1920 in the amount of $8,836.89.  The only question involved is the March 1, 1913, value of 45 acres of coal lands acquired by the petitioner prior to that date and sold in 1920 as part of a larger parcel.  FINDINGS OF FACT.  In 1920 petitioner owned a tract of land in Springhill Township, Fayette County, Pa., including 45 acres of undeveloped coal lands which were acquired prior to March 1, 1913.  The tract was surrounded on the north, west and southwest by lands of operating coal companies.  The outcrop of the property was located from 50 feet to 1,200 feet west, and slightly above the elevation of the tracks of the Baltimore & Ohio Railroad, because of which, mines on the property could have been operated in 1913, and are now being operated, 10 B.T.A. 1138">*1139  without the use of an incline to load their output into railroad cars.  In 1913 or 1917 a small tract of coal land, known as the R. W. Higinbotham1928 BTA LEXIS 3959">*3960  tract, situated approximately three miles southwest of the Morgan property, was purchased by the Fancy Hill Coal Co., operators of three adjoining or adjacent properties, for a consideration of $900 per acre.  The Fancy Hill Coal Co. mine contained rock faults.  One of these faults covered a large area and ran in the direction of and within 200 to 300 feet of the Higinbotham property line.  Coal mined from the Fancy Hill properties was transported to railroad cars by means of an incline about 850 feet long, with a grade of approximately 30 per cent.  Due to its activities on adjoining property, the Higinbotham tract was regarded as being more valuable to the Fancy Hill Coal Co. than to any other operator.  Aside from the Higinbotham sale, no coal lands in the vicinity of the Morgan tract were sold in 1913, or thereafter earlier than the year 1917.  Sometime between 1902 and 1913, J. N. McGill made an offer of $1,000 per acre for the S. A. Conn coal lands adjoining the Morgan tract.  In 1920 the petitioner sold 32.943 acres of his holdings to the Tummel Coal Co. and the remainder to Adelburt Rush.  On March 1, 1913, the 45 acres had a value of $1,000 per acre.  OPINION.  1928 BTA LEXIS 3959">*3961  ARUNDELL: We are concerned here only with the March 1, 1913, valuation of the 45 acres of coal lands.  The cost of the land and its sales price is not in dispute.  The record contains very little satisfactory evidence of comparable sales at or about March 1, 1913.  The petitioner contents himself with putting on the stand four witnesses who testified that, in their opinion, the property had a value on March 1, 1913, of from $1,600 to $2,000 per acre.  This evidence was not impressive and the opinions were not supported by a thorough knowledge of the intrinsic worth of the property.  The only transaction with which the witnesses were familiar was a sale of the so-called Higinbotham coal land, located some three miles away.  This land was sold sometime between 1913 and 1917 to the Fancy Hill Coal Co., operators of an adjoining property, for a consideration of $900 per acre.  In explanation of the lowness of that figure, the witnesses stated that it was generally believed that the coal underlying the Higinbotham land was broken by rock faults, as such faults had been found on the adjoining tracts of the Fancy Hill Coal Co.  The Morgan property was entirely undeveloped in 1913 and it1928 BTA LEXIS 3959">*3962  was not known as a fact whether it was free of such faults or not, though subsequent developments disclosed that the coal was not so broken.  10 B.T.A. 1138">*1140  The witnesses were of the opinion that the 45 acres here in dispute were more valuable than the Higinbotham tract because the coal could be mined and loaded on the cars more readily.  Coal mined on the Morgan property could be loaded directly into the railroad cars from the tipple, whereas, in the operations of the Fancy Hill Coal Co., it was necessary for it to use an incline of 850 feet, with a grade of about 30 per cent, to load the coal into the railroad cars.  This favorable factor was, in the opinion of petitioner's witnesses, sufficient to make the coal of the Morgan tract more valuable than that of the Higinbotham land, all other considerations being equal.  The revenue agent who investigated the case on the ground placed a value on the land as of March 1, 1913, of $1,000 per acre.  The record does not disclose the value placed on the land by petitioner at the time he made his original return, but, as the deficiency notice states that the additional tax proposed arises at least in part from this adjustment, presumably the1928 BTA LEXIS 3959">*3963  figure determined by the revenue agent was that reported by petitioner.  However that may be, we are satisfied after a very careful consideration of the entire record that the fair market value of the 45 acres of coal land on March 1, 1913, was $1,000 per acre, and the tax liability of the petitioner should be determined on that basis.  Judgment will be entered on 15 days' notice, under Rule 50.