Court Opinion

ID: 4606915
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:39:33.643261+00
Date Added: 2024-06-11T07:59:34.070704
License: Public Domain

LEON N. DIBBLE, EXECUTOR, ESTATE OF LOUIS N. DIBBLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Dibble v. CommissionerDocket No. 2528.United States Board of Tax Appeals6 B.T.A. 732; 1927 BTA LEXIS 3425; April 6, 1927, Promulgated *3425  Value of real estate junior mortgages determined.  John F. Malley, Esq., for the petitioner.  R. E. Copes, Esq., for the respondent.  LOVE *732  This proceeding is for the redetermination of a deficiency in estate tax in the amount of $597.32.  There is only one assignment of error, which complains of the action of the Commissioner in adjusting the value of a number of second and third mortgage securities held by petitioner as executor.  *733  FINDINGS OF FACT.  The petitioner resides in Springfield, Mass., and is the executor of the estate of Louis N. Dibble, who died June 23, 1923.  On the return filed by the petitioner the net value of the estate was fixed at $149,315.24.  The Commissioner readjusted that value fixing same at $169,454.22.  The increase in net value was brought about by reason of the action of the Commissioner in increasing the value assigned to a number of second and third mortgage securities.  The character of the several securities, amount of prior mortgage debt, the market value of securities held by petitioner as returned by him, and the market value as adjusted by the Commissioner are shown in the following*3426  tabulated statement: Character of security.Value returned.Value readjustedSecond mortgage note, original face value$2,900Unpaid balance2,450$1,837.50$2,450.00Payable $50 quarterly subject to a $3,800 mortgage.Second mortgage note, original face value2,700Unpaid balance2,4001,920.002,400.00Payable $75 quarterly for 3 years then $100 quarterly, subject to a $4,500 mortgage.Second mortgage note, original face value3,350Unpaid balance3,3503,182.503,350.00Payable Sept. 29, 1923, subject to a $5,500 mortgage.Second mortgage note, original face value19,500Unpaid balance18,75014,062.5018,750.00Payable $250 quarterly for 10 years, balance then on demand, subject to a $28,000 mortgage.Second mortgage note, original face value1,000Unpaid balance600492.00600.00Payable $25 quarterly subject to $3,300 mortgage.Second mortgage note, original face value1,500Unpaid balance1,5001,410.001,500.00Payable May 31, 1924, subject to a $3,500 mortgage.Second mortgage note, original face value4,000Unpaid balance3,5502,662.503,550.00Payable $50 quarterly for 10 years, balance on demand, subject to a $4,500 mortgage.A one-half interest in second mortgage note, original face value45,000Unpaid balance40,60014,210.0020,300.00(1/2 20,300)Payable $400 quarterly for 5 years, $500 quarterly thereafter subject to a $70,000 mortgage.Second mortgage note, original face value3,000Unpaid balance2,8502,622.002,850.00Payable $75 quarterly till December, 1925, balance on demand, subject to $4a,000 mortgage.Second mortgage note, original face value$4,000Unpaid balance1,500$1,425.00$1,500.00Payable $100 quarterly till July, 1924, balance on demand, subject to a $6,500 mortgage.Second mortgage note, original face value12,000Unpaid balance9,9008,118.009,900.00Payable $300 quarterly for 10 years, balance on demand, subject to a $20,000 mortgage.Second mortgage note, original face value3,100Unpaid balance1,9501,716.001,950.00Payable $250 semi-annually, subject to a $3,500 mortgage.Second mortgage note, original face value2,300Unpaid balance725681.50725.00Payable $75 quarterly, subject to a $5,000 mortgage.Second mortgagenote, original face value2,850Unpaid balance1,8501,757.501,850.00Payable $125 quarterly until April, 1924, balance on demand, subject to $4a,600 mortgage.Second mortgage note, original face value800Unpaid balance800760.00800.00Payable $150 semi-annually subject to a $5,500 mortgage.Second mortgage note, original face value11,000Unpaid balance6,8754,812.506,875.00Payable $125 quarterly, subject to a $25,000 mortgage.Second mortgage note, original face value1,200Unpaid balance1,2001,080.001,200.00Subject to a $3,200 mortgage.  The $3,200 mortgage was foreclosed in 1924 for nonpayment of interest.Second mortgage note, original face value1,000Unpaid balance1,000850.001,000.00Payable $50 quarterly subject to a $2,500 mortgage.Second mortgage note, original face value3,500Unpaid balance3,5003,290.003,500.00Payable April 10, 1924, subject to a $6,000 mortgage.Third mortgage note, original face value3,500Unpaid balance3,5003,150.003,500.00Payable October 30, 1923, subject to first and second mortgages totaling $19,450.Third mortgage note, original face value1,000Unpaid balance825783.75825.00Payable $25 quarterly until July 1924, balance on demand, subject to first and second mortgages, totaling $7,200.Third mortgage note, original face value380Unpaid balance230207.00230.00Payable $25 semi-annually subject to first and second mortgages, totaling $3,525.*3427 *735  The market value of the securities listed above on date of death of Louis N. Dibble were as valued by the petitioner in his return, being in the total amount of $71,069.75.  The average discount used by him on the mortgages in question was approximately 21 1/2 per cent.  These mortgages ran from on to ten years.  OPINION.  LOVE: The sole question at issue in the instant case is the value of the second and third mortgages held by the executor, the total balance due on which at date of death of Louis N. Dibble, was $90,605 and which were valued by petitioner in his return at $71,069.75.  The Commissioner readjusted the value as shown in the return, to the face value of the balance due.  Edward J. Murphy was appointed by the probate court to appraise the property constituting the estate of Louis N. Dibble.  He made such appraisal and made his report to the court, and the same was approved.  Murphy has been in the real estate business in Springfield, Mass., where the property in question is located, for thirty-four years, and has bought and sold real estate mortgages, first mortgages, second mortgages, and a few third mortgages.  At the time he made the appraisal of*3428  the Dibble estate, he was acquainted with the properties involved in the mortgages.  As a witness in this case he was shown a certified copy of his report of that appraisal, which he identified, and he testified that the values therein given by him in that report were, in his judgment, the correct market values of the several items therein listed.  In making his return, as executor, the petitioner used the values shown opposite each of the several mortgages involved in Murphy's report, and as shown in the foregoing tabulated statement.  There are several factors that enter into the appraisal of second real estate mortgages, the amount of the first mortgage as compared with the value of the property mortgaged, the personal responsibility of the payer, and the time the mortgaged debt has to run.  Murphy qualified as a competent witness on the question of the value of the mortgages here involved, and stating the factors considered and used by him in arriving at his values, so recorded them.  The petitioner used the values fixed by Murphy, which we are convinced are correct, and so decide.  Judgment will be entered on 15 days' notice, under Rule 50.