Court Opinion

ID: 4591058
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:04:57.986387+00
Date Added: 2024-06-11T07:59:13.296806
License: Public Domain

CRAWFORD LOAN & ABSTRACT CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Crawford Loan & Abstract Co. v. CommissionerDocket No. 7681.United States Board of Tax Appeals10 B.T.A. 403; 1928 BTA LEXIS 4111; January 31, 1928, Promulgated *4111  The actual cash value of abstract books acquired by the petitioner for capital stock at the time of organization was $25,000, which amount should be used in the computation of invested capital.  Louis B. Montfort, Esq., for the petitioner.  L. C. Mitchell, Esq., for the respondent.  VAN FOSSAN *403  This is a proceeding for the redetermination of income and excess-profits taxes for the years 1919, 1920, and 1921, for which the Commissioner has determined deficiencies of $114.89, $297.07, and $319.05, respectively.  It is alleged that the Commissioner erred in reducing, for invested capital purposes, the value of a set of abstract books acquired by petitioner upon organization from $25,000 to $15,000.  FINDINGS OF FACT.  The petitioner is a Missouri corporation, organized March 1, 1912, with its principal office at Sedalia, Pettis County, Mo.  At the time of its organization the petitioner acquired a set of abstract books for which it issued capital stock of the par value of $25,000.  *404  These abstract books consisted of a set of books, journals, ledgers and daily files, in which there was recorded every transaction affecting the*4112  titles to all lands in Pettis County since the organization of the county about 1833, beginning with original conveyances from the Government.  These books contained abstracts not only of deeds, mortgages, trusts, contracts and agreements conveying interests in the lands, but also of all suits or actions and probate proceedings in any way affecting real estate in the county.  The abstract of each transaction is complete, showing not only the names of the parties thereto, the consideration and description of the property, but also any special recitals and peculiar conditions or circumstances embodied in the instruments or records of proceedings.  For many years prior to 1912 there were only two authentic and recognized sets of abstract books, one of which was the set acquired by petitioner in 1912.  Prior to the acquisition of these books by the petitioner they were owned by various parties.  Several years prior to incorporation of petitioner they were acquired by one Grant Crawford at a foreclosure sale under a mortgage.  Crawford organized the petitioner and paid in these books for $25,000 par value capital stock.  At or about 1912 or 1913 a group of individuals who were organizing*4113  a trust company attempted to purchase these books for $25,000.  The other set of books, owned by the Landmann Abstract & Title Co. of Sedalia, were sold in 1883 or 1885 by R. C. Sneed, the then owner, for approximately $20,000 or $25,000, and at that time they were not as complete or reliable as the books owned by the petitioner.  In 1907 Emile Landmann purchased an undivided one-half interest in the Landmann books from the estate of his brother, Frank Landmann, deceased, for $8,000.  Abstract books generally become more valuable each succeeding year, because of the additions made thereto from year to year.  In 1917 the petitioner entered into an agreement with the Landmann Abstract & Title Co., its only competitor in the abstract business, whereby petitioner withdrew from active engagement in the abstract business.  Under the agreement the Landmann Company had the use of petitioner's books and was to transact all abstract business in the county.  The profits derived from the business, after payment of all expenses, were to be divided equally between the petitioner and the Landmann Company.  There were no actual sales of abstract books in Pettis County in 1912 or 1913.  At or about*4114  March 1, 1912, there were prospective purchasers willing to pay $25,000 for the abstract books acquired by the petitioner.  *405  The actual cash value of the abstract books acquired by the petitioner for capital stock was $25,000 on March 1, 1912.  OPINION.  VAN FOSSAN: There is presented in this proceeding only the question of the value, for invested capital purposes, of a set of abstract books paid in to the petitioner for stock.  It is admitted that the petitioner acquired the books at the time of its organization on March 1, 1912, and that it issued therefor capital stock of the par value of $25,000.  Section 326(a)(2) of the Revenue Acts of 1918 and 1921 provides that invested capital means the actual cash value of tangible property paid in for stock at the time so paid in, not to exceed the par value of the stock issued therefor, with exceptions not material here.  The petitioner introduced the testimony of four witnesses, all of whom were familiar with and had intimate knowledge of the books in question, their history, character, use, reliability and value.  One of these witnesses, Emile Landmann, was petitioner's only competitor in the abstract business; another, *4115  W. H. Powell, was the president of a local bank and had been employed in the bank for many years; another, D. L. Porter, was a real estate and loan broker who had been engaged in that business in the community for many years; and the last, J. T. Montgomery, was a practicing attorney at law and had been so engaged in the community for many years.  All these men testified that they had been familiar with petitioner's abstract books for a long period of time and had made use of them.  They were residents and business men of long standing in the community and exhibited an intimate knowledge of conditions affecting abstract books in that county.  Their businesses were of such a nature as would require them to be informed on matters affecting land titles.  One of them testified that he would have paid $25,000 for petitioner's books in 1912, and another testified that he, in association with others, attempted to purchase them in 1912 or 1913 for $25,000 or $30,000.  Another of these witnesses testified that he knew of a group of men who were negotiating for the purchase of the books about 1912 and were willing to pay $25,000 for them at that time.  All these witnesses testified that, in their*4116  opinion, the value of petitioner's books in 1912 was at least $25,000.  We are satisfied that the actual cash value of the abstract books when acquired by the petitioner, March 1, 1912, was $25,000, which amount shuld be used in the computation of invested capital.  Judgment will be entered on 15 days' notice, under Rule 50.