Court Opinion

ID: 4632276
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:27.926875+00
Date Added: 2024-06-11T07:57:51.835670
License: Public Domain

JAMES COUZENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Couzens v. CommissionerDocket No. 10438.United States Board of Tax Appeals11 B.T.A. 1040; 1928 BTA LEXIS 3663; May 5, 1928, Promulgated *3663  1.  The function of the Board is not primarily to declare a rule but to determine the issues presented in each case in the light of the evidence therein, to the end that the present tax liability of each petitioner may be settled.  2.  Where, during the negotiations for the sale of property by a taxpayer, a valuation of the property was sought from the Commissioner of Internal Revenue in order that the taxpayer could ascertain the extent of his tax liability in the event of sale, and the Commissioner stated a valuation, whereupon the sale was consummated and the tax computed and paid on the basis of the value stated by the Commissioner, the taxpayer's contention that the United States is prevented by equitable estoppel from asserting a claim for additional taxes based upon a different valuation must be treated with the utmost caution, since its sanction would result in having individual tax liability depend, not upon the tax statutes applicable to all, but upon the statements and conduct of the particular Government officer in respect of each individual.  3.  The defense of estoppel against a claim by the United States for additional taxes is not available to a taxpayer in a case*3664  where the Commissioner had no duty to make the alleged representation relied upon.  4.  Where there is no clear evidence that a taxpayer actually relied upon such alleged representation and only slight evidence from which such reliance can be inferred, such reliance may not be assumed.  5.  A stockholder of a corporation, having the right to examine the books of the corporation and make other investigations to ascertain the value of his stock and otherwise to protect himself against adverse results of a mistake in calculating the taxable gain derived from a sale by him of his stock, may not so far rely upon an expression by the Commissioner as to lay the basis for the defense of estoppel against a determination of deficiency in tax resulting from a change in the gain.  6.  The duties of the Commissioner as prescribed in section 321, Rev. Stats., or more recent revenue acts, do not include an appraisement of property before a tax has been assessed or before there has been a transaction in respect of such property within the purview of the taxing statute.  7.  An unauthorized expression by the Commissioner as to the value of property derives no force from evidence that contemporaneously*3665  there was in the Bureau of Internal Revenue a policy of being helpful to taxpayers.  8.  There is no duty of the Commissioner to create revenue, or to promote transactions from which revenue will result, or to supervise activities of private citizens except to see that taxes are properly assessed and collected.  9.  A statement by the Commissioner that the Bureau "is disposed to regard $9,489.34 as a fair valuation of the stock on March 1, 1913, and one which should be used in computing any profits made from the sale" does not, under the circumstances in evidence, amount to a definitive valuation.  10.  Estoppel must always depend upon the particular circumstances, and, irrespective of what the rule may be in other cases where the government deals on an equality with the citizen, it resists the sovereign power of taxation in only the most extraordinary case.  11.  There is no general rule which gives judicial finality to a valuation made by the Commissioner outside the scope of his official duty or prevents his successors in office from considering the value de novo.12.  The formal assessment by the Commissioner of the amount of tax shown on the face of the taxpayer's*3666  return is a perfunctory act and does not amount to a final adoption of any item stated or implied in the return.  13.  A "superficial audit" or "desk audit," correcting one item in a return, which was made so that revenue clearly due would be quickly made available and which purported not to consider or adopt doubtful items but only to lay them aside for future attention, is not a final determination as to the correctness of other items or of the return as a whole.  14.  The audit of a return by one Commissioner does not preclude a modification by his successor in office of the facts upon which the computations were based.  15.  Congress has provided in the revenue acts a system for assuring certainty and terminating disputes by way of a limitation period, a voluntary agreement, or a proceeding before the Board, and this system must be held to be complete, leaving no room for a judicial standard like that recognized as to other executive departments.  16.  A calculation which appears to the Commissioner to be based upon an incorrect formula and to deprive the government of strikingly large taxes reasonably justifying immediate inquiry may properly be reopened.  17.  Where*3667  the practice within the Bureau under a departmental order was in great confusion and the practical construction of such order was ambiguous, the Board should refrain from interpreting such order as applying to a situation not clearly within its terms.  18.  A departmental order may not, by purporting to require that cases be closed, either impose upon a taxpayer more than his statutory tax or relieve him from its full burden.  19.  The provisions of sec. 1312, Revenue Act 1921, and sec. 1006, Revenue Acts 1924 and 1926, providing for closing agreements, require a clear, unequivocal agreement manifesting the intention finally to dispose of all tax controversy as to the years in question, and do not admit the construction that some items as to such years are finally closed and other items remain open for contest by the taxpayer.  20.  In a proceeding before the Board upon a claim in abatement resulting from a jeopardy assessment under section 274(d), Revenue Act 1924, the Board is without power to adjudicate whether the circumstances upon which the Commissioner acted were such as to denote that the assessment or collection of the deficiency would be jeopardized by delay.  California Associated Raisin Co.,1 B.T.A. 1251">1 B.T.A. 1251,*3668  followed.  21.  Since the expiration of the period limited by the statute for the assessment and collection of a tax destroys the right of assessment and collection, the imminence of such expiration within a time too short for the normal operations of the Bureau may reasonably form the basis for a jeopardy assessment under section 274(d), Revenue Act 1924.  22.  In redetermining a deficiency or adjudicating the validity of the Commissioner's action on a claim for abatement, the Board is not sitting in judgment upon the incumbent of the office of Commissioner and will not consider his intent, motive or method of reasoning, and will assume without inquiry the bona fides of the determination.  23.  The determination of questions of tax liability is in the first instance to be made by the Commissioner, and it was not intended by Congress in creating this Board that by means of a perfunctory determination or assessment this function should be transferred to the Board.  24.  The Board and its Members do not have, and are not expected to have, peculiarly expert knowledge upon the value of securities or other questions of fact in proceedings before them, and can only decide issues*3669  by giving judicial consideration to the evidence properly in the record.  25.  In determining the fair market price or value of shares of stock for the purpose of computing gain on the sale thereof, evidence tending to establish that such shares had a different value when grouped with a minority interest from that of shares grouped with a majority interest is admissible.  26.  Under section 202, Revenue Act 1918, the fair market price or value to be ascertained is, in terms, absolute, the only purpose being to measure the tax by the gain above the value on March 1, 1913 (where higher than prior cost), which value the taxpayer is entitled to treat as capital reserved from tax.  27.  The method of valuation is in itself unimportant, so long as it gives due regard to all the facts and relevant evidence and results in a value which has a reasonable relation thereto.  Slavish adherence to a formula is not necessary, and whether the method should proceed from a definite study of original cost, cost of reproduction new less depreciation, general opinions of qualified witnesses, book value, recognized market quotations, or other data, depends upon the nature of the property under consideration*3670  and the extent to which such evidence bears a relation to its value.  28.  In determining the fair market price or value of stock on March 1, 1913, as the basis for computing gain or loss from its sale, the Board is not directly concerned with methods adopted for valuing good will or other intangibles separately from the tangible or other assets of the corporation, or for classifying or segregating the constituent parts which are reflected in the value of the stock representing the whole.  29.  In determining the fair market price or value of corporate stock on March 1, 1913, as the basis for computing gain or loss from its sale in 1919, the Board placed itself on March 1, 1913, - recognizing all the facts in existence or in contemplation on that date as shown by the evidence, and from them attempting reasonably to predict those to come, being neither unduly skeptical nor unduly optimistic, it sought to determine what an intelligent and reasonable seller and an intelligent and reasonable buyer would in their fairly mercenary interests have been most likely willingly to agree upon as a price for the property in question.  30.  Where on March 1, 1913, no attempt had been made to*3671  list the stock in question on an exchange and the evidence shows that, if an application had been made to the New York Stock Exchange, such listing would have been refused because of certain restricting provisions as to the stock, the problem of valuation is, and the evidence to be considered may be, different from that applicable to a listed stock.  31.  A provision in a stock certificate which does not prohibit the owner from selling or limit the selling price, but merely gives priority to certain persons (then stockholders) to purchase at the best price obtainable, is, as shown by the evidence, more likely to leave the value unaffected than it is to reduce it.  32.  A fair market does not mean that the whole world must be a potential buyer, but only that there are sufficient available persons able to buy to assure a fair and reasonable price in the light of the circumstances affecting value.  33.  In valuing the stock of a closely owned manufacturing corporation, no particular method of valuation or reasoning is controlling, and no particular class of persons may be recognized as experts; the independent judgment of the Board must be derived from the facts and circumstances*3672  in each case together with any available evidence of their interrelation and importance.  34.  Value on March 1, 1913, is not to be judged by subsequent events, but the judgment must take into consideration the reasonable and intelligent expectations entertained on that date, and subsequent events may be considered for the purpose of ascertaining whether such expectations were entertained and whether they were reasonable and intelligent.  35.  Value on March 1, 1913, may not be arrived at by looking at subsequent events known at the time of the decision and finding what the value would have been had such subsequent events been definitely known on March 1, 1913, but should be predicated upon the facts reasonably known on that date, including not only those which had completely occurred, but also those which were in process and those which were reasonably in contemplation.  36.  Upon consideration of all the evidence contained in a voluminous record - including, among other things, varying opinions of executives, accountants, engineers, economists, statisticians, bankers, and others, statements of earnings prior to 1913 showing a rapid increase in earnings in each year, and many*3673  historical facts demonstrating the constant and greatly increasing success of the corporation, the efficiency of its managers and the progressive and sound policies and methods pursued by them toward development and expansion of the business, the position occupied by the corporation in the industry in 1913, its stability, and the demand for its products, and the reasonable expectation at that time of continued and growing prosperity - but without assigning to any fact a precise weight or defining its relative emphasis or importance, the fair market price or value on March 1, 1913, of certain shares of stock in the Ford Motor Company sold by the taxpayer in 1919 is determined to be $10,000 per share.  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. *3674 STERNHAGEN *1043  BEFORE STERNHAGEN, MARQUETTE, AND VAN FOSSAN.  This is one of nine proceedings each instituted by an individual taxpayer by filing a separate petition to which respondent duly made answer.  The trial of the cases was consolidated, because a large volume of the evidence was appropriate for consideration in all, but each case is separately decided.  So far as it is practicable, repetition will be avoided.  There are two issues common to all: 1.  Whether, in the circumstances shown by the evidence, the question of the fair market price or value on March 1, 1913, of the stock of the Ford Motor Co., as the basis for computing the gain on its sale in 1919, was open for determination by the respondent Commissioner in determining a deficiency or rejecting a claim in abatement antecedent to this proceeding, and is open for redetermination in this proceeding; and 2.  If so, what was the fair market price or value on March 1, 1913, of the Ford stock? The respondent Commissioner, believing that he was authorized to do so, asserted in March, 1925, that these nine petitioners had paid less than their full liability for income tax for 1919.  As to*3675  six of them he assessed the amount, acting upon the hypothesis that *1044  delay would jeopardize collection.  Such taxpayers duly filed claims in abatement and gave bond as provided by statute; these claims were rejected, and the cases are here on such assessments and rejected claims.  As to three taxpayers, no assessment was made but notice of deficiency was mailed, and the cases are here upon such notices of deficiency, with none of the issues as to jeopardy assessments.  The amounts in controversy as shown by the original pleadings are as follows: Docket No.PetitionerAmount10438James Couzens$9,455,303.1010826Rosetta V. Hauss84,404.83 4640John F. Dodge Estate4,337,295.20 4641Horace E. Dodge Estate4,337,295.2010825Horace H. Rackham4,337,295.2010910John W. Anderson1,438,826.3511007Paul R. Gray2,277,079.8811008David Gray2,277,079.8811009Philip H. Gray Estate2,277,079.88By reason of modifications made before or during trial, these amounts were changed to some extent.  FINDINGS OF FACT.  1.  The petitioner is a resident of the City of Detroit, Wayne County, Mich., and his address is 2123 First*3676  National Bank Building, Detroit, Mich.  2.  On March 1, 1913, and prior thereto, and until September 2, 1919, the petitioner was the owner of 2,180 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 that owned by the petitioner.  Without the knowledge of the petitioner they engaged the services of the Old Colony Trust Co. of Boston and its representatives to purchase 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 2,180 shares thereof then owned by the petitioner.  4.  Thereafter the*3677  Trust Company engaged the services of Arthur A. Ballantine, a Boston lawyer and a former Solicitor of Internal *1045  Revenue, who, on behalf of and under the direction of the undisclosed principals, Henry Ford and Edsel Ford, went to Washington and conferred with the officials of the Treasury Department and the Bureau of Internal Revenue.  5.  On or about April 29, 1919, Ballantine wrote the following letter to Daniel C. Roper, then Commissioner of Internal Revenue: HOTEL WASHINGTON, Washington, D.C., April 29, 1919.Hon. DANIEL C. ROPER, Commissioner of Internal Revenue, Treasury Department, Washington, D.C.SIR: Confirming my conversation with you in behalf of the Old Colony Trust Company, Boston: The Old Colony Trust Company proposes to buy all of the 41% of the stock of the Ford Motor Company, of Detroit, not held by the Ford interests.  It is believed that the purchase if consummated will tend to promote the interests of one of the largest industries in the country.  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 as March 1, 1913.  The Bureau*3678  presumably has at hand or readily available all figures necessary for such a valuation.  May I therefore ask that you advise me what valuation the Bureau places on the stock of the Ford Motor Company as of the date mentioned?  Respectfully, ARTHUR A. BALLANTINE.  AAB:C 6.  After the passage of the Revenue Act of 1909, imposing excise taxes on corporations, there came to the Bureau from over the entire country many and varied questions concerning it.  This occurred again after the passage of the Revenue Act of 1913.  Answers were made to as many inquiries as possible which appeared to be legitimate and proper, without regard to and usually without knowledge of whether they were before or after the filing of a return.  Replies were made on the basis of the facts stated and these facts were recited in the answers.  No attempt was made to investigate the facts stated in the questions.  Answers were made to hypothetical questions and questions both of law and of fact.  7.  The object was to be as helpful as possible to taxpayers in assisting them to make up their returns.  Particularly was this so when they gave statements of fact which applied to their returns.  Rulings on*3679  numerous hypothetical cases were published in the form of primers, so-called, for the guidance of the public.  Commissioner Roper, discussing matters of policy, stated to the men holding the more responsible positions in the various units of the Bureau that the job was too big to be carried out without the cooperation of the taxpayers, and that cooperation could best be secured by giving to taxpayers *1046  all the aid and assistance they possibly and properly could in solving tax problems.  8.  The practice of answering inquiries was later modified because the complexity of the later revenue acts brought about a volume of inquiries from taxpayers, lawyers and accountants, the work of answering which became so burdensome as to interfere with the ordinary duties of some of the sections of the Bureau.  It was also found in some instances that after giving advice upon which the taxpayers had relied, the Bureau, when the returns were filed, reversed its position.  Attempts were made to get away from the practice of answering hypothetical questions as early as the latter part of 1914, and in 1917 a further attempt was made to curb the answers to such questions and instructions were*3680  issued that hupothetical questions should not be answered.  In 1919, shortly before the writing of the letter of May 19, 1919, hereinafter referred to, oral instructions structions were issued, for the purpose of checking the volume of inquiries, to refuse to answer questions that were not based upon accomplished facts.  9.  On August 13, 1919, the following mimeograph was promulgated: IT-Mim. 2228.  TO ADVISORY TAX BOARD, SOLICITOR, DEPUTY COMMISSIONERS, COLLECTORS OF INTERNAL REVENUE, REVENUE AGENTS, AND OTHERS CONCERNED: Requests are being received daily for rulings and advice upon abstract cases or prospective transactions involving questions of income tax and profits liability.  These requests are so numerous and the insistence on prompt action so great that it seems advisable at this time definitely to outline the Bureau's policy which will govern the consideration of these requests.  The Revenue Act of 1918 departs widely at many points from prior law or practice, and has given rise to new questions of such importance, complexity, and number that the resources of the Bureau are no more than adequate to advise taxpayers promptly of their present liabilities arising*3681  out of past transactions.  It is impossible to answer every question which the invention or ingenuity of the inquirer may devise without neglecting the fundamental duty of determining tax liability upon the basis of actual happenings.  Under these circumstances the administrative necessity is obvious of giving precedence over abstract or prospective cases to actual cases in which the taxpayer desires to know what are his immediate liabilities under the law.  It will be the policy of the Bureau not to answer any inquiry except under the following circumstances: (a) The transaction must be completed and not merely proposed or planned.  (b) The complete facts relating to the transaction, together with abstracts from contracts, or other documents, necessary to present the complete facts, must be given.  (c) The names of all of the real parties interested (not "dummies" used in the transaction) must be stated regardless of who presents the question, whether attorney, accountant, tax service or other representative.  DANIEL C. ROPER, Commissioner.*1047  10.  Similar mimeographs were promulgated after the passage of the Revenue Acts of 1921, 1924, and 1926.  11. *3682  The instructions in these mimeographs were followed and thereafter hypothetical questions relating to proposed transactions were not answered.  The refusal to answer such inquiries became the settled policy of the Bureau.  When such inquiries were received thereafter, a form letter was sent to the inquirer enclosing a copy of the mimeograph, or a letter was written stating that an answer could not be made unless the information required in the mimeograph was furnished.  12.  Upon receipt of Ballantine's letter of April 29, 1919, Commissioner Roper directed Percy S. Talbert, Acting Deputy Commissioner of Internal Revenue, together with such assistants as he might need, to go to Detroit, to check up the books of the Ford Company, and to examine into its affairs with a view of ascertaining the fair market price or value of its stock as of March 1, 1913.  These directions were conveyed to Talbert by Assistant to the Commissioner Callan.  13.  Talbert was directed to make a valuation of the Ford stock in anticipation of a possible sale.  He was informed that the minority stockholders were unwilling to sell their stock until they knew accurately, in advance, what their taxes were going*3683  to be, so that they would know how much of the purchase price would be left to themselves.  14.  Talbert had been in the Treasury Department since 1896 in numerous positions of increasing responsibility, and was reputed to be a capable man with good judgment and integrity.  He had made many valuations of stock for the purpose of computing capital-stock tax and income tax.  He had never had any experience in valuing securities outside the Bureau of Internal Revenue.  15.  Upon receipt of the above instructions from Commissioner Roper, Talbert selected four men, Burlingame, King, Masland, and Taylor, who were regarded as among the best in the service.  He did not say anything to these men directly as to the purpose of going to Detroit, because Callan had told him that it might prove embarrassing to the negotiations if word got out of the contemplated action.  He did, however, tell them to check up the past years' returns of the Ford Motor Co. and to get certain other information.  16.  They went to Detroit and made an investigation.  Upon arrival in Detroit, Talbert asked Collector of Internal Revenue Brady whether he had any idea of what the minority stockholders had in mind as*3684  the figure which would permit the sale to go through.  Brady informed him that he did not know the exact figure they had in mind but that he thought it was $10,000.  Talbert was also *1048  informed by some unidentified person that the sale price of the stock would probably be $12,500 a share.  17.  The accountants entered upon an examination of the books and records of the Ford Company to ascertain all the facts in respect of income and possible taxes, and to get data in respect of earnings and other information which Talbert had requested.  Talbert himself examined the minute books of the company for the period up to 1913, had conferences with the president, secretary and other officers concerning various phases of the company's business, particularly concerning the prospects of the company as of March 1, 1913, and made inquiries as to various conditions which seemed to him to have a bearing on the problem.  18.  While in Detroit Talbert met Ballantine, with whom he was acquainted, in a corridor of the Ford office building.  At that time he did not know that Ballantine had any connection with the matter, and the subject was not discussed by them.  19.  Thereafter Talbert*3685  received a report of the accountants' investigation and the working papers containing all details.  The report indicates that comparative balance sheets (not in evidence) were made for all years from 1908 to 1917, inclusive.  The working papers show that an analysis was made of many of the accounts, including depreciation and reserves.  An examination was made of the inventories.  The papers include a description of the company's accounting procedure.  They also disclose that data with reference to the tax liability of the Ford Motor Co. for various years were secured.  20.  Included was the following memorandum from Burlingame to Talbert: MAY 12, 1919.  Report on Company.  Compiled by C. M. Burlingame Mr. P. S. TALBERT, Head, Technical Division.A report is submitted herewith, of the fair market value at March 1, 1913, of the capital stock of the Company.  The information on which the report is based, was secured at the office of the company at Detroit, Mich., on May 5, to 10, 1919, inclusive.  The original amount of paid-in capital stock was $100,000.00 and this amount was increased about November 30, 1908, by a stock dividend of $1,900,000.00, to a total*3686  of $2,000,000.00 at which amount it now stands.  The surplus out of which this dividend was paid was earned from operations.  There is no record available, showing any transactions in this stock, so that a market value based on sales cannot be determined.  The stock is not listed on any exchange, as far as known.  The basis used in computing the fair market value of the stock is an average of the book value, the earnings for five previous years and the dividends paid during the same period.  Full details are shown on page 2 herewith.  *1049  Basis for computing Fair Market Value.  Explanatory Book Value Basis: Basis is purely speculative for the partial purchaser as he possibly may not benefit from a distribution of surplus.  Net Earnings Basis: Basis is speculative for the partial purchaser as only part or none of the earnings may be distributed and his return of profit will result from increased market value based on future possible distribution of profits.  Dividends Paid Basis: The actual distribution of profits influences directly the value of the stock as it is by this method that the stockholder receives his return on his investment.  Suggestion: Since*3687  the value of the stock is influenced by the three factors mentioned, the fair market value of the stock may very reasonably be computed thus: Book value March 1, 1913$1,133.68Value based on earnings of 10% for five years3,617.00Value based on dividends of 10% for five years1,416.706,167.38Average2,055.79Basis for Computing Fair Market Value.StatisticsPeriod, Oct. 1, 1908to February 28, 19134 years, 5 monthsTotal net income$31,950,006.93Average net income for one year7,233,963.84($31,950,006.93X12/53)Capital stock2,000,000.00Surplus at February 28, 191320,673,560.33Dividends paid during period$14,405,000.00Less stock dividends1,900,000.0012,505,000.00Book value per share of stock$1,133.68($22,673,560.33/20,000)Average earnings per share of stock361.70($7,233,963.84/20,000)Value based on earnings of 10% per share of stock3,617.00($361.70X10)Average dividends paid for one year, per share of stock141.67($12,505,000.00X12/53/20,000)Value based on dividends of 10% per share of stock1,416.70($141.67X10)Total$6,167.38Average$2,055.79*3688  C. M. BURLINGAME 21.  Talbert entered upon the determination of a value.  He considered the trend of earnings of the Ford Company from 1908 to 1913, the demand for the car, that the company had never been able *1050  to completely supply the demand and had carried over each year large numbers of unfilled orders, the competitive situation as of March 1, 1913, the policy of the company to reduce the price through volume production, its advantages over other manufacturers by reason of volume purchases whereby it could secure materials at lower prices, the nature and quality of the car and its place in the low-price field, the Ford selling organization, the plans under way for increasing production capacity, the plans as of March 1, 1913, for assembly plants at different points in the country, with consequent reduction in freight costs, the potential market for parts, and the difficulties confronting possible competitors.  He further considered the earnings for the two months of January and February, 1913, which he understood to be about $2,000,000 a month, and the number of unfilled orders on hand as of March 1, 1913.  He concluded that the line of stabilization of earnings*3689  was nearly the current rate.  He estimated 1913 income as $24,000,000, six times the earnings for January and February.  He averaged this with the earnings of 1913, divided by the total number of shares, and arrived at a result of $948.934 representing the earnings per share.  He capitalized this earning at 10 per cent, a rate which he believed from his previous experience represented a correct ratio of earnings to capital, and thus determined a value of $9,489.34 per share.  He considered that any risk in the automobile industry had been taken care of in estimating earnings.  22.  Talbert considered the memorandum from Burlingame but rejected it as wholly unsound.  He was aware of the restrictions on the certificates of stock (see Findings P317 and P318 herein), but gave them no weight in his determination of value.  23.  Two or three days before the preparation of his written report, set out below, Talbert communicated his conclusions to Commissioner Roper in person.  Several days later Ballantine went to Talbert's office, disclosed his connection with the matter, and asked how he was getting along.  Talbert informed him that he had given the figures to Commissioner Roper.  Together*3690  they went to Roper.  Roper stated that he saw no reason for disagreeing with the conclusion reached, was ready to approve it, and directed Talbert to prepare a letter fixing the value.  24.  Talbert prepared the letter and forwarded it to the Commissioner with the following report: MAY 17, 1919.  IT:T.  PST Mr. COMMISSIONER: - In accordance with your instructions on May 4th, I proceeded to Detroit accompanied by Messrs.  Burlingame, King, Masland and Taylor, arriving in Detroit on the morning of May 5th.  We immediately proceeded to the offices *1051  of the Ford Motor Company and started an investigation of the books and records of that company, being afforded every possible facility and courtesy for the making of a complete check of their books.  This check was finished on the night of Friday May 9th and the accountants returned to Washington, I myself returning, at the request of Mr. Callan, two days earlier.  The check of the books showed that the company's returns up to and including July 31, 1917, were correct, and that no additional tax was due for years prior to that date.  The returns and records were also checked as to the July 31, 1918, tax, but no comparison*3691  made at the present time with the return for that taxable year, as it is the purpose of the corporation to make an amended return which it is understood will show considerable additional tax for that year.  Necessary figures were obtained, however, to enable the office to check the amended return when received without reexamination in the field.  Data was also obtained, which is valuable in determining the value of the stock of the corporation on March 1st, 1913, my confidential instructions being to secure this information for the purpose of fixing a value in anticipation of the sale of a considerable portion of the stock of the company and the consequent income tax liability, because of the increase in value of such stock since March 1st.  This office in 1917 placed a value for capital stock purposes upon the stock of the company as of June 30th, 1916, of $14,420.00.  This figure was arrived at by the collector on the basis of capitalization at the rate of 10% of the earning capacity of the corporation over the five preceding years.  The figures obtained by the collector differ somewhat from the figures that would be obtained by taking the amount of earnings as shown by this report*3692  for the five preceding calendar years and this discrepancy is probably explained by the fact that the corporation is upon a fiscal year basis and the collector undoubtedly took the earnings for five fiscal years, whereas in this report the figures have been adjusted from the books to a calendar year basis.  It will be seen from the attached memorandum of earnings from January 1st, 1909, up to the present date, that the company's period of greatest expansion began during the calendar year 1912.  The method of arriving at value utilized for capital stock purposes, of capitalizing five years preceding earnings, is not, therefore, a fair or reasonable method of determining values as of March 1st, 1913.  The company's earnings during the calendar year 1912 were something over $14,000,000.  During this year apparently, as nearly as I could learn from the minute books of the company, plans for expansion of business were set in motion, properties were bought in many of the largest cities, and plants erected for assembling parts which would enable the company to ship a very much larger number of finished units.  And during the first two months of 1913, up to March 1st, 1913, the results of*3693  this expansion were evidenced in earnings approximately of $4,000,000, or at the rate of $2,000,000 per month, a rate which has been maintained fairly constantly since with the exceptions of one or two years in which the earnings were considerably larger.  I think, therefore, that to be consistent with the valuation fixed in 1917, and with the facts known as of March 1st, 1913, with regard to the market for the output of the company, its producing capacity and the prospect of maintaining its rate of profit per unit for production, that a fair method of determining the value would be to capitalize the earnings of the year 1912, plus earnings through 1913 at the rate earned during the first two months of 1913 upon the basis of 10%.  This gives an amount, $9,489.34 per share, as the value of March 1st, 1913, and is a figure which I believe, from what I can learn, is not too low to prevent the sale of minority stock by reason of the possible surtaxes such sale might involve, and is also not too high to deprive the Government of a *1052  very substantial revenue upon the difference between this figure and the price at which the stock will change hands.  I, therefore, recommend*3694  that the parties at interest be advised that this office will recognize $9,489.34 as the value of the stock on March 1st, 1913, in computing profits upon the sale of any of this stock held prior to that date.  I am submitting herewith a letter addressed to Mr. Ballantine, in behalf of the Old Colony Trust Company, making such ruling for the consideration of yourself and any of your advisiors you see fit to call into conference.  P. S. TALBERT Acting Deputy Commissioner.25.  Attached to the report Talbert transmitted the following statement: PeriodNet incomeAverage per shareCapital and surplus at beginning of periodJan. 1 to Dec. 31, 1909$3,176,033.18$158.80$2,022,246.36Jan. 1 to Dec. 31, 19104,145,901.74207.303,398,279.54Jan. 1 to Dec. 31, 19117,541,493.01377.075,544,181.28Jan. 1 to Dec. 31, 191214,119,989.87706.0010,080,674.29Jan. 1 to Feb. 28, 19133,972,896.1719,000,664.16Mar. 1 to Dec. 31, 191322,678,858.751,332.0822,673,560.3326,651,754.92Jan. 1 to Sept. 30, 191425,271,254.631,263.5634,452,419.08Oct. 1 1914 to Jul. 31, 191524,519,341.781,225.9750,823,673.71Aug. 1 1915 to Jul. 31, 191659,017,892.042,950.8961,143,015.49Aug. 1 1916 to Jul. 31, 191727,843,999.721,392.20113,960,907.53Aug. 1 1917 to Jul. 31, 191851,245,337.752,062.26133,604,907.25U. S. Govt592,483.26244,125,481.90*3695  26.  On May 19, 1919, Commissioner Roper sent the following letter, which had been prepared by Talbert, to Ballantine: 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. BALLe NTINE, 84 State St., Boston, Mass.SIR: This office is in receipt of your letter of the 20th 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 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 *1053  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*3696  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.27.  Ballantine acknowledged receipt with the following letter: 84 STATE STREET, Boston, May 23, 1919.HON. DANIEL C. ROPER, Commissioner of Internal Revenue, Washington, D.C.SIR: Acknowledgment of your letter of May 19th relative to the value of the stock of the Ford Motor Company as of March 1st, 1913, has been delayed owing to my absence from the city.  We exceedingly appreciate your making a valuation at this time, in view of the large interests involved and the impossibility of procedure without ascertainment of the valuation by the Bureau. *3697  Very truly yours, ARTHUR A. BALLANTINE AAB/C 28.  The letter of May 19, 1919, from Commissioner Roper to Ballantine was deposited in June 1919, by Stuart W. Webb with the Detroit Trust Co., by which company it is still held.  29.  In April, 1919, Henry S. Morgan, secretary to the petitioner, James Couzens, wrote a letter to John W. Anderson, another stockholder in the Ford Motor Co., who was then in California, asking if he was interested in disposing of his stock.  He recited that a Mr. Webb, purporting to represent the Old Colony Trust Co., had been in Detroit, and that he had told Webb that he did not think any of the stockholders would be interested in selling in view of the tax situation and the uncertainty of fixing a March 1, 1913, value.  To this Anderson replied by wire that the matter was one which he would prefer to allow to remain open until his return to Detroit early in May, and that in his judgment it was the worst time in the history of the country in which to sell anything involving the value represented by the Ford Motor Co. stock.  On Anderson's return to Detroit, Morgan informed him that after he had talked with Webb as stated in his letter, Webb had*3698  disappeared and had not been seen since.  Later Morgan showed Anderson a form of power of attorney, to be signed by the Ford minority stockholders, authorizing Morgan and Luman W. Goodenough to enter into negotiations with Webb for the sale of the stock on the basis of $12,500 a share.  On *1054  several occasions, still later, Morgan, in response to inquiries from Anderson as to what petitioner Couzens had done, informed him that he had done nothing.  30.  On or before June 14, 1919, the petitioner Couzens was informed that Henry Ford and Edsel Ford were the principals seeking to purchase the stock and he was shown a copy of the letter from Commissioner Roper to Ballantine.  31.  Under date of June 14, 1919, the petitioner signed the following agreement: JUNE 14, 1919.  In consideration of one dollar and other valuable consideration to me paid by Edsel B. Ford of Detroit Michigan the receipt of which I acknowledge I hereby give to siad Ford an option for the purchase of all my stock in the Ford Motor Co. of Michigan viz.  2180 shares and further agree that my sister Mrs. Hauss shall also sell at the same time if this option is exercised her holdings of 20 shares in said*3699  Company.  The price to be paid is $13,000 [sic] ex any dividends actually declared prior to consummation of the purchase and also ex any dividends which may be decreed to be paid in the suit of John F. Dodge et al vs said Ford Motor Co. which dividend said Ford agrees if not declared prior to delivery of the stock to assign to us or to collect for us at my option.  Said option shall be exercised by written notice to me at my office Dime Bank Building Detroit Mich. and at the time fixed in said notice not less than three days after the delivery of said notice I agree to deliver all said stock to the Detroit Trust Co. of DetroitMichigan at its office in Detroit with proper transfers in blank to be delivered by said Trust Company to said Ford upon payment of the purchase price above stated.  In executing this option I recognize that it is desired by said Ford for special reasons particularly for the purpose of obtaining for himself and his father through personal ownership and stock controlled as nearly complete ownership of said company as may be possible and that its purpose can and is to be accomplished only by the specific performance of this agreement and not by damages for*3700  breach of agreement to deliver.  This option is not to be exercised before Sept. 1, 1919 and shall expire on January 1st 1920 pending the option including the entire time between its date and the exercising of the option I further agree as director and stockholder to cooperate with said Ford in all matters connected with said company and particularly to consent to the purchase by the company of any and all stock of the company except stock now owned by said Ford or his father or by Henry Ford & Son, Inc. of New York, and to the issue of notes by the company for such purchases and the use of the funds of the company.  My obligation hereunder shall enure to the bunefit of the assigns or executors or administrators of said Ford and sahll be binding upon me my executors and administrators.  I authorize said Ford his executors administrators or assigns to give any notices in relation to the sale which may be appropriate under the bylaws and I waive my right to receive notice of any proposed sale of stock to said Ford or any party approved by him prior to the expiration of this option and I agree upon request to procure for said Ford similar authority and waiver from my sister.  *3701  In witness whereof I hereto set my hand and seal JAMES COUZENS*1055  32.  On July 1, 1919, Anderson called Morgan and again asked him what the petitioner Couzens had done.  Morgan replied that he had seen Couzens, who had told him to tell Anderson to go ahead on his own hook, not to bother about Couzens at all, and that he would attend to his side of the transaction himself.  33.  Thereafter, on or about September 2, 1919, the petitioner Couzens concluded a sale of his 2,180 shares of stock to the Ford Motor Co., a Delaware corporation, the assignee of the option of June 14, 1919, for the sum of $29,308,857.90, or at the rate of $13,444.43 per share.  34.  On July 10, 1919, the petitioner Couzens received from the Ford Motor Co. a dividend of $2,101,017.07 and $167,505.74 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 as set apart out of earnings accumlated in 1916.  He reported the interest in his 1919 income-tax*3702  return as 1919 income.  35.  On March 15, 1920, petitioner Couzens filed in the office of the collector of internal revenue at Detroit, Mich., his individual income-tax return for the calendar year 1919 and included therein as taxable net income the sum of $8,622,096.70 as the profit derived on the sale of the Ford Company stock, this amount being the difference between the sale price of $29,308,857.90 and the March 1, 1913, value of the stock, $20,686,761.20, computed on the basis of $9,489.34 per share, in accordance with the letter of Commissioner Roper to Ballantine.  This return reported his total charitable contributions for 1919 to have been $1,814,109.57, but a deduction of only $1,499,380.85 was taken, that being 15 per cent of his reported net income allowed by law as a deduction.  This return was received in Washington, D.C., by the Bureau of Internal Revenue on May 11, 1920.  36.  The total purchase price which the petitioner Couzens paid for the 2,180 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*3703  for 25 shares for the price of $2,500, which he paid $1,000 in cash and $1,500 in four-month notes, which notes he thereafter paid in full.  One share of this stock he held for his sister, Mrs. Rosetta V. Hauss, in consideration of $100 therefor paid to him by her.  There was thus a net cost to the petitioner of $2,400 for 24 shares.  On or about May 15, 1907, he acquired from Albert Strelow 50 shares of stock in the Ford Motor Co. together with 31 shares of stock in the Ford Motor Co. of Canada, for a total price of $25,000.  On or about September 12, 1907, he acquired from Charles H. Bennett *1056  and Vernon C. Fry 35 shares for $17,500.  On or about October 22, 1908, he received a stock dividend of 1,900 per cent, or 2,071 shares.  This made a total of 2,180 shares then owned by him, and sold as aforesaid.  37.  Commissioner Roper went out of office on March 21, 1920, and was immediately succeeded by Commissioner William M. Williams.  38.  On June 8, 1920, Commissioner Williams assessed against petitioner an income tax for 1919 of $6,075,103.83, being the amount of income-tax liability shown by the return, and this was paid by petitioner as follows: March 15, 1920$1,518,775.93June 15, 19201,472,998.95Sept. 15, 19201,518,775.95Dec. 15, 19201,518,775.95Sept. 26, 1923, credit of overpayment for 1915486.83Sept. 26, 1923, credit of overpayment for 191645,290.17Total6,075,103.83*3704  39.  Under date of June 11, 1919, Office Order No. 101, reading in part as follows, was issued within the Income Tax Unit of the Bureau: TO HEADS OF DIVISIONS, JUNE 11, 1919.  INCOME TAX UNIT.  INCOME TAX UNIT.  In view of the immediate and pressing need of the Government for funds, it becomes necessary to change the present practice of selecting returns for audit.  Consequently, it is considered advisable to audit the returns for the year 1917 according to certain classifications, which will be explained hereinafter.  (a) Certain returns should receive a superficial audit for the purpose of immediately assessing additional taxes found to be due before sending to the field for an exhaustive audit.  (b) Other returns, after receiving a careful examination, shall be immediately forwarded to the field force, if necessary, for the ascertainment of the correct tax.  (c) Still other returns may receive a careful, intensive and final audit in this office.  The returns will be taken up for audit by classes, the basis of classification being the size of either the gross or net income.  INDIVIDUAL RETURNS Classes.1.  Gross income of $1,000,000 or over.  2.  Net*3705  income of $300,000 or over.  3.  Net income of $100,000 to $300,000.  4.  Net income of $50,000 to $100,000.  5.  Net income of $25,000 to $50,000.  6.  Net income of less than $25,000.  Selection.The Statistical Division will furnish lists of the serial numbers of returns of individuals, under the first two classes.  *1057  The returns under the last four classes will be furnished by the Files Section, only one class being withdrawn at an operation, commencing with class 3, followed by class 4, etc.  Procedure.(a) The returns of classes 1 and 2 will be withdrawn from the files first and given a superficial audit.  The purpose is to assess whatever further taxes are clearly due on the face of the return.  No correspondence should be started.  When a further tax is found due the returns should be sent to the Revenue Agents Record Section for the purpose of preparing photostats or abstracts which are to be forwarded to the field.  After this is done the Revenue Agents Record Section will return the case to the audit clerk discovering the further tax, who will have the tax listed on the summary sheet.  The return and summary sheet then go to the Proving*3706  Section.  Although no additional taxes may be discovered by the audit these classes of returns should be sent to the Revenue Agents Record Section, in order that transcripts may be prepared and sent to the field.  (b) The same procedure as outlined in (a) will be followed with respect to individual returns under class 3.  (c) The returns which fall within the last three classifications will be given a thorough examination by the auditors and, if their judgment so warrants, recommended for field examination.  The procedure above outlined also applies in case the return is stamped "transcript" in the case of individuals, or "synopsis for agent" in the case of corporations.  Audit suggestions.The following inaccuracies frequently found on returns should be considered in a superficial audit of Forms 1040, 1065, 1101 and 1102: 1.  Errors in calculations indicated by comptometer.  2.  Failure to pay excess profits tax due at the 8% rate on salaries, commissions, royalties, executors' fees, reported in Blocks "A", "D" and "H".  3.  Failure to file 1101 or 1102, as the case may be, for excess profits tax at graduated rates on incomes in excess of $6,000 from business having*3707  invested capital.  Note: A taxpayer is allowed a reasonable salary for his own services, in addition to an exemption of $6,000, plus the 7 to 9% deduction of his invested capital.  When it appears that notwithstanding these allowances there will be due an excess profits tax, a return should be secured from the taxpayer through the Collector.  4.  Failure to report tax due at proper rates on dividends and partnership earnings of previous years.  5.  Failure to add to gross income the amount withheld by a debtor corporation on behalf of an individual owning tax-free covenant bonds.  6.  Improper claims for deduction under Block "J".  CORPORATION RETURNS.  * * * Chiefs of Sections.Chiefs of Sections should use their best judgment in deciding the necessary action that should be taken with regard to cases which are now either on the desks of the auditors or in the suspense files.  It is not desired to terminate abruptly the audit of a case which is nearly completed.  It is believed best to conclude the audit of all returns which have been the subject of considerable *1058  correspondence and audit.  In case a superficial audit reveals a refund the examination*3708  should be suspended at this time and the return passed for field audit.  If no additional tax is developed in connection with any of the returns falling within the classifications which are intended for field audit the return should be promptly, after consideration, forwarded to the Revenue Agents Record Section in order that a synopsis or photostat may be made.  GEO. V. NEWTON Head, Audit and Administration Division.Approved: J. H. CALLAN Assistant to the Commissioner.40.  Although this order was limited in its terms to 1917 returns, oral instructions to continue the practice were issued and the making of superficial audits was extended to returns for all years, until the order was rescinded on May 14, 1921, by Office Order No. 538, reading as follows: OFFICE ORDER NO. 538 MAY 14, 1921 TO HEADS OF DIVISIONS, CHIEFS OF SUBDIVISIONS AND SECTIONS, INCOME TAX UNIT.  Certain Returns to be audited intensively.In view of the fact that the field force has a sufficient quantity of work now on hand to keep it engaged for a considerable period of time, audit sections are instructed that until further notice all returns except those involving certain features*3709  not susceptible of explanation through correspondence, should be audited intensively.  As a check against possible erroneous audits, returns which are received back from the Review Division and which show a gross income of $500,000 or more should be routed to the Field Audit Control Section in order that photostat copies may be made for subsequent field investigations.  When such returns, irrespective of the amount of gross income, are of a questionable character, or if suitable explanation cannot be obtained from the taxpayer by correspondence, in cases where the amount involved is of sufficient size to justify that action, the returns should be referred to the Field Audit Control Section for the preparation of photostats and field orders.  This order revokes any provisions of Office Order 101 or other previously issued office order in conflict.  C. B. ALLEN Head, Administrative Division.Approved: E. H. BATSON Acting Deputy Commissioner.41.  Under Office Order No. 101 the examinations of returns within its scope were superficial in nature, only a casual or cursory examination being made.  The returns were referred to an auditor, and if any item thereon was*3710  apparently or clearly improper, it was disallowed, or if there was any item omitted which was known to belong *1059  on the return, it was placed there and assessment would follow.  The following rubber stamp imprint was placed on the return: Assessment Tax $ Penalty $ Basis Date Page Line 42.  The return was sent to the Technical Division where a review was made to ascertain whether the audit was correct.  A photostatic was made to ascertain whether the audit was correct.  A photostatic copy of the return was made and sent to the field for an intensive investigation and the return was sent back to the auditor.  It was then sent to the Proving Section on a summary sheet for assessment.  The assessment was then forwarded to the collector of internal revenue for collection.  43.  After a copy of the return had been sent to the field, a revenue agent made an investigation and embodied the results thereof in a report.  This report was forwarded to the Bureau and was sent for audit to the Field Review Section.  44.  In the latter part of 1920 the return of the petitioner Couzens was referred to I. I. Phillips, Chief of Subsection No. 8, Personal Audit Section, for*3711  superficial audit.  He made an examination of the return, found that the basis of the computation of gain on the sale of the stock was not set forth therein, and prepared the following letter which was sent to the petitioner: Office of Commissioner of Internal Revenue Address Reply to Commissioner of Internal Revenue And Refer to IT:G:P-8 IIP TREASURY DEPARTMENT, Washington, December 30, 1920.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.  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.  *1060  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.45.  Under date of January 3, 1921, Henry S. Morgan replied as follows: JAMES COUZENSDETROITJan 3rd 1921.IT:G:P-8 IIP Mr G V NEWTON Deputy Commissioner*3712 Internal Revenue Department Washington D CAttention I I Phillips DEAR SIR: We have your letter of December thirtieth, and in reply thereto beg to advise that the profit referred to was arrived at by figuring the price received for the stock in question, when sold, as compared with the value of the stock on March 1, 1913, as set by Hon Daniel C Roper, Commissioner, in his letter of May 19, 1919, addressed to Mr Arthur A Ballantine, 84 State Street, Boston, Mass.Very truly yours, H. S. MORGAN, General Secretary toJAMES COUZENS.  46.  Upon receipt of this letter, Phillips requested from the Bureau files all data pertaining to the Ford Motor Co. stock transaction together with the returns filed by all stockholders who had sold their stock, for the purpose of determining whether the profit on the sale had been properly returned.  In response to that request the file containing Talbert's report was forwarded to Phillips and was examined by him.  He accepted the March 1, 1913, value of the stock, as determined by Talbert, in checking the profit reported on the returns of the stockholders.  47.  On February 8, 1921, the following letter was sent to the petitioner*3713  Couzens: FEBRUARY 8, 1921.  IT:G:P-8 WHB-DU-801 Mr. JAMES COUZENS, 2239 Dime Bank Building, Detroit, Michigan.SIR: It is disclosed that the dividend of $2,101,017.07, 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.  *1061  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.  This increase in your taxable net income also increases the amount of credit for contributions to charitable organizations, etc.  The amount of $1,499,380.85, deducted for contributions in Block I, has accordingly, been increased to $1,813.084.57, representing the total amount of contributions made by you in 1919, exclusive of the contributions of $1,000.00 and $25.00, made to Wayne County Equal Suffrage*3714  and Patriotic Unit Order Eastern Star, respectively, which contributions are not allowable deductions for income tax purposes, inasmuch as they were not made to corporations or associations organized and operated exclusively for religious, charitable, educational or scientific purposes.  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 following is a synopsis of your 1919 return as corrected, disclosing a further tax due of $877,430.59.  Adjusted net income subject to normal tax at 1919 rates, ItemJ$7,428,771.89Less personal exemption2,800.00Balance$7,425,971.89Amount subject to normal tax at 4%4,000.00Amount subject to normal tax at 8%$7,421,971.89Normal tax at 4%$160.00Normal tax at 8%$593,757.75Surtax at 1918-19 rates:Net income item J$7,428.771.89Dividends reported730,163.11Dividend adjustment2,101.017.07Taxable interest on United States obligations23,852.80Total net income subject to surtax at 1918-19 rates$10,283,804.87$6,617,983.17Total tax liability$7,211,900.92Tax paid at source139.70Amount previously assessed on 1919 return$6,075.103.83$6,075,243.53Further tax due$1,136,657.39Less: Amount of additional tax assessed on amended 1917 return due to inclusion of dividend in question259,226.80Further tax$877,430.59*3715  Assessment of this amount will be entered on the next list.  The Collector of Internal Revenue for your district will notify you as to the time and manner of making payment of this tax.  Respectfully, G. V. NEWTON Deputy Commissioner.48.  On February 11, 1921, petitioner, by his general secretary, wrote a letter of protest against the proposed allocation of dividends as 1919 income instead of 1917 income taxable at 1916 rates, *1062  and informed the Commissioner that he had reported only sufficient items of his charitable contributions to cover his allowable deductions under the law on his reported income, and that if his income for 1919 was to be increased on account of the so-called Ford-Dodge dividends, there was, in addition to the $1,814,084.57 above stated, a further charitable contribution of $73,800 to the Harper Hospital which should be included.  He further requested that inasmuch as T. G. Thurston, Internal Revenue Agent of the Treasury Department, Bureau of Internal Revenue, was at that time in the petitioner's offices checking his returns for 1915, 1916, 1917, 1918, and 1919, the additional assessment of $877,430.59 be deferred until his report thereon*3716  had been received and such further items of debit or credit be included as Thurston's audit might cause the Commissioner to feel should be included.  49.  On February 16, 1921, counsel for petitioner Couzens wrote a letter to the Commissioner asking for a hearing on the Ford-Dodge dividend question before the making of an assessment.  On February 19, 1921, the Commissioner in reply to petitioner's letter of February 11, refused to defer the making of the proposed assessment.  50.  Commissioner Williams went out of office April 11, 1921, and Millard F. West became Acting Commissioner of Internal Revenue on that date.  51.  On April 12, 1921, the Acting Commissioner assessed against the petitioner the additional tax for 1919 of $877,430.59.  52.  The "assessment stamp" on the petitioner's return was filled in as follows: Assessment Tax $877,430.59Penalty $[*$ Basis Sup. AuditFeb. 8, 1921.  I.I.P. Date March 1921Page 3, Line 1"Sup. Audit" signified superficial audit, and February 8, 1921, was the date on which the audit was made.  The date on the lower portion of the stamp and the page and line numbers are the means of identifying*3717  the assessment on a particular assessment list.  *1063  53.  On April 25, 1921, the petitioner duly filed his claim for the abatement of the assessment made April 12, 1921, notice to pay the same having been received by him from the collector of internal revenue at Detroit on April 18, 1921.  On April 25, 1921, the petitioner transmitted to the Commissioner his appeal to the Committee on Appeals and Review from the assessment of $877,430.59 made April 12, 1921, on account of the so-called Ford-Dodge dividends.  54.  Under date of May 11, 1921, Phillips wrote a memorandum to Head of the General Audit Division Clute as follows: MAY 11, 1921.  For Mr. Clute.  The confidential file of the Ford Motor Co. attached is being returned for your disposition inasmuch as it has served its purpose and is of no further use to this Subsection.  I. I. PHILLIPS Chief, Personal Subsection #855.  When Phillips returned the file to Clute he considered that he was closing the case so far as Block D of the return was concerned.  56.  Under date of May 12, 1921, Clute wrote the following memorandum to Deputy Commissioner Batson: MAY 12, 1921.  Mr. BATSON: Attached is a confidential*3718  file covering the transfers of stock by Ford.  This file was sent down to the General Audit Division for use in connection with the adjustment of various stock transfers.  All adjustments have been made and the file is no longer necessary in this Division.  It is presumed that you desire to file it in your own files in view of the fact that it is confidential matter.  F. R. CLUTE, Head, General Audit Division.Papers attached.  57.  Commencing on February 1, 1921, Internal Revenue Agents T. G. Thurston and J. L. Chatterton, continuing until February 17 and February 3, respectively, made a field investigation concerning the income-tax liability of the petitioner Couzens for 1916, 1917, 1918, and 1919.  On February 17 they made their written report thereof to C. M. Justice, Internal Revenue Agent in Charge, Detroit, Mich., who approved it and duly transmitted it to the Commissioner.  On March 7, 1921, Justice transmitted a copy of the report to the petitioner for his information.  With reference to the profits derived by the petitioner on the sale of stock, the revenue agents reported that the sale price of the 2,180 shares was $29,308,857.90, that the March 1, 1913, value*3719  thereof as returned was $20,686,761.20, that the March 1, 1913, value as adjusted by them was $20,686,761.20, and that the value of the stock as of March 1, 1913, had been placed at $9,489.34 a share in accordance with the letter of May 19, 1919, from Commissioner Roper to Ballantine.  *1064  58.  In the report, the internal revenue agents disallowed as deductible charitable contributions the two items above mentioned aggregating $1,025, and refused to allow deductions for charitable contributions of stock at the actual value thereof at the time given, but allowed a deduction therefor in the amount of the March 1, 1913, value thereof, thereby decreasing the allowed deductions for charitable contributions made by petitioner from $1,814,109.57 to $452,140.75.  59.  The petitioner, on March 18, 1921, sent to the Commissioner his written protest against the disallowance of the deduction for charitable contributions at the actual value of the gifts at the time given as being contrary to law.  60.  In making the investigation, Revenue Agent Thurston approached the examination of the March 1, 1913, value of the stock with the understanding from his superiors that the valuation*3720  established by Talbert "created a strong presumption of being correct and acceptable," but that such valuation "was not binding upon the Government if material error could be shown." During his consideration of the question he several times discussed it with his superior officers, Justice and Kronk.  He made what he considered at the time to be sufficient inquiry to enable him to reach a conclusion as to whether the valuation which had been placed upon the stock was acceptable to the Government.  He obtained, in as brief a manner as possible, an outline of the history of the Ford Motor Co., and inspected the figures representing the net earnings of the company from its inception up to 1919.  He considered the effect of the Selden patent litigation and reached the conclusion that since the Ford Motor Co. had been successful and was released from any obligation to "pay tribute under the Selden license agreements," a new phase was brought about in the history of the company.  He considered that the successful conclusion of this litigation made it fair to omit prior years' earnings in the computation of the value of the stock.  He considered the results of the Ford-Dodge dividend litigation*3721  which resulted, according to his understanding, in the threat of Ford to withdraw from the company, which he understood had induced or compelled the minority stockholders to sell in 1919 at what appeared to him to be a great sacrifice.  He made several computations of value for the purpose of testing the Talbert valuation.  He used in his calculations the earnings for 1912 and earnings for 1913 projected on the rate shown for January and February.  Earnings for 1913 on that basis were used because the history of the company reflected a constant increase in net income for each successive year and it seemed to him reasonable to expect at least equal earnings for the balance of the year.  He used the earnings as corrected for income-tax purposes rather than the original book figures.  The average earnings produced by this method *1065  were somewhat lower than those used in the Talbert valuation.  He used a capitalization rate of 10 per cent, because of the constant and unvarying increase in earnings from year to year.  The conclusion he reached was that, since the "Talbert valuation had been given the official sanction of the Commissioner and created a strong presumption to overcome*3722  which required material evidence of error," and "considering all the various angles of the case," he "did not feel justified from his position as a field examiner in recommending a change in the figures." He had had no experience in valuing securities other than his experience in the Internal Revenue Bureau.  61.  West's term as Acting Commissioner ended May 26, 1921, and he was succeeded by Commissioner David H. Blair, who has continued in office since.  62.  On May 27, 1921, petitioner's attorney addressed a letter to the Commissioner, requesting a hearing after the auditor's report was checked.  This letter was acknowledged on June 3, 1921.  On June 3, 1921, petitioner's attorney addressed a letter to the Commissioner, for the attention of the Committee on Appeals and Review, asking for an early hearing on the Ford-Dodge dividend question for the reason that the amount of petitioner's allowable deductions for charitable contributions for 1919 could not be finally settled until there was an authoritative determination as to whether the dividend was 1916, 1917, or 1919 income.  63.  On June 20, 1921, a hearing on the question was had before the Committee on Appeals and Review. *3723  By letter under date of April 24, 1922, the Commissioner advised the petitioner that the Committee had held that the dividend constituted income for 1919 to the stockholders, including the petitioner Couzens.  64.  Thereafter the collector of internal revenue at Detroit made a written demand on the petitioner to pay the assessment of $877,430.59, together with accrued interest on the assessment for one year, $52,645.84, a total of $930,076.43, which amount petitioner paid on May 1, 1922, under written protest.  65.  In a letter under date of May 9, 1922, the Committee on Appeals and Review declined to furnish the petitioner with a copy of the decision of the committee on the Ford-Dodge dividend question.  66.  On June 24, 1922, the petitioner filed with the collector of internal revenue at Detroit his claim for refund of the $930,076.43, in which he alleged that the assessment and imposition of such tax were illegal and contrary to law.  67.  In the latter part of 1921 letters were received by the Bureau to the effect that Henry Ford owed some tax on account of the purchase of the stock of the Ford Motor Co.  The agitation apparently being the result of a published article*3724  on taxation by Henry Ford, and it being evident that he did not owe any tax in connection *1066  with the transaction, the matter was dismissed lightly by Commissioner Blair, with little or no investigation.  68.  On February 11, 1922, Senator James E. Watson, of Indiana, wrote Commissioner Blair as follows: UNITED STATES SENATE.  COMMITTEE ON INTERSTATE COMMERCE, February 11, 1922Hon. DAVID H. BLAIR, 1614 21st St., N.W., Washington, D.C.DEAR MR. COMMISSIONER: I am writing you at your home because I want you to get this letter.  After you read the enclosed, return the whole thing to me as I want to use it in the future.  This refers to the subject of taxation insofar as it relates to Henry Ford, a matter I have hitherto taken up with you but which we did not run to a finality.  Look this over carefully, and, if you deem it worthy of further consideration, set somebody to work on it to find out just what there is to it.  I shall be very glad if you will do this.  With all good wishes, Sincerely yours, JAMES E. WATSONAttached to this letter was the following memorandum: COPY The minority stockholders of the Ford Company tied up by way of*3725  injunction in the state courts of Michigan.  Henry Ford and all of the Ford properties from expending the surplus profits of the Ford Company for large extensions, which Mr. Ford had in mind, there was no way for Ford to turn except by eliminating the minority stockholders.  Negotiations were opened for the purchase of the stock of the minority owners.  Ford owned 58 1/2 per cent and the minority interests 41 1/2 per cent of the stock which was 20,000 shares of par value of $100 each.  As the negotiations proceeded, it was at once apparent that unless some low valuation could be fixed on the stock as of 1913, no trade could be made for the federal income tax would practically absorb the value of the stock when turned into cash by the minority stockholders.  Application was made to the Treasury Department, U.S. to fix the valuation of the stock as of 1913, which after some investigation on the part of the Treasury Department was fixed at a valuation of $9,000 a share.  A trade was then arranged with the minority stockholders at $12,000 a share, approximating a total purchase price of $100,000,000.  By this method 3/4 of the value of the stock or $75,000,000 escaped any federal tax. *3726 James Couzens had 2500 shares for which he received approximately $30,000,000 of which $22,500,000 escaped taxation.  On the balance, $7,500,000 the federal government made its regular large tax.  It is estimated that James Couzens received as dividends on this stock while he held it approximately $6,000.000.  In addition to a $30,000,000 he received as the sales price.  It is a well known fact in the motor industry and the information obtainable that in the year 1913, the Ford Motor Company did not manufacture (a) tractor, (b) trucks, and (c) not more than 225,000 passenger cars at which time a valuation is now fixed on the stock at $9,000 a share.  That for the fiscal year 1920, Ford and Company manufactured practically (1) a million passenger cars: (2) a larger number of tractors: (3) a large number of trucks and (4) they had developed a repair business that exceeded the profits on that item alone of more than the profit on their entire 1913 sales, *1067  through the great number of Ford cars in use in 1919 and 1920 (approximately 3,500,000 Fords in operation).  It is estimated that one-half of the passenger cars in America today are Ford cars.  The repair from this*3727  source alone is terrific.  There was no such element in 1913.  It will at once be apparent that the stock of this corporation in 1913 was of a value greatly less than $9,000 a share and that its rise in value from 1913 to 1919-1920 was greatly in excess of $3,000 a share.  In a word, by a friendly decision of the Treasury Department of the U.S. a trade was made possible and the Treasury of the U.S. lost a very large sum of money.  The attached copy of the New York Journal of November 21, 1921, shows the story of Mr. Couzens, investment of $1,000 from which he is allowed to escape taxation on $22,500,000 of the purchase price after having received five or six million in profits.  Frank L. Klingensmith, formerly one of the executive officers of the Ford Company, now president of the Grays Motor Company of Detroit, will undoubtedly give you the details on the development of the Ford business.  Alfred Reeves, executive manager of the Automobile Association of America, with a large executive publicity office in Madison Avenue in New York today, can aid, while the Automotive Industries of 239 West 39th Street, New York, have published many automobile statistics.  The Wall Street Journal*3728  carried the Ford development story last spring in five or six of its issues at four or five columns each.  ANNUAL PRODUCTION OF MOTOR VEHICLES Leonard P. Ayres, Vice President of the Cleveland Trust Company issued about three months ago an analysis of "The Automobile Industry and its Future".  He published a table on page 8, known as "Table 3" in which he shows that the production of Ford cars made by the Ford Company from 1903 to 1920, and other American made cars from 1895 to 1920, is as follows: YEARFORD CARS MADEOTHER CARS MADE1895300189660018971,20018982,40018993,87419005,00019017,00019029,000190370810,29219041,00021,83019051,69523,30519061,59932,40119078,42335,57719086,39858,602190910,607116,680191018,664168,336191134,528175,472191278,440299,5601913168,220316,7801914248,307324,7321915308,213584,4051916523,9291,059,5881917735,2561,133,6911918706,584447,0531919790,9541,085,40219201,027,6771,177,520The National Automobile Chamber of Commerce, Inc., 366 Madison Avenue, New York City, in their annual*3729  publication for 1921, publish the following as the number of cars made in America: YearNumber18993,700190311,000190421,975190525,000190634,000190744,000190865,0001909127,7311910187,0001911210,0001912378,0001913485,0001914569,0451915892,61819161,583,61719171,868,94719181,153,63719191,974,01719202,205,197*1068  MEMORANDUM ON AUTOMOBILE PRODUCTION You will note that prior to 1913, there were only a few cars in operation in America, and it has been estimated that Ford has been making about 50% of all the cars in America.  You will note that his repair business in 1913 was practically nil and his production did not exceed 170,000 cars; that he had no tractor; that he did not manufacture a truck, and in that year no one knew what the future of the motor business was.  You will also note that in the year 1919 he did have a tractor; a truck was produced and approximately 800,000 cars were manufactured; that he had a terrific repair business and that he, and all those trading with him, worked from the vantage point of a knowledge of the size of the motor industry and when you fix a value*3730  of $9,000 a share for this stock in 1913 and $12,000 a share for the stock in 1919, you can easily see that the way they went at it was by fixing a valuation from a retrospective standpoint; in a word say - "Well, this is what happened in those years and 1913 had this value in it" - instead of establishing the value from the standpoint of 1913 "as was" in that year.  No one would have paid $9,000 a share for his stock in 1913.  It would be interesting to find out what the total net investment of his corporation was in 1913.  The Tax Officers of the U.S. Government said that his property in 1913 was worth 20,000 times $9,000 or $180,000,000.  69.  Commissioner Blair made no personal investigation but turned the letter over to Deputy Commissioner Batson and asked him to look into the matter.  Commissioner Blair replied to Senator Watson as follows: HON. JAMES E. WATSON, FEBRUARY 15, 1922.  United States Senate.MY DEAR SENATOR: I am returning the paper which I received from you yesterday.  I have made a copy of the statement so as to make another investigation.  I shall trace it this time through entirely different channel, and if we get any results, we shall let you know. *3731  I thank you for calling my attention to it.  Sincerely yours, D. H. BLAIR Commissioner.70.  Under date of February 27, 1922, the following memorandum was addressed to Chatterton, assistant to Deputy Commissioner Batson, by Paul F. Cain, assistant head of the Special Audit Division: FEBRUARY 27, 1922.  In re: Ford Motor Company, Detroit, Michigan.  Mr. CHATTERTON: With reference to the case mentioned above, which we have been discussing and in which the point as considered by us was the value of March 1, 1913 of the stock of this corporation, you are advised that I find a memorandum dated May 17, 1919, signed by Mr. P. S. Talbert, Acting Deputy Commissioner, in which he arrives at a value of $9,489.34 per share as of March 1, 1913, and in this connection I have worked up three possible methods which might be used in determining the value as of March 1, 1913.  The first and usual method of determining the March 1, 1913 value, would be to take the earnings of five years prior to March 1, 1913 and capitalize these earnings on the basis of 10% and consider this as the March 1, 1913 valuation.  *1069  In this case it is not possible to secure earnings for*3732  the entire five years prior to March 1, 1913, but earnings for four years and five months from October 1, 1908 to February 28, 1913 were secured and show the value of $3,617.00 as the value of one share of stock of this corporation as of March 1, 1913.  The exact means by which this value was determined may be shown as follows: Earnings October 1, 1908, to February 28, 1913 - 4 years, 5 months$31,950,006.93Earnings 1 month (average)602,830.32Earnings 1 year (average)7,239,963.84Earnings per share (based on 20,000 shares of capital stock)361.70Value based on 10% capitalization3,617.00This method of course presupposes that average conditions were prevailing from the four years and five months, and does not take into account any unusual changes that might have taken place in any period during this period.  Since there was a marked change in the general policy in the expansion of the business during the year 1912, it seems to me that it is entirely unfair to use the years prior to 1912, and average the earnings for those years along with 1912 and 1913, when entirely different conditions were prevailing.  It seems that in 1912, plans for expansion of*3733  the business were set in motion, properties were bought in many sections of the country, assembling plants were constructed and various other similar factors became a part of the policy of the corporation, all of which would have a decided effect upon the earning capacity and value of stock of the corporation.  That such a change did have a decided effect, is shown from the fact that the average earnings for the four years and five months prior to March 1, 1913 (even considering 1912 as a part of the period) showed $7,233,963.84, whereas the earnings for the year 1912 were $14,119,989.87 and for the year 1913, $26,651,754.92, and this rate of earnings was continued subsequent to 1913, increasing rather than decreasing.  I therefore feel that while it is unusual, at the same time it is entirely reasonable to work on that short period from January 1, 1912 to March 1, 1913, and determine, if possible, a fair value for the stock.  Two possible methods may be used.  In the first place, we may proceed as follows: Earnings, January 1, 1912, to December 31, 1912$14,119,989.87Earnings, January 1, 1913, to February 28, 19133,972,896.17Total earnings for 14 months$18,092,886.04Average earnings for one month$1,292,349.00Average earnings for 12 months$15,508,188.00Earnings per share (20,000 shares)$775.40Value per share based on 10% capitalization$7,754.00*3734  A second method and that used in values which are now under consideration, is one slightly different from the one used above, and is as follows: Earnings, January 1, 1912, to December 31, 1912$14,119,989.87Earnings, January 1, 1913, to February 28, 1913, $3,972,896.17.Assumed earnings for year 1913 based on earnings for the first two months of 1913, ($3,972,896.17 X 6)23,837,377.02Total$37,957,366.89Average for one year$18,978,683.44Earnings per share (20,000 shares)$948.934Value per share based on capitablization of 10%$9,489.34Of the two methods outlined above, it would seem to me that the method that has been used in this case is the preferable one, although it does not conform *1070  exactly to A.R.M. 34, in that to a certain extent it might be said to take into consideration subsequent years, although I feel this is true only in a slight degree.  It will be noted that the earnings for the full year 1912 were considered and then the earnings for 1913 were determined as an estimate based on the earnings which had accrued to March 1, 1913.  It would seem reasonable to suppose that a purchaser of this stock could take into consideration*3735  that the earnings for 1912 (since the marked change in financial policy and expansion of business) were approximately $14,000,000.00, and that an amount had been earned during the first two months of 1913 which if continued during 1913 would show an earning of a little less than $24,000,000.00; that the estimate for the year 1913 based on the first two months was conservative is shown when the earnings for the entire year arefinally determined, in that the total earnings for the year are found to be approximately $26,650,000.00.  In view of the fact shown above, and the general study I have made of this case, I feel that a fair estimate of the value of this property was arrived at in the figure of $9,489.34, and that this is more nearly correct than either the figure of $3,617.00 or $7,754.00, and that the value which has already been used is a fair value.  PAUL F. CAIN.  Assistant Head, Special Audit Division.This memorandum was initialed by Chatterton.  71.  Under date of September 29, 1922, N. T. Johnson, Chairman of the Committee on Appeals and Review, sent the following memorandum to the Solicitor of Internal Revenue, Carl A. Mapes: COMMITTEE ON APPEALS AND REVIEW, *3736 September 29, 1922.Mr. CARL A. MAPES, Solicitor of Internal Revenue.In re: Tax liability of Henry Ford, et al.In accordance with your request I have reviewed the attached file in re tax liability of Henry Ford and others concerned, which grew out of the sale of the Ford Motor Company stock in June, 1919.  It is probable that the attached file has reference to the tax liability of the Ford Motor Company rather than that of Henry Ford.  I can not see how Mr. Ford realized any gain through the purchase of the minority interest in the Ford Motor Company in June, 1919.  Under date of May 17, 1919, Mr. Talbert, then Chief of the Technical Division of the Income Tax Unit, made a report upon an investigation made by himself, Mr. Burlingame, Mr. King, Mr. Masland and Mr. Taylor in Detroit with a view to establishing the March 1, value of Ford Motor Company stock.  This report was addressed to the Commissioner of Internal Revenue and was evidently approved by him as the basis for computing gain upon the subsequent sale of such stock.  The March 1 value fixed by Mr. Talbert in his report was $9,489.23 per share.  The attached file contains the original report addressed*3737  to the Commissioner and I am inclined to think that the basis used in fixing the March 1 value is sound.  It is understood that this stock sold in June, 1919, for $12,000 per share, thereby showing a profit of approximately $2,500 per share upon which it is assumed the stockholders have paid tax.  I am attaching hereto a copy of the net income, average earnings per share, capital and surplus for the period January 1, 1909 to July 31, 1918.  This is a copy of the report in our file in this case.  In view of the consideration which has been given to fixing the March 1 value of this stock for the purpose of computing gain or loss upon the sale thereof in *1071  1919, I believe that the valuation so fixed and approved by the Commissioner is fair both to the taxpayer and to the Government and that the case should be considered closed.  N.T.J. Enc. Attached to this memorandum was a copy of the statement forwarded by Talbert with his memorandum to Commissioner Roper.  72.  On this memorandum Solicitor Mapes wrote "Approved, C. A. Mapes," and he also wrote the following note to Commissioner Blair: MR. COMMISSIONER - In the light of Mr. Johnson's memo.  I concur in the recommendation. *3738  C.A.M. 73.  The memoranda of Cain, Johnson, and Mapes came to the personal attention of Commissioner Blair.  No action on the subject was taken at that time, the memoranda were filed, and the matter was dropped.  74.  On May 22, 1922, Special Intelligence Officer Roche addressed a report from Detroit to the Chief of the Special Intelligence Unit, Elmer L. Irey, calling attention to the sale of Ford Motor Co. stock by minority stockholders in 1919 and suggesting an investigation.  This was transmitted to Washington by Acting Special Agent in Charge David Nolan.  Under date of June 22, after a preliminary investigation Irey replied to Nolan that information similar to that furnished by Roche had been furnished to the Bureau previously, that the Bureau was fully conversant with all details concerning the matter, and that under the circumstances there was no necessity for any further investigation by special agents at that time.  75.  On July 18, 1922, the following letter was sent to the Internal Revenue Agent in Charge at Detroit: JULY 18TH, 1922.  IT:PA:FIWCR-704.  INTERNAL REVENUE AGENT IN CHARGE, Detroit, Michigan.Reference is made to your report of May 13th, *3739  1918, relative to the examination made by Income Tax Inspector Frank McCann to your report of February 17th, 1921, relative to the examination made by Internal Revenue Agent T. G. Thurston, and your Report of March 7th, 1921, relative to the examination made by Revenue Agents, T. G. Thurston, and J. L. Chatterton, covering the verification of returns for the years 1915 to 1919, inclusive, filed by James Couzens, 2339 Dime Bank Building, Detroit, Michigan.  A supplemental report is requested covering the following points: Profit on sale of stock should be arrived at in accordance with O.D. 1035, Bulletin 38-31 for the years involved.  For 1916 ordinary and necessary farm expenses are shown as $55,976,86 whereas the total of the figures listed is $58,608.28.  Please explain the discrepancy.  *1072  For 1919 personal tax is reported in the amount of $24,097.88.  An explanation of this item is requested.  You are requested to give this immediate attention in order that the adjustment may be expedited.  E. H. BATSON, Deputy Commissioner.By , Head of Division.HNR:RAR-2 76.  The matter was referred to T. G. Thurston, who, after making a further field examination*3740  occupying two days, made a supplemental report dated September 19, 1922.  This report refers to the sale in 1919 by petitioner of his Ford stock without any adjustment as to the March 1, 1913, value thereof, and reports that the "original cost was par or less and therefore less than value at March 1, 1913." On November 24, 1922, Thurston furnished a copy of this report to the petitioner Couzens.  77.  Under date of November 2, 1922, the Commissioner sent to petitioner the following letter: TREASURY DEPARTMENT Washington Registered LetterNov. 2, 1922 Office of Commissioner of Internal Revenue Address reply to Commissioner of Internal Revenue And refer to IT:PA:FR WHW-704 Mr. JAMES COUZENS, 2239 Dime Bank Bldg., Detroit, Mich.Sir: The audit of your individual income tax returns, filed for the years 1915 to 1919, inclusive, and verified by your books of account and records, indicates changes in tax liability as follows: Additional taxOverassessment1915$659.89191645,290.171917189,723.701918$5,498.2619191,270,864.57$1,276,362.83$235,673.76Net additional tax$1,040,689.07*3741  The audit as made has been approved by this office with the following exceptions: *1073 1916Net profit from stock transaction is $6,319.10, instead of $6,155.85.  This change is in accordance with the additional information contained in the report of the Internal Revenue Agent in Charge, dated September 19, 1922.  Taxes paid are increased to $142,083.90, on account of allowing income tax paid for 1916.  The tax liability, as adjusted, is $14,004.98, and as $59,295.15 has been assessed, there is an overassessment of $45,290.17.  1917From information on file in this office, the correct allocation of dividends is found to be $108,327.34, and $974,971.88 for 1916 and 1917, respectively.  Tax paid at source in the amount of $292.60 is eliminated from Item 31, as there is no normal tax due from which it may be deducted.  In accordance with additional information furnished in the supplemental report of the Internal Revenue Agent in Charge, dated September 19, 1922, there is allowed a stock loss of $3,250.00 and taxes paid are reduced from $38,762.42 to $38,742.19, as the difference was allowed in 1916.  The tax liability as adjusted is $418,537.39 and as $608,261.09*3742  has been assessed, the overassessment is $189,723.70.  1918In accordance with additional information furnished in the supplemental report before mentioned, profit from sale of stock is changed to $15,719.35, rental income is changed to $11,655.49 and contributions are changed to $97,442.60.  The tax liability as adjusted is $312,047.25, and as $306,548.99 has been assessed, there is a further tax liability of $5,498.26.  1919Income from stock transactions is changed to $9,172,667.37 in accordance with the supplemental report previously referred to and credit is allowed for the additional assessment of $877,430.59.  The tax liability as adjusted is $8,223,398.99, and as $6,952,534.42 has been assessed, there is an additional tax due of $1,270,864.57.  The overassessments shown herein will be made the subject of certificates of overassessment which will reach you in due course through the Collector of Internal Revenue for your district and will be applied by that official in accordance with Section 252 of the Revenue Act of 1921.  In view of the fact that the principal points upon which this additional tax is based have been fully considered by the Commissioner*3743  and by the Committee on Appeals and Review and final decision rendered thereon, this assessment will be made upon the next list going to the Collector or Internal Revenue for your district and you will be notified by that official as to the time and manner of payment.  Respectfully, E. H. BATSON Deputy Commissioner.78.  On November 15, 1922, the petitioner Couzens by telegram requested the Commissioner to grant a hearing on the items involved in the deficiency letter of November 2, and on the same day the petitioner's counsel by letter repeated the request.  On November 17, 1922, Deputy Commissioner Batson replied by telegram setting the date for a conference on November 22, and notifying the petitioner that assessment would be withheld pending the conference.  *1074  On November 22, 1922, the conference was held, petitioner being represented by his attorney.  79.  On November 23, 1922, the petitioner made and filed his appeal to the Commissioner from the additional assessment proposed in the letter of November 2, 1922, the appeal involving, as to the year 1919, the question of whether a charitable gift in property is deductible at the value at the time given*3744  or at the March 1, 1913, value thereof.  The Commissioner thereupon referred the matter to the office of the then Solicitor of Internal Revenue as the appeal agency.  80.  On December 11, 1922, petitioner's attorney wrote a letter to the Commissioner referring to the conference held, and reading in part as follows: The main item involved was that of the amount of allowable deductions for charitable contributions for the year 1919, and the file has been transmitted by your office to the office of the Solicitor of Internal Revenue on an appeal under T.D. 3409 (Nov. 13, 1922) for a disposition of that phase of the matter.  You will recall that at our conference we went over the remaining questions involved, and that it was your decision to sustain the audit as to all items questioned excepting the one regarding the Highland Park Land Company and the Minnesota Sugar Company dividends involved in 1917 return, and as to those, you stated that you would investigate the same and give consideration to our claims.  As soon as you have done this and determined what position you should take, I would be pleased to have you advise me accordingly.  Your A-2 letter did not tie*3745  in your proposed assessment with the Thurston-Chatterton audit, and while I was there, I took some data, hoping to be able to report to my client the manner in which you reached the variances; and I herewith with send you copy of my office memorandum regarding the same.  This, however, is not sufficiently detailed to meet the necessities of my client's bookkeeping record, in that it does not disclose the particular items of stock affected by your changes in figures from the Auditors report.  Our client keeps a specific record of each stock certificate and bond, and these losses and gains as you have allowed them, he must on his books allocate to the several stock certificates and bonds and other items of property to which they pertain, else there will be confusion in his books and also confusion in making returns for the years following the audits involved herein.  We, therefore, desire that you furnish us a statement specifically indicating the changes made in the report of the auditors Thurston-Chatterton, tying the same in with the amount you propose to assess.  On one of the memoranda attached to this letter was the following notation: 1919The auditors computed stock*3746  transaction profits at $9,171,172.87, whereas the government computes them at $9,172,667.37, or an increase of $1,494.50 in the income for 1919, which at 73% means an increase of the tax of $1,090.99.  81.  On January 11, 1923, Commissioner Blair replied, advising petitioner's attorney that the information requested would be furnished in a communication addressed to the petitioner after the Solicitor had ruled on the question of charitable contributions and that *1075  all of the adjustments affecting the tax liability of the petitioner would be covered at that time.  82.  On January 5, 1923, a hearing was had and oral arguments presented on behalf of the petitioner and others before the Solicitor of Internal Revenue and his associates on the question of allowable deductions to be made in the case of charitable gifts of property, and on or about January 30, 1923, counsel for petitioner transmitted to the Commissioner and Solicitor of Internal Revenue a printed brief of ninety pages on the question.  Thereafter, on May 1, 1923, the Solicitor of Internal Revenue, by Solicitor's Opinion No. 1118, sustained the contentions of petitioner and held that under the law the value of*3747  the gifts at the time given was the lawful basis for their deduction as charitable contributions.  On July 13, 1923, the Solicitor of Internal Revenue declined to send petitioner's attorney a copy of Solicitor's Opinion No. 1118.  83.  On May 24, 1923, a letter was sent to petitioner Couzens notifying him of the decision concerning the deduction for charitable contributions and that his adjusted tax liability for 1919 was $276,627.33.  It was stated in the letter that the adjustments set forth in the letter of November 2, 1922, had not been changed as to the year 1919 except for those necessary on account of the change in the amount of allowable charitable contributions.  The computation shown in the letter gave effect to changes only on this one item.  The petitioner was granted 30 days in which to file an appeal.  84.  On June 11, 1923, counsel for the petitioner sent the following telegram to the Commissioner: COMMISSIONER OF INTERNAL REVENUEWASHINGTON D C ATTENTION MR. CALLAHAN DEPUTY COMMISSIONER YOUR INDEX NUMBER IT: PA: FR: WHW-704 REGARDING JAMES COUZENS REFERRING TO YOUR LETTER OF MAY TWENTY FOURTH TO HON JAMES COUZENS REGARDING GOVERNMENTS ADJUSTMENTS ON HIS NINETEEN*3748  NINETEEN RETURN OUR JUDGE LACY WILL ON REHALF OF MR. COUZENS BE IN WASHINGTON NEXT MONDAY JUNE EIGHTEENTH FOR CONFERENCE REGARDING GOVERNMENTS ADJUSTMENTS FOR THE YEAR NINETEEN NINETEEN AS SET OUT IN YOUR LETTER OF MAY TWENTY FOURTH AND ALSO GOVERNMENTS ADJUSTMENTS FOR THE YEARS NINETEEN FIFTEEN TO NINETEEN EIGHTEEN INCLUSIVE AS SET OUT IN YOUR LETTER OF NOVEMBER SECOND NINETEEN TWENTY TWO SENATOR COUZENS DESIRES TO HAVE ADJUSTMENTS COVERING THE YEARS NINETEEN FIFTEEN TO NINETEEN NINETTEN INCLUSIVE CONCLUDED AND DISPOSED OF FINALLY IN THIS CONFERENCE SO THAT HE MAY MAKE IMMEDIATE PAYMENT OF WHATEVER NET BALANCE THERE IS DUE TO THE GOVERNMENT ACCORDING TO THE RULINGS OF THE DEPARTMENT SAVING HIS RIGHTS UNDER THE ADVERSE RULINGS HERETOFORE MADE PLEASE CONFIRM THIS BY WIRE ADDRESSED TO US AND INSTRUCT WHEN AND WHERE JUDGE LACY REPRESENTING HIM MAY MEET CONFEREES ON MONDAY OR TUESDAY NEXT ANDERSON WILCOX LACY AND LAWSON 623 MOFFAT BUILDING DETROIT MICHIGAN*1076  85.  On June 14, 1923, Deputy Commissioner Chatterton made an appointment for a conference on June 18.  Petitioner's attorney went to Washington and conferred from June 17 to June 20 with McMannis, Bennett, Lewis, *3749  and Yagle, conferees and auditors in the Income Tax Unit.  In this conference the computations and changes were examined and reconciled, and the net balance of the income-tax liability of the petitioner for the years 1915 to 1919, inclusive, was found to be $92,228.83.  It was arranged that the additional assessment for 1919 and the certificates of credit for 1915, 1916, and 1917 would be sent through accordingly.  All of the adjustments and computations made by the Income Tax Unit in determining the tax liability for the year 1915 to 1919, inclusive, including those relating to profits and losses on sales of stock reported on Block "D" of the 1919 return, were explained to petitioner's attorney, but no adjustment or change was proposed or mentioned with reference to the profits derived on the sale of the stock of the Ford Motor Co. of Michigan.  86.  On July 23, 1923, an additional assessment for 1919 of $276,627.33 was made, which, together with the amount previously assessed for 1919, but not paid, of $45,777, made a total unpaid income tax for 1919 of $322,404.33.  Against this liability there was credited to petitioner on September 26, 1923, for overpayment in 1915, $486.83, *3750  for overpayment in 1916, $45,290.17, and for overpayment in 1917, $184,398.50.  This left a net balance unpaid, according to the rulings of the Department, of $92,228.83.  The balance of the over-payments for 1915 and 1917 in the amounts of $173.06 and $5,325.20, respectively, as shown in the letter of November 2, 1922, were credited in the discharge of the additional tax for 1918 in the amount of $5,498.26.  87.  The difference of $92,228.83 between the tax liability for the years involved as reported by the petitioner and that as determined by the Commissioner was due principally to the following adjustments: For 1916:Increasing the net profits on the sales of securities by $163.25, due to changes in the loss or gain of seven transactions in stock of five corporations.  Reducing taxable dividends by $435,650, representing stock dividends from American and foreign corporations, and by $736.40, an error in calculation.  Disallowance of $3,407.04 as business expense and allocation thereof to tax-exempt income, and transfer of $450, claimed as business expense, to depreciation.  Disallowance of $46.46, water rates paid, deducted as taxes.  Increasing depreciation charges*3751  by three items totaling $1,382.37.  For 1917:Treating $2,101,017.07, Ford-Dodge dividend as 1919 income.  Increasing salary by $33.33, tax withheld from salary by Highland Park State Bank.  *1077  Reducing farm loss by disallowing depreciation of $1,055.84.  Reducing rental income by $400.  Increasing 1917 dividends taxable at 1917 rates by $151,543.51 and reducing 1917 dividends taxable at 1916 rates by $151,553.91.  Disallowance of $35.21, water rates paid, deducted as taxes.  Allowance of loss of $3,250 on certain securities.  Disallowance of $1,995.88 as business expense and allocation thereof to tax-exempt income.  Increase of $2.67 in the allowable deduction for excess profits.  A net reduction of $4,813.48 in the allowable deductions for charitable contributions, by disallowing some items and allowing others.  For 1918:Decreasing depreciation on farm furniture and improvements $1,327.92, and allowance of $375, paid in settlement of a damage claim, as an operating expense.  Increasing by $1,200 the profit on the sale of certain New Jersey property, by reason of depreciation.  Increasing by $295.97 the gain derived from the sale of*3752  bank stock.  Increasing income by $288.80, tax paid at source.  Allowance of $12.26, interest paid for carrying Liberty bonds.  Disallowance of $46.94, water rates paid, deducted as taxes.  Reduction in the allowable deductions for charitable contributions by disallowing certain items.  Disallowance of $5,601.56 as business expense and allocation thereof to tax-exempt income.  For 1919:Decreasing depreciation on farm furniture and improvements $451.68.  Increasing salaries by $250 received in January, 1919, for last half of December, 1918.  There was a net increase of $24,162 in the profit on sales of stock, resulting from increasing or decreasing various items.  The profit from these transactions was reported in Block D of petitioner's return for 1919, which also included the reported income from the sale of the stock of the Ford Motor Company.  Reduction of $948.02 in depreciation on building.  Disallowance of $23.89, water rates paid, deducted as taxes.  Increasing the allowable deduction for charitable contributions from $1,499,380.85 to $1,814,109.57, as set forth above.  Disallowance of $3,066.60 as business expense and allocation thereof to tax-exempt*3753  income.  Increasing income from dividends by treating $2,101,017.07, Ford-Dodge dividend, as 1919 income.  In addition to the above, there were several other minor adjustments.  88.  On August 11, 1923, petitioner's attorney sent a telegram to the Commissioner, and a letter on the same day for the attention of Bennett, McMannis, and Yagle, quoting and confirming the telegram, directing attention to a certain charitable contribution of $6,271.38 made by petitioner in 1918, which had been disallowed in the conference and by the Commissioner under what the attorney believed to be a misapprehension of the facts.  He enclosed with the letter the affidavit of petitioner's secretary as to the facts.  On *1078  August 30 the Commissioner replied, advising the petitioner that the contribution did not, under the rulings of the Department, represent an allowable deduction, that the adjustments previously made were correct, and that case had been closed accordingly.  89.  Immediately prior to October 20, 1923, the collector of internal revenue at Detroit notified the petitioner that the net balance of his income-tax liability was $92,228.83, and demanded payment thereof.  90.  On*3754  October 22, 1923, the petitioner paid the sum under written protest, the protest reading as follows: DETROIT, MICHIGAN, October 16, 1923.COLLECTOR OF INTERNAL REVENUE, Detroit, Michigan,and COMMISSIONER OF INTERNAL REVENUE, Washington, D.C.Re JAMES COUZENS, 2123 First National Bank Bldg., Detroit, Michigan.GENTLEMEN: Herewith I hand you Ninety Two Thousand Two Hundred Twenty Eight and 83/100 Dollars ($92,228.83) in full payment of assessment of balance of my income taxes for the years 1915 to 1919 inclusive, as computed by the government and per your notice of demand for payment dated October 10, 1923.  Entering into the computations upon which such additional assessment is based are the transfers from 1917 income at 1916 rates to 1917 income at 1917 rates of (a) the Ford Motor Company special dividends, viz: 69.15% of $218,000 paid Jan. 19, 1917, and all of $109,000 paid May 17, 1917, and $218,000 paid June 21, 1917; and (b) a like transfer of $807.50 of Minnesota Sugar Company dividends paid in 1917; and (c) a like transfer of the item of $2,101,017.07 distribution of Ford Motor Company from 1917 income at 1916 rates to 1919 income at*3755  1919 rates; and (d) the disallowance as deductible expense of that portion of the taxpayers office and administrative expense which his tax exempt income bears to his total income, viz: $1,995.88 in 1917; $3,857.04 in 1916; $5,601.56 in 1918; and $3,066.60 in 1919; total, $14,521.08.  This taxpayer pays the additional tax due to such erroneous transfers and disallowances, but under this formal protest for the following reasons: The said disallowances were made contrary to law; the said transfers were made contrary to law; the taxpayer has heretofore paid the full lawful income tax in respect to all of said items of income; and all the other reasons more fully set forth in his protest dated May 1, 1922 and claim for refund filed May 26, 1922 respecting the transfer of said Ford Motor Company distribution item of $2,101,017.07, which protest and claim for refund are hereby renewed.  The taxpayer further protests against the foregoing departmental rulings and the action in offsetting against lawful refunds due taxpayer for 1915, 1916 and 1917, the consequent additional debits of $5,498.26 for 1918 and $322, 404.33 resulting in the assessed balance of $92,228.83 herewith paid under protest, *3756  and further protests against the failure of the department to allow said refund claimed in respect to said Ford Motor Company distribution item of $2,101,017.07, and to credit it to this taxpayer in making said final computations.  For greater particularity as to facts and reasons, reference is hereby made to *1079  the claims for abatement, protests, appeals, briefs, claims for refund and supplemental data heretofore filed in the department by this taxpayer respecting said items.  Yours Respectfully JAMES COUZENSBy H. S. MORGAN General Secretary91.  Petitioner received from the collector a receipt for the payment which recited that the payment of $92,228.83 was in full for the petitioner's 1915, 1916, 1917, 1918 and 1919 income and excess profits taxes, paid under protest.  92.  Under date of October 31, 1921, Treasury Decision 3240 was promulgated by Commissioner Blair with the approval of the Secretary of the Treasury.  This Treasury decision is as follows: REOPENING OF CASES TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D.C. To Collectors of Internal Revenue and Others Concerned:Where any case in the Bureau*3757  of Internal Revenue has been finally closed after the taxpayer, or other party thereto, has had a hearing or has been afforded by written notice an opportunity to present oral or written arguments or statements of fact in support of his contentions, the case will not be reopened except (1) where a showing is made of new and material facts, accompanied by an explanation, satisfactory to the Commissioner of Internal Revenue, of the failure to produce such facts prior to the closing of the case, or (2) where the case is materially affected by the change of regulations or by the final decision of another case either by the Commissioner of Internal Revenue or by a court of competent jurisdiction.  The application for reopening a case should be addressed to the Commissioner of Internal Revenue, should state succinctly the facts and circumstances upon which the application is based, and must be supported by the affidavit of a person having knowledge of the facts.  This decision is not to be construed as modifying the regulations relating to the filing of claims in abatement or claims for refund, nor as denying the right of a taxpayer to a hearing or to an appeal at any stage of his case*3758  until the case has been finally closed.  After the taxpayer has exhausted his remedies within the Bureau, however, and the case has been finally closed, it will be reopened only under the conditions stated in the decision.  D. H. BLAIR, Commissioner of Internal Revenue.Approved October 31, 1921.  A. W. MELLON, Secretary of the Treasury.93.  Treasury Decision 3240 was promulgated because there were so many cases reopened upon the application of taxpayers.  First one attorney and then another would endeavor to reopen a case to secure a refund.  It was designed to "stem that tide" and prevent the *1080  reopening of so many cases.  In the absence of new and material facts a closed case was, under this order, at an end so far as the taxpayer was concerned.  94.  On December 3, 1923, the Tax Simplification Board made a report to the Speaker of the House of Representatives.  Included in the report was the following: In surveying the work of the income tax unit it was discovered that even after the return of a taxpayer had been audited, and additional tax liability found, the amount thereof assessed and subsequently paid by the taxpayer, and the case marked*3759  closed, it frequently happened that the case was reopened by an auditor or other official of the income tax unit, of his own motion on account of some new ruling or decision.  The taxpayer was, thereupon, notified and the questions of additional tax liability or overpayment were again gone into, although the amount thereof had been previously settled.  As long as such procedure prevailed the work of the income tax unit was materially increased and there was no chance of the taxpayer knowing definitely what his tax liability was short of the period of the statute of limitations, and, indeed, not even then, for in many cases he had been induced to sign a waiver of the statute.  This practice appeared to our board to be disastrous to the orderly procedure of the administration of the revenue law, grossly unfair to the taxpayer, and productive of little, if any, benefit to the Government.  Our board brought this situation to the attention of the commissioner, and, in pursuance of our recommendation, he issued an order that cases once closed should not be reopened except in case of fraud or gross error.  95.  The order issued by Commissioner Blair relative to reopening closed cases*3760  was as follows: JANUARY 20, 1923.  Numerous complaints from various sources have reached me that taxpayers are being subjected to examinations and requests for information concerning cases in which the audits have been completed and the cases closed.  Such examinations are not advisable and are clearly contrary to the spirit of the act and the regulations of the department.  The reopening of closed cases should be the rare exception and not the rule.  In the absence of evidence of fraud or gross error, cases once closed are not to be reopened.  96.  In the Bureau of Internal Revenue there is no hard and fast rule nor is there any generally accepted definite understanding as to what constitutes "gross error" within the meaning of this order, except that the amount of tax involved would be the principal factor.  It is apparently a matter of judgment in each case.  Gross error did not exist unless there was some mistake in computation or some new or material fact.  97.  The word "closed," as applied to cases, had three distinct meanings in the Bureau of Internal Revenue.  98.  It had, first, a very restricted meaning and was used to denominate those cases in which a final agreement*3761  had been entered into between the taxpayer and the Commissioner pursuant to section 1312 *1081  of the Revenue Act of 1921, section 1006 of the Revenue Act of 1924, or section 1106(b) of the Revenue Act of 1926.  99.  Secondly, the word "closed" was applied to all cases on which the statute of limitations had tolled.  In this sense of the word, it was not considered that a case was closed prior to the running of the statute.  100.  There are two classes of files in the Bureau of Internal Revenue - the active files and the inactive or closed files.  The active files contain all returns on which the statute of limitations has not tolled.  The inactive files contain the cases on which the statute of limitations has tolled and which are considered "closed" within this meaning of the word.  All returns are filed in groups by years and are transferred for storage purposes from the active to the inactive file by such groups.  The file of 1919 returns was transferred to the inactive or closed file some time after March, 1925.  101.  It has been the practice of the Bureau of Internal Revenue since 1913, soon after the enactment of the Revenue Act of 1913, to examine returns as soon*3762  as they arrived, to make a desk audit, and if additional tax was found to be due about which there was no doubt at the time, to make an assessment.  Prior to the passage of the Revenue Act of 1921 it was the view in the Bureau that tax bore interest only after notice and demand and accordingly tax was assessed as soon as possible after the returns were received.  102.  The returns were audited as carefully as possible from the information at hand.  Originally the audits were not as intensive as later, a great many being made on the face of the return, and the return passed for the time being.  In those cases where it was not clear whether additional tax was due, the matter was referred to field agents for further investigation.  Generally there was only one field audit.  Frequently, however, where taxpayers sent in additional evidence, or where it was otherwise found necessary, the matter was referred to the field agent for further investigation.  103.  It was customary to make more than one audit.  If all the tax due was not found at once, further assessments were made.  If, after a case had been sent to the general files, information was received affecting the tax liability - *3763  that there were more taxes due than had been determined or that more tax had been determined than was actually due - the entire file was examined if the circumstances justified it.  If additional tax was found to be due, the necessary adjustments were made and assessment was made if within the statute of limitations.  104.  Additional assessments were often made as a result of information received from information certificates as to dividends, salaries, wages, interest and other items paid to taxpayers.  In some cases *1082  the procedure necessitated as many as three or four separate assessments.  It was considered that tax could be assessed at any time prior to the toll of the statute, as often as additional facts were developed, and that there was no limitation as to the number of assessments which could be made on the same subject matter prior to the running of the statute.  105.  It made no difference whether the error relied upon to justify reopening the case was brought to the attention of the Bureau by the taxpayer or by governmental subordinates, and no distinction was made between additional tax due as a result of a change in law and tax due as a result of a change*3764  in facts.  106.  The practice of making more than one assessment in a case was followed under Revenue Acts of 1913, 1916, 1917, 1918, 1921, 1924, and 1926.  107.  Finally, the word "closed" was used to describe a case where the taxpayer's liability had been determined to the extent of and in accordance with the available data, assessment made, the case closed in the usual office way and sent to the general files.  It was this type of "closed" cases to which the office order of January 20, 1923, referred.  108.  Under the practice in the Bureau of Internal Revenue, after a case had been audited, letters sent to the taxpayer, conferences held, revised assessment letters sent out, and the tax assessed, the file was returned to the general files and disassembled, the returns placed in one file and the revenue agents' reports and correspondence in another file.  The case was then considered "closed" in this sense of the word.  109.  A case did not get into the general or closed files during the pendency of any question or until it had been closed for the time being.  If it did get to the general files, it stayed there until there was a new reason to believe it should receive a further*3765  audit.  110.  Under date of July 20, 1923, the Solicitor of Internal Revenue made the following recommendation to the Commissioner: Solicitor's Recommendation on Appeal No.  In re: Appeal of Mrs. Gustava D. Anderson, Detroit, Michigan.  JULY 20, 1923 Mr. COMMISSIONER: (For Deputy Commissioner, Head, Income Tax Unit.) This office has had under consideration the appeal of Mrs. Gustava D. Anderson, Detroit, Michigan, from the action of the Income Tax Unit in adjusting her tax liability for the year 1919.  After careful consideration of all facts presented, oral hearing having been had by the taxpayer, this office concludes: *1083  That the claim that the valuation of $14,420 per share placed upon the stock of the Ford Motor Company by the Bureau as of January 1, 1917 for capital stock tax purposes should be accepted as the fair market value of the stock of such company received by her January 29, 1917 by way of gift should be allowed.  Accordingly this office recommends that the appeal of Mrs. Gustava D. Anderson be sustained.  NELSON T. HARTSON Solicitor of Internal Revenue.111.  Commissioner Blair endorsed his approval on this recommendation, and*3766  a copy of it was sent to attorneys for Mrs. Anderson.  She was advised by letter of the adjustment made and the letter indicates that a refund of $64,020.73 was made as a result thereof.  112.  In February, 1925, one M. W. Thompson, called on Secretary of the Treasury Mellon and stated that the Ford minority stockholders, including the petitioner Couzens, then United States Senator, who had sold out to Ford in 1919, owed large additional taxes.  113.  At that time the Finance Committee of the United States Senate was considering the extension of a committee which had been appointed by the Senate on March 12, 1924, with directions for the investigation of the Bureau of Internal Revenue, and of which the petitioner was Chairman.  Secretary Mellon in a telegram dated March 14, 1925, to Senator Ernst, stated in part as follows: I was unwilling to raise the question then, because I would be charged with attempting to intimidate Senator Counzens in his effort to have his committee extended.  114.  On February 26, 1925, the Senate adopted a resolution extending the life of the committee to June 30, 1925.  115.  On March 6, 1925, Thompson handed to Secretary Mellon the following*3767  memorandum: Memorandum re Over-Appraisal of 1913 value of Ford Motor Co. "minority stock" in an advance appraisal made by the Bureau of Internal Revenue in 1919, resulting in a large under-assessment of income- and sur-taxes March 15, 1920 1.  In the summer of 1919, following a court decision in a minority stockholders' suit requiring the Ford Motor Co. (contrary to the previous lowdividend policy of its majority shareholder, Mr. Henry Ford), to pay dividends proportionate to its earnings, Mr. Ford offered to buy out all the minority shareholders of the company at a price of $12,500 per share.  These minority holders owned 41% of the 20,000 shares of the company's stock, Mr. Ford holding the remainder.  2.  The minority shareholders agreed to sell out at this price, provided the Treasury could be induced to state in advance a figure, satisfactory to them, *1084  at which it would appraise the market value of their stock as at March, 1913.  They could then take that amount into their accounts free of tax: their taxable profit would be the difference between that figure and the selling price.  3.  The Treasury was accordingly procured contrary to its rule in such*3768  cases to meke the advance appraisal desired.  In the absence of actual sales in 1913, its statisticians proceeded to make sundry computations and estimates, and shortly it fixed the 1913 market value of the stock at approximately $9,000 per share ($8,900), nearly three-quarters of the 1919 value established by the offer of $12,500 mentioned.  Thereupon the trade was closed and Mr. Ford paid the price stated, in cash.  4.  It will be instructive to compare the artificial figure of $9,000 for 1913, with the true value for 1919 disclosed by the actual sale for $12,500.  For the latter was tangible, an actual transaction for cash money between men dealing at arm's length; but the former was a mere estimate or guess.  From the actual sale we may learn what the estimate ought to have been.  5.  For we can take the volume of business and the net earning power of the company in 1919, and see their relation to the 1919 selling price of the stock whose purchase conveyed 41% thereof.  We then can apply this index or ratio to the volume of business and the net earning power in 1913.  The result will be a stock value for 1913 which, being directly related to the 1919 actual selling price by*3769  the same formula, will probably be not far off from the truth.  And if any corrections are required because of changed conditions of special kind, it will then be simple to make them.  6.  Proceeding thus, it appears that the Ford Motor Co. produced 165,000 cars in 1913; and in 1919, 850,000 cars, five times as many - Poor's Manual publishes the figures.  Passing from physical to financial results, the comparison is not dissimilar.  In 1913 the Company's annual profits were reaching the twenty five million dollar class; and in 1919, the hundred million dollar level, which is four to one.  But the true growth in market value of the stock was greater.  For in 1913 the Company had been on its feet barely six years and had made really large profits, ten millions or more, only two years.  But by 1919 it had a dozen years of unparalleled growth behind it; it had become an institution, whose stability and continuity were assured.  In fact, the Prospective future growth was greater in 1919 than it had been in 1913.  Consider also the enormous growth of the steady and exceedingly profitable business in repair parts.  In the meantime, there had been no change in the issue of capital stock, *3770  which stood at 20,000 shares as before.  The earning power per share thus rose from $1,250. per share per annum in 1913, to $5,000. per share per annum in 1919.  7.  That is to say, the 1919 selling price of $12,500 per share was 2 1/2 times the 1919 earning power of $5,000 per share.  On the same basis the 1913 earning power of $1,250 per share discloses a market value of $3,125 per share.  8.  This last figure is however too high.  For it does not allow any discount for (1) the relatively unproven condition of the Company in 1913, or again for (2) the difference in the expectation of dividends to be paid in 1913, and in 1919.  It is elementary, that the market value of stock in the hands of minority shareholders is adversely affected by a small-dividend policy on the part of the majority in control.  So in 1919, the actual sale reflects the bulge in the value of the stock due to the victory of the minority shareholders in the litigation before mentioned; whereas in 1913 the minority faced a period of low dividends.  *1085  In view of these considerations, if the stock in 1919 was worth $12,500 a share, its market value per share in 1913 cannot fairly be placed above one-fifth*3771  of that figure, which is $2,500.  This is high, rather than low.  9.  Let us nevertheless call it $2,500 and proceed to compute the difference in taxable profits resulting to the minority on 8,200 shares sold, thus: 1913 market value of 8,200 shares sold in 1919 for$112,400,000As appraised by Treasury in 1919, $8,900 per share72,980,000By comparison with actual in 1919, 2,500 per share20,500,000Over-appraisal, free of tax, $6,400 per share$52,480,000That is:Tax was paid on $112,400,000 minus $72,980,000 or on$39,420,000Should have been $112,400,000 minus $20,500,000 or on$91,900,000The resulting underpayment of taxes by all minority shareholders together is around $35,000,000.  The corresponding underpayment by the largest indidivual minority shareholder, who was Mr. James Couzens (now Senator Couzens) of Detroit, would be about $10,000,000 to $11,000,000.  10.  But we may say, if the Treasury hadn't fixed the 1913 figure too high, the 1919 sale wouldn't have gone through.  There are two answers to this.  The first is, that it might have, for the shareholders might have concluded it was better to get what they could into tax-exempt securities*3772  at once rather than pay taxes on their future dividends.  The other answer is, What if it hadn't gone through?  Mr. Ford might have been disappointed, and the Treasury would not have at that time taken in the $20,000,000 or so that it actually collected in taxes on the understated profits of the sale instead of getting a larger sum later on the future dividends.  But such considerations do not justify Mr. Ford as one party, Mr. Couzens and his fellow minority-stockholders as another party, and the Bureau of Internal Revenue as the third party, in making a three-cornered deal based on an appraised 1913 market value of Ford Motor stock manufactured for the occasion.  Or if not made to order, then worked out by clerks inexperienced in large transactions, from whom the 1919 sale-price was sedulously concealed.  The vast extra-legal authority which public officers became used to wielding during the war, and the ingrained habit of the Bureau of Internal Revenue to assess taxes to suit themselves (ordinarily with little regard to the taxpayers' proofs that they should be less), these things may explain, or even perhaps excuse, this sort of taxation by special ukase.  But they do not justify*3773  it, and the unjustified actions of public officials do not bind their successors in office.  And, after the special pleaders have all been heard, this fact remains: These stockholders owe the Treasury $35,000,000 which the Treasury should proceed to collect from them.  11.  The present Treasury officials should be informed of the facts set forth above in order that they may corroborate (or disprove) them from the files of their predecessors.  If the facts prove to be as stated, prompt attention will be necessary, as but a short time remains (before the statute of limitations runs out) for the Treasury to start action to recover the unpaid taxes, with interest and penalties, if any.  And such action will accomplish far more than the collection of sundry millions of tax-money, for it will serve notice on wealth and influence that these things can't be done - or if they appear to get done, they won't stay done.  See next page for notes on product and income.  *1086  The notes referred to were as follows: Notes1.  Ford Motor Co. product of cars, by years; from Poor's Manual of Industrials, 1917, and Poor's and Moody's 1924; 1923 corrected, and 1924, and 1925 estimated, *3774  from data derived from automobile trade sources; all, to nearest round figures: 19251,800,000 cars241,800,000 cars232,000,000 cars221,350,000 cars211,090,000 cars201,145,000 cars1919850,000 cars18706,000 cars17735,000 cars16533,000 cars15308,000 cars1914248,000 cars1913164,500 cars1268,500 cars1134,500 cars1018,700 cars190910,600 cars86,400 cars78,800 cars61,600 cars51,700 cars19041,700 cars2.  Net income of Ford Motor Co.: published figures scattered and not always reliable; accurate figures should be taken from the Bureau's files.  The figure of income before, rather than after, income and profits-taxes is the controlling factor in making comparative evaluations of the stock for 1913 and 1919, because the taxes had already been cut in two before the summer of 1919 and it was then manifest that they would soon be further greatly reduced, as in fact happened.  116.  Under date of March 7, 1925, Commissioner Blair wrote the following letter and personally delivered it to the petitioner in Washington on that date: MARCH 7, 1925.  Hon. JAMES COUZENS, United States Senate.*3775 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.  All 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 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*3776  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.  *1087  Under the practice in force hearing to review such an assessment may be had in the Solicitor's Office, and in the event the assessment is there confirmed you will, of course, have your appeal to the Board of Tax Appeals.  Very truly yours, D. H. BIAIR Commissioner.Attached to the letter were a copy of the memorandum filed with Secretary Mellon by Thompson on March 6, and a waiver form.  117.  Commissioner Blair was accompanied by his assistant, Charles R. Nash.  Commissioner Blair wanted to persuade the petitioner to sign a waiver because it was not clear in his own mind that a tax was due.  He stated to petitioner that he did not want an assessment to be made unless there was a tax due, that he wanted to do it quietly with no publicity about it, and that if petitioner would sign the waiver he would put some of the best men in the Bureau on it, and that if they*3777  could satisfy themselves that no tax was due they would notify petitioner, and if there was he would be given a hearing.  118.  The petitioner told Blair and Nash that they "were after the wrong man and that they should go after Mr. Ford because he had a contract with him to pay the additional tax if there should be any." 119.  The petitioner refused to sign the waiver.  120.  On March 11, 1925, Acting Commissioner of Internal Revenue Nash made an assessment against the petitioner of income and profits tax of $10,861,131.53 for 1919.  On March 13, 1925, there was made a further assessment against petitioner of income and profits tax of $48,456.55 for 1919.  121.  These assessments appeared on special lists for March, 1925, each of 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*3778  placed, and that the amount chargeable to the collector is as above.  Each of these certificates was signed "C. R. Nash, Acting Commissioner of Internal Revenue." 122.  Nash had been informed by those who were investigating the cases that the statute of limitations would expire on March 13.  No jeopardy except the imminent tolling of the statute existed in his mind when he made the assessments against this and the other petitioners in these cases.  123.  Commissioner Blair had left Washington for North Carolina soon after the conversation with the petitioner and was not in Washington when the assessment were made.  *1088  124.  On January 27, 1925, the following memorandum was issued: I.T.U. MEMORANDUM NO. 21 January 27, 1925.  TO HEADS OF DIVISIONS, CHIEFS OF SECTIONS, AND MEMBERS OF INCOME TAX UNIT CONCERNED.  Cases for Solicitor to be Protected from Running of Statute of Limitations and Jacketed.  Effective immediately, cases moving to the office of the Solicitor of Internal Revenue, where the statute of limitations is about to run, must be protected and jacketed in accordance with the provisions of this memorandum.  Procedure Where a Deficiency Only is*3779  Involved.  1.  Where a deficiency in tax is found and the case is to be referred to the Solicitor for any reason whatever, if there are less than thirty days before the statute of limitations or statute as extended by a waiver will expire, an immediate assessment shall be made under the provisions of Section 274(d) of the Revenue Act of 1924, and the taxpayer notified of such action using form letter NP-3 for this purpose.  However, if the head of division or the chief of the independent section in which the case is pending desires to afford an opportunity to the taxpayer to file a waiver, he may do so, but he will be held responsible for any failure to assess a deficiency within the period, as a consequence of such action.  WHERE THE HEAD OF DIVISION EXERCISES HIS DISCRETION AND GIVES AN OPPORTUNITY TO A TAXPAYER TO FURNISH A WAIVER, THE ASSESSMENT SHALL NOT BE DELAYED TO A DATE WHICH ALLOWS LESS THAN SIX WORKING DAYS TO LIST SUCH ASSESSMENT.  WHERE A CASE IS SO HELD IT MUST BE SENT BY MESSENGER TO THE PROVING SECTION, RECORDS DIVISION, UNDER PROPER COVER MEMORANDUM IN ORDER THAT A SPECIAL LIST MAY BE AUTHORIZED.  2.  If in any case to be referred to the Solicitor's office there*3780  are more than thirty days but less than 120, the taxpayer shall be requested to furnish a waiver.  Waiver forms in duplicate (filled in and showing the symbols of the section making such request) shall be transmitted with the letter of request and the taxpayer advised that he may retain one copy.  a.  Fifteen days may be allowed taxpayers within which to furnish waivers, if located east of the Mississippi River and twenty-five days if west thereof.  Proper follow-up should be maintained in order that an immediate assessment may be made, and taxpayer advised of such assessment, using form letter NP-3, if waiver is not furnished within the time specified.  Additional time for furnishing a waiver may be allowed in the discretion of the Head of Division, in which the case is pending, but he will be held responsible for any failure to have the deficiency assessed, and must follow the provision respecting six days of allowance for making assessment as set forth above.  (1) Waivers shall not be requested from executors or administrators, or guardians, or relied on if executed by such fiduciaries.  * * * Distribution Units not to Move Cases Unless This Memorandum Complied With.  *3781  Distribution Units of the Distribution Section of the Records Division shall not accept for transmittal to the office of the Solicitor of Internal Revenue any case where the provisions of this order have not been complied with.  J. G. BRIGHT Deputy Commissioner.*1089  125.  It was considered that six days was the minimum time required for the clerical work incidental to making an assessment.  126.  Between February 15, 1925, and March 15, 1925, over 3,000 jeopardy assessments on account of the running of the statute of limitations were made by the Bureau of Internal Revenue under I.T.U. Memorandum 21.  127.  Under date of March 12, 1925, the following penciled note was sent to the Secretary of the Treasury: On train Pennsylvania Railroad System The St. Louisan The New Yorker MAR. 12, 1925.  DEAR MR. SECRETARY: I had to start for Oklahoma yesterday to be present at a Federal Court hearing Saturday.  I woke up early this morning and got to thinking about what your Internal Revenue people would base their tax levy on in the Couzens case, and so I got up in time to mail a memo., herewith, at Columbus, so as to reach you Friday.  The train is now stopping*3782  at Columbus - please excuse haste.  Respy., M. W. THOMPSON.  Attached to this letter was a pencil memorandum reading as follows: Memo. Re Ford Minority Stock MARCH 12, 1925.  1.  The 1913 value of $2,500 per share arrived at in the preceding memor may prove to be too high, also as a round figure it is not in all ways ideally suited for the base of a definite calculation of taxes.  Although in the absence of a more exact figure it would serve.  2.  But time is not available for a precise determination in the case of a shareholder who refuses to sign a waiver.  3.  In the absence of a satisfactory appraised value of stock, a taxing official will be justified in levying tax on the basis of the par value of the stock, leaving it to the taxpayer to prove another value in court if he can.  There is ample precedent for such action and the income tax law itself provides that par value shall be presumed to be the true value in certain cases.  4.  Conclusion: In the case of a Ford stockholder who refuses to sign a waiver, taxable profits on this sale of Ford Stock in 1919 should be computed upon the presumption that the value of the stock at March, 1913, was $100 per share. *3783  5.  If Senator Couzens takes his case into court, as the newspapers state he declares he will, the treasury will have no trouble in obtaining evidence of actual sales of stock that will be destructive of Mr. Roper's 1913 appraisal based on earnings.  Mr. Ford increased his holdings from 25 per cent to 57 1/2 per cent of the stock by such purchases, but Mr. Roper's clerks appear not to have been informed of this fact or of the prices and dates of the transactions.  All this can be brought out in Court upon documentary evidence and books of buyers and sellers.  *1090  128.  Under date of March 13, 1925, Deputy Commissioner James G. Bright sent the following letter to the petitioner: MARCH 13, 1925.  IT:PA-5 IIP Sen. JAMES COUZENS.  2239 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 $10,909,588.08, 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, *3784  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.  Deputy Commissioner.Respectfully, Inclosures.  Statements.  Attached to this letter was the following statement: STATEMENT IT:PA-5 IIP In re: James Couzens, 2239 Dime Bank Building, Detroit, Michigan.  1919 Deficiency in tax $10,909,588.08 An adjustment of your 1919 individual income tax return discloses the above deficiency, which is computed as follows: Block D, as reported 2180 shares Ford Motor Company stockSale price$29,308,857.90March 1, 1913 value20,686,761.20Profit reported$8,622,096.70March 1, 1913 value reported$20,686,761.20March 1, 1913 value corrected5,742,120.00Profit understated$14,944,641.20Normal and surtax at 73%Additional tax$10,909,588.08*3785  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.  *1091  129.  The additional assessments of $10,909,588.08 were 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.  130.  Demand was thereafter made upon petitioner by the collector of internal revenue at Detroit that he pay the tax so assessed.  Thereafter, within ten days, the petitioner filed in the office of the collector of internal revenue at Detroit a claim for abatement of the assessments, and filed therewith his bond as required by law in the sum of $12,000,000.  131.  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 the letter of Commissioner Blair to the petitioner dated March 7, 1925.  132.  Under date of April 20, 1925, petitioner's*3786  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 three letters dated May 16, 1925, petitioner's attorney renewed these requests, requested confirmation of a personally expressed refusal to petitioner to examine the Ford files, and further requested photostatic copies of certain papers relating to the matter.  By two telegrams dated June 15 to the Commissioner the requests were again renewed.  On June 15 the Solicitor advised petitioner's attorney by telegram that the data requested would be mailed on the following day.  133.  Under date of June 16, Acting Commissioner of Internal Revenue Nash wrote a letter to petitioner advising him that the value of $2,634 was computed as follows: Average annual income for the years 1910, 1911 and 1912$8,602,000.Average annual income for the years 1916, 1917 and 191843,500,000.Value upon the basis of the sale in 1919, 20,000 shares at $13,320266,400,000.*3787  Average income prior to sale, $43,500,000, is to the total value as at the time of sale, $266,400,000, as the average income prior to 1913, $8,602,000, is to the fair market value of total stock as of March 1, 1913, ($52,680,000).  Fair market value as of March 1, 1913, of 20,000 shares, (shown above)$52,680,000.Fair market value of each share2,634.134.  On the same day Acting Commissioner Nash wrote a letter forwarding photostatic copies of certain documents and advising petitioner that the basis used by Talbert in computing a March 1, 1913, value of $9,489.34 a share was as follows: Actual earnings for 1912$14,119,989.87Estimated earnings for 1913, based on earnings for 2 months (January 1 to February 28, 1913, $3,972,896.17)23,837,377.0237,957,366.89Average annual earnings of 20,000 shares18,978,683.45Average earnings of each share948.934Capitalized at 10%9,489.34*1092  135.  On the same day Acting Commissioner Nash in a letter to petitioner confirmed the Bureau's refusal to grant him permission to examine the returns of the Ford Motor Co. for the years prior to and including 1919.  136.  On June 29 and*3788  30, 1925, the petitioner had hearings by the Bureau of Internal Revenue on his claim for abatement and on June 29, filed with the Commissioner evidence and data which petitioner claimed justified and required the sustaining of the claim for abatement.  137.  Under date of November 3, 1925, the Commissioner sent to the petitioner the following letter, which letter forms the basis of this proceeding: Nov - 3 1925 Hon. JAMES COUZENS, 2123 First National Bank Building, Detroit, Michigan.MY DEAR MR. COUZENS: You are advised that your claim for the abatement of $10,909,588.08, additional individual income tax assessed for 1919, has been examined.  The basis of the claim is, in effect, that the value as of March 1, 1913, of the stock of the Ford Motor Company sold by you in 1919 is $9,489.34 instead of $2,634.00 a share as determined by the audit of this office as stated in office letter dated March 13, 1925.  You are further advised that a reexamination of the evidence on file in this office discloses the maximum fair market price or value of the said stock as of March 1, 1913, was not in excess of $3,547.84.  You are further advised that a recomputation of the*3789  profit wherein the March 1, 1913, value of $3,547.84 is used in connection with determining the profit from the sale of 2,180 shares of the stock in question, discloses the amount to have been overstated $1,992,171.20 in the former audit, dated March 13, 1925.  The normal tax at 8% and the surtax at 65% on the amount of decreased profit of $1,992,171.20 is $1,454,284.98.  In view of the foregoing, your claim will be allowed for $1,454,284.98.  You are further informed that 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 deficiency in tax as assessed and forward it to the Commissioner of Internal Revenue, Washington, D.C.  In the event that you acquiesce in a part of the determination, the agreement should be executed with respect to the items agreed to.  Sincerely yours, D. H. BLAIR Commissioner.Enclosure: Agreement*3790  - Form B.  *1093  138.  Under date of November 7, 1925, petitioner's attorney requested information as to the basis by which the March 1, 1913, value of the Ford stock was fixed at $3,547.84 a share, what factors were taken into account and figures were used in making the computation.  139.  Under date of November 19, 1925, Commissioner Blair replied as follows: NOVEMBER 19, 1925.  SOL: Hon. JAMES COUZENS, 2123 First National Bank Building, Detroit, Michigan.SIR: Receipt is acknowledged of a letter, dated November 7, 1925, from Mr. Arthur J. Lacy, wherein it is requested that you be furnished with information as to the following: The basis and method by which the March 1, 1913 value of the Ford Motor Company stock is now fixed at $3,547.84 a share, and what factors were taken into account and what figures were used in making that computation.  In compliance with this request, you are advised that the maximum value of $3,547.84 for each share of Ford Motor Company stock as of March 1, 1913, has been determined by the application of the method outlined in a memorandum of the Committee on Appeals and Review (A.R.M. 34, (third method), *3791 2 C.B., page 31) 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 intangibles$7,265,735.35Intangibles - excess earnings capitalized at 15%$48,438,235.67Add: net tangibles on March 1, 191322,518,635.02Total value of 20,000 shares$70,956,870.69Value of each share$3,547.84D. H. BLAIR, Commissioner.140.  Stock in the Ford Motor Co. was also sold in 1919 by John F. Dodge, Horace E. Dodge, Horace H. Rackham, 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 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*3792  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 Anderson, Rackham, and the Grays and a notice of deficiency was sent to Mrs. Hauss.  In April, 1925, notices of deficiency were *1094  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 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.  141.  The Ford Motor Co. is a Michigan corporation organized on June 18, 1903, with an authorized capital stock of $150,000, consisting of 1,500 shares of common stock having a par value of $100 each.  One thousand shares were issued*3793  as fully paid in cash and property as follows: Cash$28,000Notes and accounts receivable21,000Machinery10,000Contracts1,000Patents40,000100,000142.  The original stockholders, their shares, and payments were as follows: StockholdersSharesPaymentsMachinery$10,000Henry Ford255Alex Y. Malcolmson (A copartnership.)255Contract1,000Patents40,000John S. Gray105Cash10,500John F. Dodge503-month note5,000Horace E. Dodge504-month note5,000Albert Strelow50Cash5,000Cash3,000Vernon C. Fry50Note2,000Charles H. Bennett50Note5,000Cash3,500Horace H. Rackham50Open account1,500John W. Anderson50Cash5,00025Cash1,000James Couzens254-month notes1,500Charles J. Woodall10Two 4-month notes1,000143.  The authorized capital stock was increased on November 9, 1908, to $2,000,000, and the number of shares to 20,000.  Nineteen thousand shares were then issued as a stock dividend.  144.  John S. Gray, Alex Y. Malcolmson, Henry Ford, John F. Dodge, and John W. Anderson constituted the first board of directors.  The*3794  first officers were John S. Gray, president, Henry Ford, vice president, James Couzens, secretary, and Alex Y. Malcolmson, treasurer.  145.  From April 1, 1909, to May 26, 1915, Henry Ford owned 58 per cent of the stock.  From May 26, 1915, to July 1, 1919, he owned 57 per cent.  He controlled the business.  *1095  146.  The Ford Motor Co. began business on Mack Avenue, Detroit, Mich., in a two-story building 90 by 150 feet.  The car first produced consisted largely of parts which had been manufactured elsewhere by others and which were assembled at the plant.  Dodge Brothers manufactured the motors, frames and axles.  The Ford Company did some painting of the assembled cars.  It also carried on some experimental work, under the direction of Henry Ford, assisted by Harold Wills, Peter Martin and others.  147.  Its business increased, and in the latter part of 1904 it moved to Piquette Avenue, into a four-story building 65 by 450 feet.  In this plant the company manufactured some parts.  The experimental division was four or five times as large as it had been at the Mack Avenue plant.  148.  In the early days of its existence, the company experimented with various models, *3795  called A, B, C, K, N, R, and S, which were produced by it in the order named.  Model K was a six-cylinder automobile.  149.  From the beginning, it was Henry Ford's desire to manufacture one kind of car simply and cheaply, and in large quantities for sale to a large market.  In 1903 he said to John W. Anderson, "The way to make automobiles is to make one automobile like another automobile, to make them all alike, to make them come through the factory just alike - just like one pin is like another pin when it comes from a pin factory, or one match is like another match when it comes from a match factory." 150.  For about two years prior to 1908 the object of the experimentation had been to standardize one model, and make it a universal car.  The purpose of this was to manufacture in large quantities, reduce costs and price, and thus increase demand.  In that year, as a result of these experiments, the company brought out Model T, and thereafter, until the time of the hearing of this proceeding, production was confined exclusively to this model.  151.  Model T was a small, light-weight car, the touring car having a capacity of five passengers and the runabout of two.  It had a*3796  100-inch wheel base and a 56-inch tread; 20-horsepower, water-cooled motor with 4 cylinders of 3 3/4-inch diameter and 4-inch piston stroke all cast in one block; a Holly carburetor; a vertical tube radiator; a 10-gallon gasoline tank, which gave it a touring radius of from 160 to 180 miles; two sets of brakes, one operated by a foot lever acting on the transmission and the other by a hand lever acting on the rear axle.  152.  The principal distinguishing features of Model T were the planetary transmission, a rear axle of unusual design, the magneto built into the flywheel as an integral part of the motor, the use of vanadium steel, and its relative lightness and power.  153.  The planetary transmission provided two speeds forward and one reverse and it was easy to operate.  The three-point suspension *1096  principle enabled the car to accommodate itself to inequalities in the road, distributing the strain, and avoiding fracture of the frame.  This principle, however, was not unique to the Ford car.  Incorporating the magneto as a part of the flywheel reduced the weight of the car.  Vanadium steel was used in the car to make it stronger and lighter.  This increased the ratio*3797  of the horsepower to the weight.  No other company was using vanadium at that time.  Decreasing the weight made the car cheaper to operate.  154.  Model T was simple of design, and this made it easy to operate and easy to maintain and repair.  The parts for it were so precisely manufactured that a number of cars could be disassembled, the parts mixed, and the same number of cars rebuilt from the parts.  This could not be done with any other car in the low-priced field in 1913.  155.  In April, 1907, the company had acquired a 57-acre tract of land at Highland Park, Mich., for $81,225.  After the adoption of Model T as the company's standard product, plans were laid and arrangements made for the construction of a new plant on this property.  Construction of this plant was begun in 1909.  On December 18, 1909, the board of directors passed a resolution authorizing the construction of a foundry on this property at a cost not to exceed $40,000.  The plant was completed, occupied and operated toward the end of 1910.  156.  The Highland Park plant was located on a belt line connecting with most of the railroads entering Detroit.  These railroads served all sections of the country. *3798  157.  The floor space in this plant at the end of 1910 was 597,000 square feet, and at the end of 1912 and on March 1, 1913, was 1,113,400 square feet.  In 1914 there was a floor space of approximately 1,947,000 square feet.  Floor space is an indication of production capacity.  Doubling the floor space more than doubles the production capacity.  The production capacity of the plant as of March 1, 1913, was at least 200,000 cars.  158.  The Highland Park plant was designed, constructed and equipped for the production of Model T automobiles in large quantities.  It was unique in the automobile industry.  In the Piquette Avenue plant, as in other ordinary factories, machines, such as drill presses or milling machines, were located in groups according to type or class of operation, and the material in the process of manufacture was conveyed to the machines.  The continuity of manufacture was interrupted and made to conform to the location of the stock room, machines and departments.  The Highland Park plant was designed to avoid this by having the machines and employees placed in such sequence that the material would move in a predetermined line of production without interruption*3799  or loss of time from one operation to another from the raw material to the finished product.  For example, in the connecting rod production line a babbitting furnace *1097  was placed between two machine tools.  This system was known as line production.  The Ford Company was the first to use it.  It reduced inventories, eliminated storage rooms and the transportation of materials from one department to another.  It materially lowered the cost of production.  159.  The company was the first to use conveyors to bring material to workmen instead of having the workmen go after the material.  It sought to keep the material three feet off the floor at all times.  It developed systems already in use of power-driven and gravity conveyors such as cranes, chain conveyors, and slideways to carry material from one department to another and from one man to another.  These lowered cost.  160.  In designing the Highland Park plant the company contemplated the installation of special machinery and equipment.  Money was freely spent for improved machines which would effect economies.  A large shop was devoted to experimental work where new special machines and special fixtures were designed*3800  and made.  Each manufacturing operation was studied and special machinery was designed to perform that operation.  The ordinary factory tool room was devoted almost entirely to replacing and sharpening tools used for standard machines, whereas in the Ford plant almost all the work in the experimental tool room was devoted to making new tools and jigs for both standard machines and special Ford machines and to devising new ways of using old machines and ways of improving the special machines they were developing.  New machines were being developed constantly to reduce the operations to the smallest possible unit.  After such a machine was developed the operation was performed by unskilled labor, which could be trained in a few days.  This lowered cost.  New improvements and developments which reduced costs were installed every year and there were always prospects of further reducing costs by further efficiencies.  161.  In 1913 the plant was equipped with a large number of very expensive single-purpose machines and unique manufacturing contrivances and fixtures.  162.  Among the special machines developed and used by the company on March 1, 1913, were multiple drilling machines. *3801  These drilled simultaneously 45 holes in one cylinder block from four directions in one and one-half minutes.  It was unnecessary to take the casting out and turn it bottom side up or around as would be required in using a standard machine.  The use of these machines secured accuracy in drilling, avoided loss of castings, reduced the time of operation, and took up less floor space.  This particular machine was adaptable for use only on Model T motors.  Similar principles were utilized in other operations, such as reaming and tapping.  163.  A special milling machine permitted milling 12 cylinder blocks in one operation.  Its use was possible only in quantity production.  *1098  A special radiator assembly machine inserted many tubes through a large number of punched sheets in one stroke of a press.  Special machines were used at that time for painting wheels; the entire wheel was immersed in paint and was dried by spinning, the excess paint being thrown off by centrifugal force.  164.  Bliss presses were used, which pressed the forms of crank cases out of flat steel plates, and which in one operation formed fender plates from rectangular pieces of steel.  Other automobile*3802  plants were manufacturing crank cases of cast aluminum or cast iron.  These were the first steel crank cases to be used on motor cars.  By making its crank cases of sheet steel the weight of the car was reduced and its efficiency increased.  Because of the great cost of Bliss presses they could be used economically only where there was quantity production and where they would not stand idle.  Two or three of these machines were in use in 1913 and no other company was using them.  They lowered cost.  165.  The Highland Park plant had a research department headed by Harold Wills and William H. Smith.  High-speed steels were developed.  Vanadium, tungsten and other compounds of steel were used in making high-speed steel for use in machine tools, such as lathes and milling machines, to increase the speed at which work was being done.  Such a steel has the ability to hold a cutting edge while red hot.  No other company was using vanadium at that time.  The use of high-speed steel increased production on machine parts about one-third.  Such steel was in use prior to March 1, 1913.  166.  On March 1, 1913, the company had its own furnaces for heat-treating steel.  Some other automobile*3803  manufacturers had case-hardening furnaces, but did very little heat treating.  It was an expensive process.  Ford was not satisfied with the steel purchased from the steel mills, and it was well known that he was conducting experiments on steel and its physical qualities.  The heat-treating furnaces were connected with a pyrometer room.  The temperatures in the furnaces were read in this room, and the furnaces controlled from that point in accordance with the formula supplied by the heat-treating engineer.  The control was exercised by means of lights, which were watched by unskilled workmen.  167.  The company, by reason of its large volume of business, used special machines to a greater extent than other companies could.  Among the special machines were piston-turning machines, designed particularly for Ford work, and many Landis crankshaft grinders.  The latter were expensive, and few companies had more than two.  In the engine-testing department the company used electrical devices for testing the effeciency of motors by measurement of friction, making it unnecessary to put the motor in a chassis and run it over the road.  *1099  168.  All machines were grouped more closely*3804  together in the Ford plant than in the ordinary factory.  In many instances to accomplish this the beds of lathes and of milling machines were cut off.  This close grouping economized operation.  169.  In every detail the factory was laid out on a large production scale.  It had been tooled regardless of cost, having in mind only the greatest effeciency, and was laid out with the idea of taking advantage of every possible economy and of producing the quantity desired at the lowest possible price.  At that time no other company was able to tool in the same manner or manufacture as cheaply.  The plant was recognized as the greatest advance in manufacturing methods in the country at that time, and was the best automobile producing layout in the United States.  170.  The methods used by the company in 1913 have since become recognized not only in the automobile industry but in other industries.  171.  In 1910 the Ford Motor Co. was purchasing its bodies, wheels, and radiators from other manufacturers.  172.  About the middle of June, 1912, plans were started for buildings known as W and X, to be erected at Highland Park.  These plans were approved by Henry Ford in August, 1912, *3805  were completed by the Ford organization in 1912, and were turned over in April, 1913, to the architect who superintended the construction.  At the end of 1912 it was expected that these buildings would double production capacity.  Construction was started in May, 1913.  In 1912 railroad tracks were rearranged to provide shipping facilities for these proposed buildings.  173.  Each of these buildings was a six-story building 840 feet long by 60 feet wide, and each had a floor space of 348,800 square feet or a total of 797,600 square feet.  They were separated by a craneway 800 feet long by 40 feet wide which was roofed with glass.  A light well was thus provided for the length of the buildings.  The craneway side of each building was left open without a wall.  Heating plants and air washers were installed on the roofs and the heated or washed air was forced through the buildings by means of hollow columns and the buildings were thus ventilated and the temperature regulated.  As the air escaped from the open sides of the buildings it automatically provided heat and ventilation for the craneway without extra expense.  In these respects the buildings were unique in factory construction. *3806  A railroad track entered the craneway, and projecting platforms were built at several places in each floor of these buildings in such a manner that materials could be loaded or unloaded at any point on any floor in either building by means of a crane.  The buildings were designed so that material could be hoisted as near the roof as possible and could be worked down, during the manufacturing operation.  Holes were cut through the floors, and *1100  parts which started in the rough at the top floor could pass by gravity down through chutes, conveyors or tubes and become a finished article on the ground floor.  174.  These buildings were very efficient, and in 1913 no other automobile company had such buildings.  175.  The units W and X, when originally planned in 1912, were only two of a contemplated group of seven units.  The other units were to follow.  Only four units, however, were ultimately erected.  176.  The plant of the John Keim Mills at Buffalo was acquired sometime prior to 1911.  This plant had large Bliss presses and had been manufacturing rear axle housings, crank cases and transmission covers of pressed steel for the Ford Company.  It was thought advisable*3807  to buy the plant, tear down the machines, ship them to Detroit and erect and put them into operation there, rather than to take the time to have them built new; and this was done.  177.  The following are the minutes of a special meeting of the stockholders of the company on June 22, 1911: SPECIAL MEETING of the Stockholders of the Ford Motor Company held at the Company's offices, at four P.M., Thursday, June 22, 1911: in pursuance to call made June 15th, 1911: PRESENT: Henry Ford, John F. Dodge, H. E. Dodge, H. H. Rackham, J. W. Anderson, David Gray, J. Couzens representing all the stock of the Company.  Moved by David Gray, and seconded by J. F. Dodge, that WHEREAS the John R. Keim Mills Inc. of Buffalo, New York, with a capital stock of $350,000, has offered to sell to this Company all of the assets of that Company, at its book value, which upon audit and examination by Hawkins-Gies and Company, Public Accountants, shows same to be worth $164.15 per share, or a total net worth of $574.529.08, therefore BE IT RESOLVED that this Company purchase said assets at the above mentioned figures, and the officers are hereby instructed to obtain same, and turn into the Ford Motor*3808  Company, and at the same time arranging for the dissolution of the John R. Keim Mills Inc.: payment for said assets to be made to the individual stockholders upon surrender of stock certificates.  Carried unanimously.  Moved by H. H. Rackham, and seconded by H. E. Dodge, that WHEREAS it has been recommended by the Directors of this Company that it appears to its best interests that the steel plant in Buffalo, formerly the John R. Keim Mills Inc., be removed to Detroit, therefore, BE IT RESOLVED that the officers are hereby authorized to make such arrangements as in their opinion seem necessary to move said plant to Detroit, and that they are further authorized to dispose of the plant and other assets in Buffalo that are not to be moved to Detroit, at such prices, and on such terms, as appear in their discretion to be to the best interests of the stockholders of this Company.  Carried unanimously.  Moved by J. F. Dodge, and seconded by David Gray, that WHEREAS it has been reported by the Directors of this Company that on account of the removal of the Buffalo plant, formerly the John R. Keim Mills Inc., and that other plans have developed for the manufacture of our own bodies, *3809  therefore, BE IT RESOLVED that the officers are authorized to make such extensions and additions to the plant in the way of buildings and equipment as may seem necessary - it being represented that such extensions and improvements will not exceed the sum of $500,000.00.  Carried unanimously.  *1101  Moved by David Gray, and seconded by J. W. Anderson, THAT the officers be and are hereby authorized to sell the plant of this Company located at Beaubien and Piquette Avenues, at the best price obtainable.  Carried unanimously.  On motion duly moved and seconded the meeting then adjourned.  178.  At the time the plant was acquired, many of the former executives of the Keim plant came into the Ford organization, including William H. Smith, Charles Morgana, John Findlater, W. E. Davis, E. A. Walters, one Carnegie, John R. Lee, and W. S. Knutson.  Lee and Smith were the chief men in the company and were both practical men.  These men were valuable additions to the executive staff of the Ford Motor Co.  179.  Distribution methods in the automobile industry were divided between marketing through distributors throughout the country and marketing through one's own branches and*3810  assembly plants.  The policy of the Ford Motor Co., established early in its history, was to distribute through branch houses and assembly plants, under which were dealers and subdealers.  The branch-house system enabled the company to control prices and service throughout the country.  This was important because of the volume of the company's business and because of the service required on the Ford car.  180.  In 1912 plans were being made for branch houses in practically every important city in the country.  They were located at freight rate-breaking points so as to reduce the cost of shipment.  Branch houses were in existence in March, 1913, in the following cities: American:AtlantaBostonBuffaloCambridge Charlotte, N.C.ChicagoCincinnatiClevelandColumbus Dallas DenverDetroit Fargo Houston Indianapolis Kansas CityLong Island CityLos AngelesLouisville Memphis MinneapolisNew YorkOklahoma City Omaha PhiladelphiaPittsburghPortland, Oreg. St. LouisSt. Paul San FranciscoSeattle Foreign:Calgary, AlbertaHamburg, GermanyHamilton, OntarioLondon, England London, OntarioManchester, England*3811  Melbourne, Australia Montreal, QuebecParis, FranceSaskatoon, SaskatchewanToronto, OntarioVancouver, British ColumbiaWalkerville, OntarioWinnipeg, ManitobaThis was more than any other company had at that time.  *1102  181.  The total sales of the company, the sales made by branches, and the ratio of branch sales to total sales are as follows: Fiscal period ended - Total salesBranch salesPercentageSeptember 30, 1909$9,041,290.55$5,628,024.5362.2191016,711,299.4511,181,998.8866.9191124,658,787.7517,111,888.8769.4191242,477,677.2230,888,135.0572.7191389,108,884.5670,251,786.7878.71914119,489,316.9995,124,724.6779.6July 31, 1915121,130,859.63104,622,232.6886.41916206,867,327.46181,628,851.4387.8182.  An assembly plant is a miniature manufacturing plant located to serve a particular territory.  The Ford assembly plants made automobiles from parts and motors shipped from the main factory.  Each assembly plant made, painted and trimmed its own automobile bodies.  Only large-quantity production justifies the use of the assembly-plant system.  183.  On July 28, 1909, the*3812  board of directors authorized the purchased of a site in Kansas City, Mo., and the building of an assembly plant thereon.  At the same time provision was made for a branch selling and distributing house in London, England.  On March 4, 1910, the board of directors authorized the purchase of a site at Long Island City, New York, and directed that plans for the erection of a building thereon be prepared.  184.  The minutes of a meeting of the board of directors on May 1, 1912, include the following: Pursuant to a resolution passed by the Board of Directors at a meeting held December 12th, 1911, in which the Secretary and Treasurer was authorized to go to California, with full authority to make arrangements by purchase, lease or otherwise for Branch Houses, Warehouses, Assembly Plants, or such other facilities as seemed necessary, the Secretary and Treasurer made such a trip and reported to the Directors the following: "Due to the distance between the Factory and Pacific Coast points, and the apparent possibilities for large business on the Pacific Coast, it was thought advisable to purchase land outright for the purpose of building thereon suitable buildings for the Assembling*3813  of our cars out there, instead of at the Factory, and for the further purpose of giving service to our customers, and the general handling of our business at the various points designated.  We, therefore, purchased property at Los Angeles, located on the Southern Pacific Railway, between Los Angeles and Pasadena, aggregating about five acres, at a cost of about $7,000.00, but this was only done because it appeared we would not be able to get Los Angeles property to suit our purpose, but afterwards it was found possible to get property which would better suit our purpose located right in the City, at Seventh and Santa Fe, at figures approximating $93,000.00.  At San Francisco certain property was purchased along Harrison and Treat Streets, between Twenty-first and Twenty-second Streets, and arrangements made with our Manager and Attorney to close up for certain other properties in the same locality.  These have not all been completed, but when completed will approximate the cost of about $100,000.00.  The North Pacific Coast being so far removed from California, it was found impracticable to distribute to that territory from any of the California points *1103  so that a piece*3814  of property was purchased in Portland, located at Seventh and Division Streets, approximating 48,000 square feet, and located on the Southern Pacific Railway, for $30,000.00.  Owing to the rivalry between Seattle and Portland, and the two distinct territories served by these cities, it was deemed advisable to purchase real estate in Seattle as well, although these cities are located but about one hundred and eighty-seven miles apart.  Negotiations have not been completed at Seattle, but when completed the land will cost approximately $40,000.00 to $60,000.00." After the above report was rendered, it was moved by Director David Gray, and supported by Director H. H. Rackham: THAT the action of the Secretary and Treasurer in making the purchases referred to be and the same is hereby ratified.  Carried.  Moved by Director David Gray, and supported by Director John F. Dodge that the Secretary and Treasurer be and is hereby authorized to proceed to conclude the negotiations started for the purchase of property in San Francisco and Seattle, which have not as yet been completed.  Carried.  The Officers reported to the Directors that it seemed desirable to complete arrangements for*3815  carrying out the plan outlined for the handling of our business on the Pacific Coast in certain other large centers of distribution: particularly points were our leases are now running out.  After a thorough discussion of the matter, it was deemed advisable to have such a plan carried out, and to recommend the same to the Stockholders, together with a recom mendation that the Directors be permitted to spend Fifteen percent of the net earnings of the Company each year, beginning with October 1st, 1911, and until further advised, for the purpose of developing this plan.  It was moved by Director David Gray and supported by Director H. H. Rackham that the above recommendations be submitted to the stockholders at the Meeting called for this day.  Carried.  185.  At a special meeting of the stockholders held on the same day the directors were - empowered to spend in the development of this plan an amount not to exceed fifteen percent of the net earnings of the Company each year, beginning with October 1st, 1911, and until otherwise instructed by the stockholders.  On motion of Director John F. Dodge, supported by Director David Gray, the above resolution was unanimously adopted.  *3816  186.  At a second meeting of the board of directors held on the same day, the motion was carried that - The officers be and are hereby authorized to proceed with the development of this plan within the scope of said resolution, and be prepared to report to the Directors the work accomplished along this line from time to time, as required by them.  187.  At that time it was estimated that 15 per cent of the earnings would take care of future expansion.  188.  The assembly-plant system was regarded as one of the foundation stones of the company's future development and the plans for it were put into effect and operation as rapidly as possible.  This was an unusual plan at that time and promoted the business.  The two experimental assembly plants at Kansas City and Long Island had been proven to be satisfactory and this plan was the result.  189.  In July of 1912 plans had been made for assembly plants in Seattle and St. Louis, and during the year 1912 plans were drawn for twelve or thirteen assembly plants to be built as soon as possible.  *1104  190.  On March 1, 1913, arrangements were being made to complete as fast as possible assembly plants in all places which had*3817  been decided upon at that time.  191.  On April 15, 1913, the treasurer reported to the board of directors the following estimated cost of the erection of various assembly plants in addition to those already in existence: Boston$400,000.00Chicago414,654.00Denver229,640.00Kansas City addition120,000.00Long Island addition185,032.00Los Angeles271,435.68Memphis186,306.00Minneapolis300,000.00Philadelphia$400,000.00Portland130,000.00St. Louis230,000.00St. Paul56,000.00San Francisco214,955.00Seattle230,000.00Total$3,368,022.68192.  At the same time the treasurer reported the purchase of real estate in the following cities at the costs set forth: Boston$89,785.06Chicago176,331.09Denver16,025.50Detroit, part 2/23/10, bal. 191334,832.55Long Island, part 6/27/10, bal. 1913149,033.47Los Angeles101,895.80Memphis38,295.00Minneapolis66,803.23Philadelphia, "about to be closed"$167,000.00Portland30,026.50St. Paul10,199.43St. Louis58,629.28San Francisco101,736.95Seattle80,177.35Kansas City, purchased 8/27/0917,901.68Total1,138,672.89193.  Building*3818  contracts were let for the construction of assembly plants in the following cities, and the buildings were occupied on the dates shown: LocationContract letOccupiedDetroit, MichJune 8, 1910Jan. 25, 1914Long Island, N.Y.Aug. 31, 1910July 1, 1911Memphis, TennSept. 16, 1912Nov. 21, 1913Los Angeles, CalifDec. 18, 1912Nov. 9, 1913Denver, ColoDec. 31, 1912Nov. 25, 1913Chicago, IllJan. 25, 1913Oct. 15, 1913Portland, OregApr. 9, 1913Jan. 1, 1914Kansas City, Mo1 May 10, 1913Oct.  , 1910St. Louis, MoMay 12, 1913Apr. 6, 1914Cambridge, MassJune 11, 1913Apr. 24, 1914Seattle, WashJune 14, 1913Feb. 1, 1914Minneapolis, MinnAug. 4, 1913Dec. 1, 1914Dallas, TexSept.15, 1913July 11, 1914Philadelphia, PaSept. 30, 1913Sept. 1, 1914Houston, TexOct. 10, 1913July 2, 1914Columbus, OhioOct. 30, 1913June , 1914San Francisco, CalifDec. 26, 19131 Oct. 10, 1913Indianapolis, IndApr. 15, 1914Feb. 2, 1915Atlanta, GaApr. 27, 1914Mar. 1, 1915Cincinnati, OhioMay 8, 1914Apr. 4, 1915Cleveland, OhioJuly 29, 1914Aug. 1, 1915Buffalo, N.YFeb. 6, 1915Nov. 29, 1915Louisville, KyMar. 9, 1915Oct. 1, 1915Milwaukee, WisJuly 3, 1915Not shown.Washington D.C.July 31, 1915Not shown.Oklahoma City, OklaSept. 7, 1915Not shown.Omaha, NebrSept. 9, 1915Not shown.Pittsburgh, Pa1 May 4, 1919Feb. 15, 1915194.  On January 28, 1916, the vice president reported to the board of directors that, pursuant to the resolution passed by the stockholders on May 1, 1912, expenditures from October 1, 1912, to December 1, 1915, amounted to $13,084,405.74.  195.  The assembly-plant system brought about cheaper and more efficient practices in connection with railroad transportation.  *1105  Knocked-down automobiles could be loaded more heavily than if set up.  Straight carloads of parts took lower class rates and lower aggregate charges, and made available ordinary freight cars instead of special cars.  These practices also reduced the cost of loading and handling, and made diversion and reconsignment more practicable and available.  By having parts shipped directly from other manufacturers to assembly plants, freight charges and handling costs were lowered.  196.  The price of the automobile to the buyer was f.o.b. Detroit.  To this price an amount was added equivalent to the freight charge on each automobile set up as under the old system of shipping.  197.  The assembly-plant system enabled the company to accumulate stocks of parts at the various plants.  This*3820  permitted production during those parts of the year in which business was slow, eliminating the sharp curves of production.  It made available more storage room at the Highland Park plant formerly required for assembled machines.  198.  The assembly plants established immediate sources of supply in territories in which they were located.  Dealers were furnished stocks of parts and were enabled to drive cars to their places of business without handling by freight, and purchasers could secure immediate supplies in case of broken parts.  199.  At March 1, 1913, carload shipments of parts were being made to the assembly plants at Kansas City and Long Island, which were the only points at which such plants had been completed.  To all other points cars were shipped completely assembled.  No other company had assembly plants on March 1, 1913.  200.  The company standardized its containers to handle fixed quantities of parts.  These containers made possible a sight count, eliminated count in and out of the receiving, inspection, and stock rooms, respectively, and into the assembly room, and brought about savings in shipments to branches throughout the country.  201.  The company had*3821  a large number of dealers or agencies.  Ford cars sold with the least sales resistance and offered an inviting field for dealers.  The dealers were under the jurisdiction of the branch houses.  All contracts with them were made by the home office.  They were selected with great care as to their financial position, the character of buildings they occupied, and their standing in the community.  Road men investigated these dealers very carefully, and compared them with other dealers in the same territory.  They were allowed to carry only Ford cars.  Very close supervision was maintained over the dealers.  The control extended to the appearance of the salesroom.  Accessories were not permitted to be sold in the salesrooms, so the attention of a possible purchaser of a car would not be distracted.  *1106  202.  Dealers were required to carry an adequate stock of the parts which were most in demand.  This enabled prompt service and prompt repairs to the owner.  203.  In some cases it was the policy of the company to "break down" territory by reducing the size of the territory covered by a particular dealer's contract.  The United States was analyzed by counties and townships.  If*3822  any county dealer did not properly work the townships in his territory, the company eliminated such townships from his contract and appointed independent dealers to take such territory.  The same plan was applied in cities by zones.  A city was divided into blocks and a certain number of blocks assigned to each dealer.  This was an intensive method of retail selling, covering an entire city.  This expansion plan of breaking down territory and increasing the number of dealers was one of the features of the Ford selling plan prior to March 1, 1913.  204.  Having a great number of agencies, the company had a service ability greater than that of any other company at that time.  No other company had a system of supervision of service comparable to it.  Road men working from the home office and from branch houses checked tools used by dealers in their service departments, taught them simpler operations for quick work in cars, and supplied lits of tools required for repairing Ford cars advantageously and economically for the buyers.  These men demonstrated to country dealers the best methods of selling cars.  They also taught dealers how to handle advertising copy, how to arrange showrooms, *3823  how to keep books, and how to handle stocks of parts.  The road men rendered detailed reports covering every phase of the agents' business.  These reports were filed in the hom office.  205.  The company made it easier for the dealers to borrow money from local banks by withdrawing its funds from the large banks and depositing them in the small local banks throughout the country on condition that those banks would lend money to the dealers.  All dealers were given the same discount.  No special discounts were given.  Price lists of parts were furnished to customers and dealers.  206.  On March 1, 1913, the Ford Motor Co. had nearly 7,000 dealers under the direction of Norval A. Hawkins, general sales manager.  It was the largest automobile sales organization in the world.  At the end of December, 1912, the organization covered practically every town and city in the United States down to those with a population of 2,000 or less.  The company had agencies in all parts of the world.  It had more representatives - more agents, more dealers, and more salesmen - coming in contact with the public than any other automobile company.  207.  From practically the time of its organization*3824  in 1903 until 1911 the Ford Motor Co. was involved in litigation in the courts over its alleged infringement of the Selden Patent, so-called, and was engaged in a controversy before the public wherein it and the Selden *1107  Patent interests exchanged threats and challenges through the medium of advertisements in newspapers and automobile trade journals.  208.  On November 5, 1895, the United States Patent Office issued to George B. Selden letters patent No. 549160 covering, broadly speaking, a combination of three elements of the road engine - the carriage, the driving mechanism, and the engine.  These letters patent were assigned by the patentee to the Columbia & Electric Vehicle Co. on November 4, 1899.  On June 26, 1900, the Columbia & Electric Vehicle Co. assigned them to the Electric Vehicle Co.  Thereafter various suits were instituted by the Electric Vehicle Co. and George B. Selden against various manufacturers, dealers, owners and users of gasoline propelled motor vehicles, and various consent and pro confesso decrees sustaining the patent were secured.  209.  On March 5, 1903, the Association of Licensed Automobile Manufacturers was organized, the Electric*3825  Vehicle Co. licensing each of the members of that organization under the Selden Patent.  The board of managers of this association was given the power to determine to whom licenses should be granted and to make rules and regulations for carrying on business under the licenses, and to provide penalties for any violation of such rules or regulations, including the power to cancel the license.  210.  The stockholders of the Ford Motor Co. were aware of the Selden Patent from shortly after the organization of the company but were advised that it was no good and decided not to join the Association of Licensed Automobile Manufacturers and to take whatever consequences ensued.  The following is an extract from the minutes of the annual meeting of the stockholders of the company on October 15, 1903: J. Couzens moved and C. H. Bennett seconded that a committee be appointed by the President to confer with Messrs.  Parker & Burton relative to action to be taken regarding Licensed Association, with Power to act.  Carried.  Committee - John F. Dodge, J. W. Anderson, J. Couzens, H. Ford and John S. Gray 211.  In the summer of 1903 articles appeared in the automobile trade journals and in the*3826  daily press suggesting the inadvisability or purchasing cars manufactured by manufacturers who were not oper ating under licenses granted by the Association of Licensed Auto mobile Manufacturers.  The Association of Licensed Automobile Manufacturers caused the following advertisements to be inserted in the Detroit Free Press on July 26, 1903: NOTICE TO MANUFACTURERS, DEALERS, IMPORTERS, AGENTS AND USERS OF GASOLINE AUTOMOBILES United States Letters Patent No. 549,160, granted to George B. Selden, Nov. 5th, 1895, controls broadly all gasoline automobiles which are accepted as commercially *1108  practical.  Licenses under this patent have been secured from the owners by the following named manufacturers and importers: ELECTRIC VEHICLE CO.THE WINTON MOTOR CARRIAGE CO.  PACKARD MOTOR CAR CO.OLDS MOTOR WORKS.  KNOX AUTOMOBILE CO.  THE HAYNES-APPERSON CO.  THE AUTOCAR CO.  THE GEORGE N. PIERCE CO.  APPERSON BROS. AUTOMOBILE CO.  SEARCHMONT AUTOMOBILE CO.  LOCOMOBILE CO. OF AMERICATHE PEERLESS MOTOR CAR CO.  U.S. LONG DISTANCE AUTO. CO.  WALTHAM MANUFACTURING CO.  POPE MOTOR CAR CO.THE J. STEVENS ARMS & TOOL CO.  H. H. FRANKLIN MFG. *3827  CO. CHARRON, GIRARDOT & VOIGT CO. OF AMERICA (SMITH & MABLEY) THE COMMERCIAL MOTOR CO.  BERG AUTOMOBILE CO.  CADILLAC AUTOMOBILE CO.  NORTHERN MFG. CO.  POPE-ROBINSON CO.  THE KIRK MFG. CO.ELMORE MFG. CO.  E. R. THOMAS MOTOR CO. These manufacturers are pioneers in thie industry and have commercialized the gasoline vehicle by many years of development and at great cost.  The are the owners of upwards of four hundred United States Patents, covering many of the most important improvements and details of manufacture.  Both the basic Selden patent and all other patents owned as aforesaid will be enforced against all infringers.  No other manufacturers or importers are authorized to make or sell gasoline automobiles, and any person making, selling or using such machines made or sold by any unlicensed manufacturers or importers will be liable to prosecution for infringement.  ASSOCIATION OF LICENSED AUTOMOBILE MFRS.  No. 7 East 42d Street, New York.  Advertisements of similar import appeared weekly, with few exceptions, in the Motor World, a publication issued in the interests of the motor car trade, over the period from July 23, 1903, to July 28, 1904.  212. *3828  The Ford Motor Co. caused the following advertisement to be inserted in October 1, 1903, issue of the Motor World: NOTICE!TO DEALERS, IMPORTERS, AGENTS AND USERS OF OUR GASOLINE AUTOMOBILES We will protect you against any prosecution for alleged infringements of patents.  Regarding alleged infringement of the Selden patent we beg to quote the well-known Patent Attorneys, Messrs.  Parker and Burton: "The Selden patent is not a broad one, and if it was it is anticipated.  It does not cover a practicable machine, no practicable machine can be made from it and never was so far as we can ascertain.  It relates to that form of carriage called a FORE CARRIAGE.  None of that type has ever been in use, all have been failures.  No court in the United States has ever decided in favor of the patent on the merits of the case, all it has even done was to record a prior agreement between parties." We are the pioneers of the GASOLINE AUTOMOBILE.  Our Mr. Ford made the First Gasoline Automobile in Detroit and the third in the United States.  His *1109  machine made in 1903 [sic] is still in use.  Our Mr. Ford also built the famous "999" Gasoline Automobile, which was driven*3829  by Barney Oldfield in New York on July 25, 1903, a mile in 55 4/5 seconds on a circular track, which is the world's record.  Mr. Ford, driving his own machine, beat Mr. Winton at Grosse Pointe track in 1901.  We have always been winners.  FORD MOTOR COMPANY 688-692 Mack Avenue, Detroit, Mich.  The same advertisement appeared in issues of the Motor World on the five succeeding weeks, in many instances being opposite the advertisement of the Association of Licensed Automobile Manufacturers.  Other advertisements of a controversial nature were published by the Ford Motor Co. and by the Association of Licensed Automobile Manufacturers during 1904 and 1905.  213.  On or about October 21, 1903, the Electric Vehicle Co. and George B. Selden instituted suit in the Circuit Court of the United States for the Southern District of New York against the Ford Motor Co. and C. A. Duerr & Co., a Ford dealer, for the alleged infringement of the Selden patent, asking for an injunction and an accounting of profits and for damages.  On October 28, 1903, a similar bill was filed against the O. J. Gude Co. for alleged infringement arising out of the use of Ford automobiles.  On January 21, 1904, a*3830  similar bill was filed against the firm of John Wanamaker for alleged infringement arising out of the sale of machines manufactured by the Ford Motor Co.  214.  The following is an extract from the minutes of the directors' meeting of the Ford Motor Co. held on November 6, 1903: Meeting called together for purpose of discussing probable action of the Licensed Association of Automobile Manufacturers.  Mr. Parker of Parker & Burton was present and gave a talk of his progress in the matter of his Answer to the suit in New York.  The information was very reassuring of our success.  215.  The following is an extract from the minutes of the directors' meeting of the Ford Motor Co. held on January 7, 1904: H. Ford moved, A. Y. Malcomson seconded, that Messrs. Anderson & Rackham represent the Company to obtain all data and to obtain information as to progress of the Seldon Suit from time to time.  Carried.  J. W. Anderson moved, A. Y. Malcomson seconded, that all Parker & Burton's bills be presented to the Board before payment and to be passed upon.  Carried.  216.  The suits against the Ford Motor Co., C. A. Duerr & Company, O. J. Gude Co. and the firm of John Wanamaker were*3831  consolidated.  The taking of testimony was begun on April 13, 1904.  217.  A bill of complaint similar in character to that against the Ford Motor Co. was filed by the same plaintiffs against Stephen De Foher in the United States Circuit Court for the Eastern District of Pennsylvania.  The defendant took no proof in support of his answer and an interlocutory decree was filed December 27, 1905, *1110  upholding validity of the patent, determining that the defendant infringed the first, second, and fifth claims thereof, and decreeing an accounting and a perpetual injunction.  The injunction was issued December 29, 1905, and a judgment for profits, damages, interest and costs was filed September 17, 1906.  In a suit against William Gould Brokaw the patent was held valid, an accounting was decreed and a perpetual injunction was filed on March 18, 1907, in the Circuit Court for the Eastern District of New York.  In 1907 thirty-one actions were instituted in the United States Circuit Court for the Southern District of New York against manufacturers, importers, owners and users of automobiles for alleged infringement of the Selden Patent.  218.  Testimony was taken in the suits*3832  against the Ford Motor Co., C. A. Duerr & Co., O. J. Gude Co., and the firm of John Wanamaker from time to time until December 31, 1908, when the taking of testimony was concluded.  The argument was commenced on May 28, 1909, and was concluded on June 4, 1909.  On or about September 19, 1909, the trial court in these cases upheld the validity of the Selden Patent and held that claims 1, 2 and 5 thereof were infringed by the automobiles manufactured by the Ford Motor Co.  The opinion of the court is reported in volvume 172 of the Federal Reporter, page 923.  219.  On February 11, 1910, the Ford Motor Co. caused the following advertisement to be inserted in the Chicago Inter-Ocean, a daily newspaper published in Chicago, Illinois: "THIS ADVERTISEMENT IS PUBLISHED FOR THE PROTECTION OF AUTOMOBILE BUYERS"By the FORD MOTOR COMPANY An advertisement recently published under this heading was for the intention of intimidating prospective buyers, who, deciding on merits only, would overlook all of the "71" varieties mentioned and purchase a FORD.  History repeats itself.  That same sort of advertising appeared in 1903, warning against the purchase of an Unlicensed*3833  Car.  After nearly seven years the Licensed Association has unexpectedly received a Lower Court decision and the advertising of 1903 is repeated.  They tell you in bold face type that "There is no reason why anyone buying a car should not buy a Licensed Car." There are many reasons why anyone should NOT buy a car licensed under the Selden Patent, because by so doing trust methods are encouraged, the evolution of the industry curtailed, and the maintenance of high-priced and poor quality cars assisted, because it is obvious that a protected monopoly does not try to please the public by producing better goods by more economical means.  Who has constituted this "Divine Body" to tell the public the nemes of manufacturers who market honest or dishonest cars?  Who will say that FORD cars are dishonest after all they have done to promote the advancement of the industry? In this connection we were speaking to one of the prominent Licensed members the other day, and during the conversation he stated that without doubt HENRY FORD had done more, in building and marketing his low priced machines, to advance the industry than any dozen other manufacturers in the business.  It is a safe*3834  bet that the car will be honest as long as the manufacturer pays his dues to this "Divine Body." And would this same body delign to pronounce *1111  the FORD car dishonest in face of what it has done for the development of the entire car industry?  Would the FORD be a dishonest car if FORD would join the "71" varieties?  Our opinion and our position, taken from the beginning, is unshaken - that this Selden Patent is a freak among alleged inventions and is worthless as a patent and worthless as a device.The advertising campaign in the newspapers of this "Divine Committee" represents commercial morals and business methods which are very questionable.  If the Ford Motor Company cared to resort to such tactics it has patents that cover many of the leading features of automobile construction a thousand times more valuable in the automobile industry than Selden's, and could also threaten and bring suits against many of this "Divine Committee" as infringers of its patents.  Not for a moment, however, had it entered our heads to harass or annoy invividual users of licensed product by suing them as infringers of Ford patents.  Although the opinion of Judge Hough was filed on*3835  September 15, 1909, no injunction has ever been entered against us in this case, nor indeed has any decree been entered.  It would really seem, then, that this threatening cabal shoudl get through with us first before they make any attack upon our customers.  The court will not permit our customers to be sued and persecuted as individuals while this suit is pending against us as manufacturers.  A Lower Court Decision is far from final.  It is only the first round of a patent battle.  There remain the Court of Appeals and then the Supreme Court, to both of which we can, and, if necessary, will, carry this case.  This is a right granted us by the Constitution of the United States, which right we will exercise, so that it is hardly becoming of our esteemed Licensed competitors to take this decision as final, and by it endeavor to intimidate present and prospective owners of Ford cars.  The opinion of the patent in the lower court was rendered by District Judge Hough, showing on its face that he expected an immediate appeal to the higher court from the doubtful questions disclosed by his opinion.  Although it is seven years since this fight was started and nearly six months since*3836  the decision was rendered, no decree has yet been entered, and there is no immediate likelihood.  There are millions of dollars invested and more being invested every day in the building and marketing of Unlicensed automobiles which will unquestionably bring advanced methods of manufacture into vogue and will mean better and more economical cars to buy and to maintain.  It is a well known fact that prices are already too high, although this "divine Executive Committee" says to the Unlicensed makers, "Before we will place upon you our 'Divine' blessing we desire you to advance your prices several hundred dollars per car and to limit your production," and while they do not say, it is clearly implied, "so we will not have such keen competition." Because the unlicensed makers are not organized they do not present such an array of names as their self-constituted saviors of the public, but we assure you that there are sufficient independent manufacturers who will continue to fight against turning the automobile industry into a monopoly.  It is clearly the duty of every law-abiding American citizen to respect exclusive rights secured by a patent, when that patent has been honestly*3837  obtained, honestly operated and declared to be an honest patent by the highest courts in the land.  Such, however, cannot be said of the Selden patent.  We take issue with the statement that the members of the Licensed Association individually and collectively are chiefly responsible for the development of the automobile to its present perfect state.  HENRY FORD alone has done more to develop the automobile industry than the combined members of the Licensed Association, which fact cannot be honestly contradicted.  We believe the public will agree with us in this.  *1112  It is not true that those Licensed under the Selden patent have been and are now leaders in the production of medium, low and high priced cars.  We can prove by figures and facts that HENRY FORD produces more low priced cars than any other maker in the world.  So it can hardly be stated that these Licensees are the leaders in the production of low priced cars.  We ask our friends who have heard or read some of the statements made by these "Divine" people to call upon them to furnish their proof.  In conclusion we beg to state if there are any prospective automobile buyers who are at all intimidated by*3838  the claims made by our adversaries that we will give them, in addition to the protection of the Ford Motor Company with its some $6,000,000.00 of assets, an individual bond backed by a Company of over $6,000,000.00 more of assets, so that each and every individual owner of a Ford car will be protected until at least $12,000,000.00 of assets have been wiped out by those who desire to control and monopolize this wonderful industry.  The bond is yours for the asking, so do not allow yourself to be sold inferior cars at extravagant prices because of any statement made by this "Divine" body.N.B. - This fight is not being waged by the Ford Motor Company without the advice and counsel of the ablest patent attorneys of the East and West.  This Announcement Is Made So That Buyers of Automobiles May Know the Facts and be Governed Accordingly.  220.  On March 9, 1910, at a meeting of the board of directors of the Ford Motor Co., the following resolution was adopted: Moved by Mr. Gray Seconded by Mr. Couzens that H. B. Harper and G. J. Wahl be and are hereby appointed as Attorneys in fact for the purpose of either of them being empowered to sign for the Ford Motor*3839  Co. as principal together with the National Surety Co. as surety any Surety Bonds that may be issued to our customers to protect them against any suits, damages or losses for the alleged infringement of the Selden patent.  Carried.  221.  In April, 1910, actions similar to that instituted against the Ford Motor Co. were instituted in the United States District Court for the Eastern District of Michigan against eight other automobile manufacturers.  222.  On August 11, 1910, interlocutory decrees were filed decreeing that the Ford Motor Co., C. A. Duerr & Co., O. J. Gude & Co., and John Wanamaker had infringed the Selden Patent, that the complainants recover the profits, gains and advantages derived, together with damages for the infringement and perpetual injunction in accordance with the prayer of the bill.  On August 23, 1910, the Ford Motor Co. filed a bond in the amount of $350,000 suspending the injunction, and on August 29, 1910, bonds for damages and costs in the amounts of $7,500, $500 and $500, respectively, were filed, and appeals were allowed to the United States Circuit Court of Appeals for the Second Circuit.  223.  In September and October, 1910, twenty actions*3840  were instituted in the United States Circuit Court for the Southern District of New York, alleging infringement by other manufacturers of motor vehicles.  224.  On January 9, 1911, the United States Circuit Court of Appeals reversed the decree of the lower court, sustaining the validity of the Selden Patent, but holding that the claims thereof were not infringed by the gasoline automobile manufactured by the Ford *1113  Motor Co.  The opinion of the court is reported in volume 184 of the Federal Reporter, page 893.  225.  Henry Ford had no fear of the Selden Patent, and the directors always believed that they would prevail in the litigation over the patent.  The litigation created some resistance to the selling of Ford cars, but the effect on the sales was not very great.  Some dealers canceled their contracts with the company on account of the litigation, but it was not difficult to secure new dealers.  226.  The original application for the Selden Patent was divided prior to the issuance of the foregoing patent, and on June 4, 1912, letters patent were issued to George B. Selden on the additional application, being Patent No. 561733.  This patent was not involved in the*3841  foregoing litigation.  227.  The directors were jubilant when the Circuit Court of Appeals held that the Ford Motor Co. did not infringe the Selden Patent.  The company received a large amount of beneficial advertising from the successful termination of the suit.  228.  The Ford Motor Co. advertised extensively.  The means it employed directly were newspapers, magazines, billboards, small signboards, and electric signs.  Dealers all over the country were required to establish signboards leading to their places of business, using the Ford trade-mark.  It also was accorded free advertising in the form of newspaper publicity as to the activities of Henry Ford and of the company.  The car was nationally known and was a common topic of conversation.  229.  The company published monthly a house organ, the Ford Times, which was edited by the company's advertising manager.  This was the authorized mouthpiece of the Ford Motor Co,, and contained statements of the plans and policies of the company and articles of interest.  Many thousands of copies were published, which were generally distributed to employees, branches, dealers, owners and prospective purchasers.  230.  A magazine was*3842  published in Brooklyn called the Ford News, which accepted advertisements of accessory houses selling all kinds of novelties which could be added to a car.  The company derived an advertising benefit from this magazine.  231.  The home office furnished newspaper copy to dealers.  During the period from 1910 to 1913 articles on Ford were numberous in all trade periodicals, not only in this country but in Germany and England as well.  There were many more Ford articles than those descriptive of other machines or other motor companies.  The car was advertised in foreign languages, for example, in Japan, China, Australia, New Zealand, South America and all over Europe.  In 1913 the Ford car was known everywhere and sold over practically the entire world.  232.  The Ford Motor Company was the largest and most widely known motor car company in the world in 1913, was the leader in manufacturing methods, and had no serious competitors in its class.  *1114  It had acquired a valuable good will, had an extraordinary reputation, and stook in a class by itself.  It was regarded as a successful and prosperous organization.  233.  The managers of the company thought that serious competition*3843  was not possible, basing their judgment on the character of the car, the car's standardization, the financial position of the company, its organized sales force, the extent of its advertising, the public acceptance of the car, the service rendered, and the plans for establishing assembly plants all over the United States.  234.  The company was considered by those in the automobile industry to be free from competition for many years to come.  Its position was regarded as unapproachable.  It was the general opinion in the automobile trade that it was a prohibitive proposition to try to compete with the Ford Motor Co. and that it would have been foolish to go into the automobile business with that idea in mind.  The Ford investment was very heavy, and had anyone determined upon producing in the same manner as the Ford Company it would have been necessary to tool in the same fashion as the Ford Company.  This would have required many millions of dollars.  It would have taken a competitor from one and one-half to two or three years to design special machines and methods of manufacture and get into the market with a new car.  In the intervening time the Ford Company would have acquired*3844  greater experience and the car would have been improved; it would have had the advantage of further reducing costs, and the consequent probability of a reduction in price; and the prospective competitor would still have been far behind.  235.  On March 1, 1913, the directors of the company were Henry Ford, James Couzens, John F. Dodge, Horace H. Rackham and David Gray.  The officers were Henry Ford, president, John F. Dodge, vice president, and James Couzens, secretary and treasurer.  Henry Ford at that time stood at the head of American automobile producers.  He had original ideas, with the means and willingness to act upon them, and he accomplished remarkable results.  He was regarded as having ability and good business judgment and as being a good designer.  James Couzens was considered to be a man of good judgment and ability, and a careful and shrewd buyer.  John Dodge and Horace Dodge had good reputations in the manufacturing world, and were regarded as able men.  The directors were regarded as having sound business judgment.  No motor company enjoyed management superior to that to the Ford Company.  The organization was regarded by the industry as being very strong.  The factory*3845  management was in the hands of Henry Ford, John R. Lee, Harold Wills, P. E. Martin, W. S. Knudsen, Wm. H. Smith, Hobard, Fred H. Diehl, Klingensmith, Hogue, Sorenson, and Norval A. Hawkins.  These men had good reputations in the automobile industry.  Wills assisted Henry Ford.  He *1115  had a good reputation.  He was a pioneer in the industry.  He was an engineer of ability and was qualified as a metallurgist.  236.  On March 1, 1913, and at all times prior to the Dodge dividend suit in 1916, friendliness and harmony existed among the officers, directors and stockholders of the company.  The fact that the Dodge brothers started manufacturing the Dodge Brothers car had no effect upon their relations with the Ford Motor Co.  The Dodge brothers had an enormous investment in their plant and were manufacturing many sets of parts for the Ford car.  They foresaw that in the future the Ford Company would be required to make its own parts and as a protection for their own investment they started the manufacture of the Dodge Brothers car.  This car did not compete with the Ford car, but was a much higher-priced car.  237.  On July 17, 1913, Dodge Brothers sent the following letter*3846  to the Ford Motor Co.: John F. Dodge Horace E. Dodge DODGE BROTHERS, Automobile Parts Complete Chassis Drop Forgings, Bronze Castings, Gears DETROIT, MICH., July 17th, 1913.Mr. JAMES COUZENS. Secretary & Treasurer, The Ford Motor Company, Detroit, Michigan.DEAR SIR: - On August Thirtieth, 1912, there was a certain lease entered into between the Ford Motor Company of Detroit and the co-partnership of Dodge Brothers covering the business as existing between the two Companies.  One of the principal reasons for the making of this lease was to do away with the trouble arising annually when prices were agreed upon.  Inasmuch as this lease has failed to overcome this trouble, we wish to exercise our right as given under clause ten of this lease permitting either party to cancel the same upon twelve months' notice, to be give during the month of June of any year, and while this notice is not given strictly within the mentioned period, there was a mutual understanding between the two companies that the terms of the lease would be extended to on or about July Tenth pending the writer's return from England.  We expect to fulfill strictly, all of*3847  the conditions imposed on us by this lease for the ensuing year, and expect your company to do the same, and in this connection wish to call your attention to clause three covering delivery estimates as required for ensuing year.  We are enclosing a list giving the prices as arrived at under the terms of this lease.  Yours respectfully, DODGE BROTHERS, JNO. F. DODGEJ.F.D./A.R. 238.  The policy of the Ford Company in concentrating on one model was unique in the automobile field in 1913 and was an important factor of its success.  Other manufacturers were changing models as often as once a year, although some went without change *1116  for two or two and one-half years.  It was the policy of most automobile companies to put out many and varying models and styles.  239.  In a paper on "Multiplicity of Models," read by G. W. Bennett, vice president of the Willys-Overland Co. at a convention of the National Association of Automobile Manufacturers, Inc., in November, 1912, he said: The trend of success in the automobile industry to-day is unquestionably pointed toward concentration, and concentration is not possible where the product is divided into several models. *3848  Little doubt exists in my mind that eventually the marked successes of the automobile business will lie in specializing, each plant making that which best fits its demand, and making that model in quantities to which its place in the automobile market entitles it.  * * * * * * * * * We are all familiar with the most striking success in the industry, who for the past three or four years has made practically no changes in his chassis, who makes his various styles of bodies fit that one chassis, and has limited himself to that one model, producing it in immense quantities.  $240.  Manufacturing a single model continuously is cheaper and more efficient than manufacturing several or making changes in the model.  Both machinery and labor are stabilized.  Sales and maintenance service are facilitated.  Obsolescence of parts and supplies is avoided.  Dealers' bank loans are made more available.  Advertising is simplified.  241.  Before March 1, 1913, the company had established the policy, in effect on that date, of continually reducing the price and at the same time improving the car.  This was done regardless of the number of unfilled orders on hand.  The amount of each price reduction*3849  was determined after ascertaining the profits of the preceding year.  It contributed to increase the volume of sales.  This policy was a factor of success.  242.  The following are the prices of Model T runabouts and touring cars during the period from October 1, 1908, to February 11, 1926: DateRunaboutTouringOct. 1, 1908$850.00Oct. 1, 1909950.00Oct. 1, 1910780.00Oct. 1, 1911$590.00690.00Oct. 1, 1912525.00600.00Aug. 1, 1913500.00550.00Aug. 1, 1914440.00490.00Aug. 1, 1915390.00440.00Aug. 1, 1916345.00360.00Feb. 21, 1918435.00450.00Aug. 16, 1918$500.00$525.00Mar. 4, 1920550.00575.00Sept. 22, 1920395.00440.00June 7, 1921370.00415.00Sept. 2, 1921325.00355.00Sept. 16, 1922319.00348.00Oct. 17, 1922269.00298.00Oct. 2, 1923265.00295.00Dec. 2, 1924260.00290.00Feb. 11, 1926290.00310.00*1117  243.  The car was sold with no accessories attached, but with only the bare necessities, so as to secure a price as low as possible.  244.  Model T was a utility car.  It was a good car.  It had a good reputation and a thoroughly accepted standing in*3850  1913.  It was used by all classes of people.  It was the cheapest car on the market and was a greater value for its price than any other car.  Because of its low price it had a much larger field of demand than any other car.  It was within the purchasing power of the greatest number of people and they were repidly availing themselves of it.  There was a greater demand for it than for the car of any other company.  245.  The people of the country, particularly those not living in the city, were ready for an economical means of transportation.  By 1913 the advantages of handy, rapid transportation were readily recognized.  The automobile had come to be regarded not only as a pleasure machine, but also as a convenient means of necessary transportation.  246; The low-priced car field served by Model T was always regarded as the largest automobile market.  In 1913 it was regarded as practically inexhaustible, the most favorable field for future profit, and as being of much greater potential value than the high-priced car field.  A company enjoying this market had a decided advantage over a company supplying a higher-priced market.  247.  Looking at the situation in 1913, a yearly*3851  production of 200,000 cars would not adequately supply this market.  Year after year the company was unable to produce sufficient cars to meet the demand.  It was always oversold.  248.  The unfilled orders on hand at the end of each month from October, 1908, to July 1916, and the monthly average during the fiscal years ended September 30, 1909, to 1919, inclusive, the fiscal 10-month period ended July 31, 1915, and the fiscal year ended July 31, 1916, were as follows: Month19091910191119121913191419151916August48,845September38,631October7743631931,04113,30482,37818,40640,779November91031017273721,502111,86050,55646,107December1,3984081,2023,65424,510102,99359,33049,295January1,7366611,2242,50228,10273,59860,83751,100February2,5044991,5744,76320,27553,14772,08141,662March3,1722,1362,92810,23033,21055,36174,30529,584April5,5943,5513,29013,06970,72964,38984,03430,819May3,5772,6274,70217,34960,50448,39872,72529,936June1,6487905,46114,47425,59341,22852,73729,038July2,2201544,13311,09810,40230,35556,927703August1,226491,7687,5666,71423,156September712755215,6587,1633,583Average2,1239692,2477,67826,83457,53760,19536,375*3852 *1118  249.  The unfilled orders on hand at the beginning of each month from October, 1908, to July, 1916, and the monthly average during the fiscal years ended September 30, 1909, to 1914, inclusive, the fiscal 10-month period ended July 31, 1915, and the fiscal year ended July 31, 1916, are as follows: Month19091910191119121913191419151916August58,757September46,645October489159723706,4997,1604,76940,389November6652031021,03813,30483,04119,10641,685December98231017374123,346111,67251,65445,077January1,3594611,2532,66424,765105,33058,22959,855February1,9484991,1242,4796,96073,01061,59541,600March2,5025831,5714,76312,49155,09871,78141,762April4,5502,1722,97810,19463,57060,07174,67028,588May4,5943,6833,29013,72979,75464,40385,50130,647June3,4382,4204,56917,34955,54056,75173,79938,600July1,6479344,37214,44525,09240,05551,12635,218August2,2201544,72811,4847,01230,115September1,672392,4716,8886,60524,160Average2,1729682,2257,17927,07859,23955,23042,402*3853  250.  The figures in the two preceding tabulations are taken from the monthly statistics sheets of the Ford Motor Co.  There is no explanation of the difference between the figures for the end of one month and the beginning of the next month.  251.  On May 5, 1913, the company issued a notice to its dealers, subdealers, and branch managers, advising them that under no circumstances would further orders be received except for Town Cars, prior to August 1, 1913, and called their attention to the fact that the closing of the company's order books was predicted several months earlier.  252.  The Ford Motor Co. was the largest producer of cars, numerically, in the world on March 1, 1913.  No other motor company had a quantity production equal to it.  253.  The cars and trucks produced by the Ford Motor Co. during the period from 1903 to 1922, inclusive, are as follows: Period endedCarsTrucksSept. 30, 1904 (15 months)1,708Sept. 30, 19051,578Sept. 30, 19061,500Sept. 30, 19078,432Sept. 30, 19085,857Sept. 30, 190910,174Sept. 30, 191017,771Sept. 30, 191132,174Sept. 30, 191269,762Sept. 30, 1913170,224Sept. 30, 1914242,602July 31, 1915256,025July 31, 1916489,202July 31, 1917718,563204July 31, 1918604,46140,543July 31, 1919415,18269,116Dec. 31, 1919312,68051,310Dec. 31, 1920845,206115,627Dec. 31, 1921877,68764,796Dec. 31, 19221,135,993133,564*3854 *1119  254.  During the war years 60 per cent of the company's floor space was given over to war work, such as the production of Liberty engines, caissons, ambulances and Eagle boats.  During these years production of automobiles was interfered with.  Upon the signing of the armistice the company started changing back to the production of motors.  This took from seven to eight months.  255.  The number of cars manufactured by the Ford Motor Co. during each month of the fiscal years ended September 30, 1912 and 1913, is as follows: Fiscal year ended Sept. 30, 1912Fiscal year ended Sept. 30, 1913October3,1645,264November3,3585,685December2,87811,301January2,28617,487February4,15613,987March7,53317,477April10,03322,001May9,68821,401June8,07822,151July8,15914,939August4,6037,640September4,1718,724Total68,116168,057256.  The number of cars sold by the Ford Motor Co. during the calendar years 1908 to 1919, inclusive, is as follows: 19085,986190912,292191019,293191140,402191278,6111913182,8091914260,7201915355,2761916577,0361917802,7711918402,9081919777,694*3855  257.  In 1911 the company had predicted and made plans for a production of 75,000 cars in 1912, and in 1912 plans were made for a production of 200,000 cars in 1913.  On March 1, 1913, materials were being purchased to produce 175,000 cars for the year.  258.  The monthly sales of the Ford Company from October, 1907, to July, 1915, inclusive, and the total sales for each fiscal period, before and after adjustment, are as follows: Year ended Sept. 30, 1908Year ended Sept. 30, 1909Year ended Sept. 30, 1910Year ended Sept. 30, 1911October$186,478.02$93,064.53$846,290.45$594,446.31November130,940.5786,856.50536,001.93894,111.09December121,471.88186,459.44527,155.66680,897.43January156,342.99269,663.72 752,218.011,285,949.21February175,424.96322,441.211,085,915.861,940,990.13March242,967.06778,606.502,310,570.773,093,614.48April595,954.00585,742.463,150,009.893,776,066.41May868,738.681,043,581.322,716,405.474,250,812.45June1,032,383.231,544,652.602,202,476.902,251,964.59July663,150.261,564,388.44987,226.301,317,924.38August390,068.731,438,631.16928,237.902,798,432.22September171,034.171,162,961.32688,222.951,826,692.154,734,954.559,077,069.2016,730,732.0924,711,900.65Adjustments-33,656.13-35,778.65-19.432.64-55,132.90Total4,701,298.429,041,290.5516,711,299.4524,656,767.75*3856 Year ended Sept. 30, 1912Year ended Sept. 30, 1913Year ended Sept. 30, 1914Year ended July 31, 1915October$1,996,988.86$2,398,301.25$3,786,817.51$7,836.713.81November1,839,882.663,091,232.215,160,350.107,472,148.12December1,690,190.005,148,173.108,167,134.096,293,040.45January1,816,671.468,142,534.339,700,843.153,866,051.59February2,183,054.027,179,358.1210,944,495.205,576,530,52March4,552,996.269,551,656.6314,080,018.7617,862,376.89April6,327,409.3012,054,491.5413,898,569.5021,091,896.65May6,842,222.8911,683,141.4712,607,399.3120,946,948.72June4,943,364.2311,488,177.3912,304,618.0918,910,837.75July5,064,865.828,207,413.519,145,095.2911,262,485.43August2,573,956.925,645,316.569,914,749.20September2,449,513.174,405,789.759,660,347.1142,281,115.5988,995,585.87119,370,437.31121,119,030.93Adjustments176,561.63113,298.69118,879.6811,828.70Total42,477,677.2289,108,884.56119,489,316.99121,130,859.63*1120  259.  The amounts of sales for the fiscal years ended July 31, 1916, 1917, 1918, and 1919, corresponding*3857  to the adjusted figures in the foregoing tabulation, are as follows: 1916$206,867,327.461917274,575,051.531918308,719,033.601919305,637,115.28260.  Because of its quantity production the company was enabled to purchase most cheaply and manufacture most economically.  Because of the low price the greatest market was open to it.  Quantity production tended to reduce overhead costs.  It made possible the assembly-plant system, and the use of special machinery.  261.  The following shows the number of passenger cars and trucks produced by all manufacturers, including the Ford Motor Co., from 1895 to 1919, inclusive: YearPassenger carsTrucksTotal1895300189660018971,20018982,40018993,7003,87419005,00019017,00019029,000190311,000190420,2611,43121,692190525,000190634,000190744,000190865,0001909121,8684,725126,5931910181,0001 10,374187,0001911199,31910,655210,0001912356,00022,000378,0001913461,50023,500485,0001914543,67925,375569,0541915818,61874,000892,61819161,493,61790,0001,583,61719171,740,792128,1571,868,9491918926,388227,2501,153,63819191,657,652316,3641,974,016*1121  262.  From 1909 to 1919, inclusive, the Ford Company sold the following percentages of all passenger automobiles manufactured in the United States: YearPer cent190910.09191010.66191120.27191222.08191339.63191447.95191543.39191638.63191746.12191843.49191946.91263.  In 1914 the Ford Company, with an average of 12,963 employees for the year, sold 260,720 cars of 45.82 per cent of the total production (both passenger cars and trucks) of the automobile industry, while the remaining 308,334 cars and trucks, or 54.18 per cent of the total production, were produced in 299 establishments by 66,344 employees.  264.  At March 1, 1913, the Ford Motor Co. sold from 85 per cent to 95 per cent of all cars in the low-priced field, that is, of all cars selling for less than $750.  265.  The net earnings of the Ford Company for the fiscal periods upon which the books were actually kept, from the date of incorporation to July 31, 1919, were as follows: Fiscal period ended - EarningsApr. 1, 1904$82,017.87Sept. 30, 1904201,019.44Sept. 30, 1905285,231.94Sept. 30, 1906107,360.01Sept. 30, 19071,011,826.47Sept. 30, 19081,251,097.67Sept. 30, 19092,686,134.46Sept. 30, 19104,452,609.81Sept. 30, 19116,226,327.80Sept. 30, 1912$13,056,425.10Sept. 30, 191324,714,078.07Sept. 30, 191429,764,500.07July 31, 191524,519,341.78July 31, 191659,017,892.04July 31, 191727,843,999.72July 31, 191851,837,821.01June 30, 191952,094,241.53July 31, 1919 [sic]76,775,366.44*3859  266.  The net earnings of the company adjusted to the calendar year basis for the period from January 1, 1906, to September 30, 1919, were as follows: YearAdjusted net earnings1906$175,615.2419071,001,767.4419081,168,953.5519093,176,007.1819104,145,901.741911$7,541,493.01191214,119,989.87191326,651,754.92191426,341,464.92191538,199,758.981916$54,606,713.06191729,726,046.85191856,513,014.491919 (9 mos.)71,106,631.26*1122  267.  The adjusted net earnings of the company by months for the period from January 1, 1909, to March 1, 1913, were as follows: MonthAdjusted net earnings1909January$56,497.08February75,752.24March196,924.29April174,577.76May341,969.05June475,260.09July532,294.09August468,583.70September370,557.20October251,636.63November138,412.62December93,542.431910January194,532.37February293,004.59March721,976.53April1,001,101.62May898,774.26June679,328.06July266,267.58August$192,179.34September(Loss)278,146.22October75,549.16November75,457.35December25,877.101911January228,239.95February384,895.74March694,575.77April847,286.83May912,518.68June496,917.03July286,965.36August1,318,324.53September879,765.30October520,701.05November413,267.40December558.035.371921January$385,186.85February544,426.27March1,210,356.00April2,053,223.52May2,178,280.39June1,531,857.66July1,529,194.49August665,207.27September1,466,688.83October264,720.82November805,335.97December1,485,511.801913January2,249,685.70February1,723,210.47*3860  268.  The capital stock, surplus, and net tangibles of the eompany on various dates were (as stipulated) as follows: DateCapital stockSurplusNet tangiblesApr. 1, 1904$100,000$50,017.87Sept. 30, 1904100,000183,037.31Sept. 30, 1905100,000268,269.25Sept. 30, 1906100,000375,629.26Sept. 30, 1907100,0001,377,455.73$1,477,455.73Sept. 30, 1908100,0002,128,553.402,228,533.40Dec. 31, 19082,022,272.36Sept. 30, 1909$2,000,0001,214,687.863,214,687.86Dec. 31, 19093,398,279.54Sept. 30, 19102,000,0003,367,297.675,367,297.67Dec. 31, 19105,544,181.28Sept. 30, 19112,000,0007,888,670,479,888,670.47Dec. 31, 191110,080,674.29Sept. 30, 19122,000,00014,745,095.5716,745,095.57Dec. 31, 191219,000,664.16Mar. 1, 19132,000,00020,673,560.3322,673,560.33Sept. 30, 19132,000,00028,259,173.6430,259,173.64Dec. 31, 191334,452,419.08Sept. 30, 19142,000,00048,823,673.7150,823,673.71July 31, 19152,000,00059,143,015.4961,143,015.49July 31, 19162,000,000111,960,907.53113,960,907.53July 31, 19172,000,000131,604,907.25133,604,907.25July 31, 19182,000,000175,242,728.26177,242,728.26June 30, 19192,000,000222,436,969.79224,436,969.79July 31, 19192,000,000227,542,708.74229,542,708.74*3861  269.  By "net tangibles" is meant the total tangible assets minus all liabilities.  There is not included in these figures, or in the net earnings above set forth, anything for patents, trade-marks, copyrights or good will.  The figures represent land, plant and facilities carried on the books of the company at cost less depreciation on plant and facilities.  270.  The ratio of net earnings for each fiscal year, 1908 to 1913, to net tangible assets at the beginning of the year and the ratio of average earnings to average yearly net tangibles are: Year endedNet earningsNet tangibles at first of yearPercentageSept. 30, 1908$1,251,097.67$1,477,455.7384.68Sept. 30, 19092,686,134.462,228,553.40120.53Sept. 30, 19104,452,609.813,214,687.86138.51Spet. 30, 19116,226,372.805,367,297.67116.01Sept. 30, 191213,056,425.109,888,670.47132.03Sept. 30, 191324,714,078.0716,745,095.57147.59Average8,731,119.666,486,960.12134.59*1123  271.  The Commissioner of Internal Revenue in determining the average ratio of net income to invested capital during the prewar period, pursuant to section 311(c)(2) of the Revenue*3862  Act of 1918, determined that in the industries manufacturing and selling automobiles and parts, bicycles, motorcycles and parts, and motor trucks and parts, the average ratio of net income to invested capital during the prewar period was not over 10 per cent.  272.  The earnings for January and February of each year from 1906 to 1913, inclusive, and the ratio of each calendar year's earnings to the total of those two months are as follows: January and February earningsYear's earningsJanuaryFebruaryTotal (100%)RatioPer cent1906$175,615.241 $1,045.49$7,625.23$6,579.742,66919071,001,767.4446,055.4569,705.38115,760.8386519081,168,953.55994.475,639.016,633.4817,62219093,176,007.1856,497.0875,752.24132,249.322,40219104,145,901.74194,532.37293,004.59487,536.9685019117,541,493.01228,239.95384,895.74613,135.691,230191214,119,989.87385,186.85544,426.27929,613.121,519191326,651,754.922,249,685.701,723,210.473,972,896.17671273.  The adjusted net earnings for the period from October to February, inclusive, of each fiscal*3863  year from 1909 to 1913, inclusive, and the ratio of the earnings for the whole period to such earnings, are as follows: Fiscal year ended - Earnings for yearOctober to February (100 per cent)Ratio - Per centSept. 30, 1909$2,686,134.46$125,968.282,132Sept. 30, 19104,452,609.81971,128.64458Sept. 30, 19116,226,372.80790,019.30788Sept. 30, 191213,056,425.102,421,616.94539Sept. 30, 191324,714,078.076,528,464.76379*1124  274.  A condensed statement of the assets and liabilities of the Ford Motor Co. at March, 1, 1913, is as follows: AssetsCash$4,977,047.55Bonds1,073,652.67Notes receivable62,009.54Accounts receivable5,130,195.90Prepaid account177,347.25Inventories9,838,046.52Plant accounts6,796,344.52Outside investments5,766.66Total28,060,410.61LiabilitiesAccounts payable$4,662,513.53Accrued accounts611,254.27Reserve for bad debts3,501.52Reserve for contract rebates88,779.63Reserve for insurance20,801.33Surplus20,673,560.33Capital stock2,000,000.00Total28,060,410.61275.  The current assets, current liabilities, ratio*3864  of current assets to current liabilities, and the amount of cash, municipal bonds, United States bonds and sight drafts held by the company for the fiscal years 1909 to 1919, inclusive, are: Fiscal year ending - Current assetsCurrent liabilitiesRatioCash, municipal bonds, United States bonds, sight draftsPer cent1909$3,085,559.01$911,006.47339$1,423,970.9419103,944,328.761,012,099.193901,073,788.5819119,002,514.502,517,580.703575,742,787.87191214,447,885.033,696,506.893917,901,933.88191325,304,912.274,695,555.6653915,541,865.43191441,064,815.705,537,048.9674231,050,756.32191560,833,450.298,074,019.6375343,909,763.73191693,220,016.7311,541,244.9280858,333,709.111917106,082,372.8119,307,623.5854959,597,086.391918135,401,624.4014,518,637.8193369,333,194.761919253,801,567.01103,362,536.2324688,374,266.47276.  These figures do not include reserves for buyers' profit sharing in 1914, 1915, and 1916.  The current liabilities do not include reserves for bad debts, for cost of material, for profit on branch inventories or for dealers' *3865  rebates and bonuses.  Corresponding adjustments were made in the current-assets column.  277.  The sales during fiscal years from 1906 to 1919, the inventory at the end of the year, and the ratio of the sales to the inventory are as follows: Fiscal year ending - Sales for the year (not cost of goods sold)Inventory at end of yearRatio - per cent1906$1,491,626.16$212,172.9170319075,773,851.38445,320.501,29719084,701,298.42631,289.8474519099,041,290.551,571,345.95575191016,711,299.452,777,192.56602191124,656,767.753,585,182.88688191242,477,677.226,332,718.00671191389,108,884,569,586,321.599291914119,489,316.999,378,436.621,2741915 (10 months)121,130,859.6316,409,921.047381916206,867,327.4632,202,467.146421917274,575,051.5346,949,853.185851918308,719,033.6044,949,865.966871919305,637,115.2876,702,339.53398*1125  278.  The factory costs, commercial expenses and gain of the company for each fiscal period from 1908 to 1919, inclusive, and the percentage which each is of the foregoing sales for the respective year, are: Fiscal year endingFactory costsFactory cost to sales - per centCommercial expensesCommercial expense to sales - per cent GainGain to sales - per cent1908$2,916,297.4062.03$511,178.0110.87$1,273,823.0127.1019095,618,305.3962.14605,361.926.702,817,623.2431.16191010,547,151.6063.111,198,155.577.174,965,992.2829.72191116,156,391.6065,521,424,652.915.787,075,723.2428.70191226,753,689.0162.982,338,786.225.5113,385,201.9931.51191359,859,816.4267.183,661,092.114.1125,587,976.0328.71191479,729,004.7266.726,130,749.305.1333,629,562.9728.15191575,135,815.3062.026,913,065.565.7239,081,978.7732.261916132,149,580.6163.8811,983,389.835.7962,734,357.0230.331917224,649,228.1981.8215,747,308.195.7434,178,515.1512.441918243,704,836.1678.9412,090,035.773.9252,924,161.6717.141919223,523,699.8173.1319,837,748.686.4962,275,666.7920.38*3866  279.  Revenue, as follows, was derived from the sales of parts for the fiscal periods ended - Sept. 30, 1909$308,959.71Sept. 30, 1910459,088.60Sept. 30, 1911557,639.05Sept. 30, 1912835,555.81Sept. 30, 1913$4,806,770.19Sept. 30, 19147,187,833.81July 31,19159,806,076.36July 31, 191623,259,945.22280.  On March 1, 1913, the selling of parts of Ford automobiles was expected to be an increasingly valuable part of the business.  As production increased more cars would need maintenance and new parts.  281.  A stock dividend of $1,900,000 was declared by the Ford Motor Co. on November 30, 1908.  Cash dividends were paid as follows: dateAmountOct. 15, 1903$2,000.00Nov. 24, 190310,000.00Jan. 8, 190420,000.00June 16, 190468,000.00June 16, 1905100,000.00July 24, 1905100,000.00Oct. 24, 190610,000.00Nov. 13, 1907100,000.00Apr. 30, 1908100,000.00May 22, 1908100,000.00June 20, 1908100,000.00July 28, 1908100,000.00Oct. 1, 1908100,000.00Nov. 25, 1908100,000.00Jan. 25, 1909100,000.00Mar. 17, 1909100,000.00Apr. 30, 1909100,000.00May 24, 1909100,000.00June 16, 1909100,000.00June 26, 1909100,000.00July 21, 1909100,000.00July 28, 1909600,000.00Aug. 25, 190989,000.00Aug. 31, 190911,000.00Sept. 24, 1909100,000.00Oct. 18, 1909$300,000.00May 17, 1910700,000.00June 25, 19101,000,000.00Sept. 8, 1910300,000.00Feb. 21, 19115,000.00Apr. 29, 1911800,000.00July 1, 1911300,000.00Aug. 1, 1911600,000.00Oct. 2, 1911300,000.00Dec. 13, 1911800,000.00Dec. 31, 1911200,000.00Jan. 2, 1912300,000.00Apr. 1, 1912300,000.00May 15, 19122,000,000.00July 1, 1912300,000.00July 11, 19122,000,000.00Oct. 1, 1912300,000.00Jan. 2, 1913300,000.00Apr. 1, 1913300,000.00June 16, 191310,000.000.00July 1, 1913300,000.00Oct. 1, 1913300,000.00Jan. 1, 1914300,000.00Apr. 1, 1914300,000.00May 14, 1914600,000.00May 29, 1914$1,400,000.00June 12, 19142,000,000.00July 1, 1914300,000.00July 16, 19142,000,000.00July 23, 19142,000,000.00Oct. 1, 1914300,000.00Oct. 23, 19143,000,000.00Jan. 2, 1915300,000.00Apr. 1, 1915300,000.00May 28, 191510,000,000.00July 1, 1915300,000.00Oct. 1, 1915300,000.00Oct. 13, 19155,000,000.00Jan. 1, 1916300,000.00Apr. 1, 1916300,000.00July 1, 1916300,000.00Oct. 1, 1916300,000.00Nov. 9, 19162,000,000.00Jan. 2, 1917300,000.00Jan. 19, 1917$2,000,000.00Apr. 2, 1917300,000.00May 17, 19171,000,000.00June 21, 19172,000,000.00July 2, 1917300,000.00Aug. 15, 19171,000,000.00Oct. 1, 1917300,000.00Dec. 12, 19172,000,000.00Jan. 2, 1918300,000.00Apr. 1, 1918300,000.00May 9, 19184,000,000.00July 1, 1918300,000.00Oct. 1, 1918300,000.00Jan. 2, 19192,300,000.00Jan. 31, 19192,000,000,00Apr. 1, 1919300,000.00July 1, 1919300,000.00July 10, 191919,275,385.96*3867 *1126  282.  The total cash dividends paid during the calendar years were as follows: Calendar yearCash dividend1907 (from Oct. 1)$100,000.001908600,000.0019091,800,000.0019102,000,000,0019113,005,000.001912$5,200,000.00191311,200,000.00191412,200,000.00191516,200,000.0019163,200,000.001917$9,200,000.0019185,200,000.001919 (to Sept. 30)24,175,385.96283.  In 1912 the Ford Motor Co. received cash discounts of approximately $687,000, earned interest of $302,000, and received miscellaneous earnings from scraps and similar items as a result of operations amounting to $327,000, or a total of $1,316,000.  This amount represented a profit of about 66 per cent on its capital stock or of more than 6 per cent on its net tangible assets.  284.  On March 1, 1913, the Ford Motor Co. was the largest purchaser of automobile materials in the world.  Its purchases in 1911 were $18,735,816.23, in 1912 they were $33,514,324.84, and in 1913 they were $63,500,084.11.  285.  The Beaudette Body Co., the Holly Carburetor Co., the American Top Co., and other companies were furnishing their entire output to the Ford Motor Co. *3868  in 1913.  The Ford Company was able to get lower prices on supplies purchased from companies furnishing their entire outputs.  The Transue-Williams Co., the Cleveland Hardware Co., and several wheel companies were furnishing the major portion of their production to the Ford Company at that time.  Ford business was sought for by suppliers.  The suppliers for large-quantity purchasers can spend more money in tools, machinery, and dies than companies furnishing small quantities.  In several instances the company purchased parts for cost or less because the manufacturers were willing to sell at reduced prices as an advertising matter so as to be able to sell replacement parts to the public.  *1127  286.  To aid its suppliers in improving manufacturing methods, the company sometimes put engineers and experts into their plants and advanced money before the receipt of material.  It also sometimes furnished the material for its supplies.  This was done to make certain as to the quality of the material entering into the parts, and to take advantage of the company's superior buying power by reason of its quantity purchases.  If the supply companies had made the purchases they could not*3869  have secured the quality or delivery service secured by the Ford Company.  At that time service was essential.  The Company thus reduced the cost of parts which it bought.  The Company always paid for supplies in cash, and by so doing it secured large discounts in 1913.  No other company approached the Ford Company's position or had the advantages it had in connection with purchases.  This was a matter of general reputation and comment in 1913.  287.  The number of persons on the salary and pay rolls of the company for each month of the fiscal years ended September 30, 1909, to 1914, inclusive, and the fiscal period October 1, 1914, to July 31, 1915, and the average for each period are as follows: Month1908-91909-101910-111911-121912-131913-141914-15October6091,7222,2854,3648,21513,01713,637November7251,6332,5554,6829,25814,24813,536December7351,9292,6684,58710,08914,31513,530January8672,2163,1564,32813,20914,54613,776February9292,3423,2945,31014,55014,76914,548March1,2183,0823,8895,37314,07014,40915,710April1,6923,6064,1025,83115,55513,92217,743May2,0034,1954,4096,69916,18712,81618,642June1,9753,5753,4397,14915,85110,55219,297July2,2482,4083,3766,51414,97110,50119,479August1,8762,3594,3796,63813,67310,909September1,7712,3094,3037,04512,75112,429AVERAGE1,3872,6063,4885,71013,19813,03615,990*3870  Seventy per cent of the operatives could be taught their operations in less than two days' time and did not need to be able to read, write or speak the English language.  Very few skilled workmen were necessary, except in the tool room.  288.  The following is an extract from the minutes of a meeting of the board of directors held January 14, 1913: The Treasurer reported that the distribution of the Five Hundred Thousand Dollars appropriated at the Board of Directors Meeting held October 24th, 1912, for distribution among the employees, was made as follows: Branch Managers$245,600.00Home Office and Factory Employees (Special)146,700.00Branch Employees other than Branch Managers (Special)10,000.00Employees who have been with the Company in all departments for three years or more, and not included in any other list31,958.17Balance turned back to Treasury65,741.83$500,000.00*1128  289.  The following is from the minutes of a meeting of the board of directors held January 5, 1913: It was suggested by the Officers that a plan of better equalizing the Company's earnings between the Stockholders and labor employed by the Company be inaugurated. *3871  The plan was gone over at considerable length, but briefly it carried with it, in addition to wages, sums to make the minimum income of all men over twenty-two years of age $5.00 for eight hours work, and that other increases were to be made to men getting above the minimum wage to maintain the same rate between the minimum, intermediate and maximum wages.  After considerable discussion it was moved by Director Rackham, and supported by Director Couzens, that such a plan be put into force as of January 12th, 1914, which plan it was distinctly understood would approximate an additional expenditure for the same volume of business of Ten Million ($10,000,000.00) Dollars, for the year 1914.  Carried unanimously.  290.  The establishment of this policy was responsible for getting better workmen in the shop.  The conditions under which the workingmen operated on March 1, 1913, were good, so far as wages were concerned.  The morale of the labor force was good.  The plant had never operated on a piece-work plan.  It never had a strike or any trouble with labor.  291.  The officers of the company were optimistic over the future prospects of the automobile industry generally, the prospects*3872  of the low-priced-car field, and particularly the prospects of the Ford car.  They believed that the company had a great future.  From an analysis of the situation about March 1, 1913, they considered that its prospects of future profits were unlimited and that a continual output to the extent of from 200,000 to 400,000 cars a year would be consumed each year for an indefinitely long time.  292.  The average life of a car at March 1, 1913, was about five years; at the end of that time the car would be worn out.  The man who once owns a car usually continues to own one, and the replacement market, consisting of the replacement of obsolete and worn-out cars, is large.  It is looked upon as a permanent and growing market - a surer market than the market among those who have never owned cars.  On March 1, 1913, the Ford Motor Co. had more automobiles in operation than any other manufacturer, and this assured a large replacement market in itself.  293.  Not including the replacement market, the officers believed that an output of 200,000 cars a year would be required for 10 years to satisfy the requirements of 2,000,000 families who it was estimated would need but had not purchased*3873  cars.  294.  In making its analysis as to prospective production the company considered the number of farmers in the United States, numbering at that time about 6,000,000, including tenant farmers in the South who might not be buyers.  The number of farms and the *1129  total value of all farm property in the United States for the years 1890, 1900, and 1910, are: FarmsValue of Property18904,564,641$16,082,267,68919005,737,37220,439,901,16419106,361,50240,991,449,090295.  On March 1, 1913, there were over 62,000 towns in which the Ford Company did not have agents.  296.  On March 1, 1913, the good-roads movement was growing very fast and had a very favorable effect upon the market for automobiles.  The following tabulation shows the years in which laws for State aid of road improvement were first passed and the number of States enacting such laws in those years: YearNumber of States1891118921189521898319012190211903319042190551906119071190811909619101191181912119133After 19136Total48The total amount expended under the supervision of State*3874  highway departments in 1904 was $2,549,912, and in 1914 was $25,220,850.  The total cash expended on roads from all sources in 1904 was $59,527,170, and in 1914 was $240,263,784.  The estimated expenditures for 1912 were $156,270,631.  In 1912, 9.96 per cent of the roads in the United States were improved.  The percentage of improved roads in each State varied from .3 per cent to 50.8 per cent.  The total amount expended on roads and bridges from 1906 to 1919 was as follows: 1906$74,000,000190780,000,000190890,000,0001909100,000,0001910120,000,0001911140,000,0001912156,000,0001913$175,000,0001914250,000,0001915275,000,0001916280,000,0001917290,000,0001918300,000,0001919400,000,000These amounts do not include the value of statute labor and pertain only to roads outside of city or town limits.  297.  The delivery-wagon business was developing rapidly at March 1, 1913.  The company at that time had regular commercial buyers' contracts with large buyers, giving 10 per cent discount if *1130  50 or more delivery cars were purchased during a 12-month period.  These contracts were extensively used by buyers and*3875  this constituted a large future market.  298.  The total number and value of automobiles imported and the value of parts imported for the years 1906 to 1913, inclusive, were: ImportsYearNumber of automobilesValue of automobilesValue of parts19061,106$3,844,505$400,51419071,1764,041,025801,25419081,0452,500,134490,90519091,6242,905,391773,74319101,473$2,851,446$985,63819118881,898,843351,91619129632,134,181304,14419137481,759,380263,827299.  The total number and value of automobiles exported, and the value of parts exported for the years 1906 to 1913, inclusive, were: ExportsYearNumber of antomobilesValue of automobilesValue of partsNot1906shown.1 $3,497,01619072,8624,890,886$611,35519082,4774,656,991620,85619093,1845,387,021605,17919106,926$9,548,700$1,641,520191111,86312,965,0492,544,180191221,75721,550,1394,107,155191325,2866,012,9345,240,599300.  In the early stages of the automobile industry, from about 1895 to 1909 or 1910, there were*3876  many failures.  Inadequate financing and improper manufacturing had been the chief troubles.  Some companies were still suffering from mistakes, but they were in the process of correction at the time, and the industry was on the upswing.  In 1913 the motor industry was not in its infancy, nor was it a new industry.  It was well advanced and established.  301.  Bulletin 66 of the Bureau of the Census, Census of Manufactures: 1905, Automobiles and Bicycles and Tricycles, contains the following: In five years the manufacture of automobiles in the United States has grown from an industry so unimportant that it was not reported separately at the census of 1900 to one with products valued at $26,645,064.00 at the census of 1905 which covered the calendar year 1904.  This remarkable growth is not, like that of the bicycle, based on a fad, and so liable to as sudden a decline.  Unlike the bicycle, the automobile is not essentially a new vehicle, but merely a carriage or truck with a new means of propulsion, possessing many advantages over a vehicle drawn by horses.  As a means of amusement its popularity may fluctuate or decline, but its practical value has been so thoroughly demonstrated*3877  that its use will doubtless become more general each succeeding year, until it is displaced *1131  by some vehicle as much its superior as the automobile is the superior of the horse and wagon.  * * * Though not yet perfected, the automobile has become at least reliable.  Models and parts are being standardized, thus rendering it possible to replace broken or worn out parts without delay.  In the United States many express and transfer companies, department stores, and fire departments have abandoned the horsedrawn vehicle for the automobile.  In New Mexico it has supplanted the stage coach between Roswell and Torrance, a distance of 101 miles.  It has worked a revolution in Nevada, where the means of local transportation have heretofore been confined to the mule.  Liverymen acknowledge the passing of the horse by operating automobiles in connection with their stables.  In many of the larger cities the automobile has been introduced for public transportation.  Although it is as yet unsuited for general transportation in the field, yet the utility and advisability of the self-propelled vehicle for military purposes have been amply demonstrated.  In Germany armored automobiles*3878  are being constructed for use in the army.  In the United States the use of automobiles will be limited only by their cost and the condition of the highways.  The cost is gradually becoming less and the automobile itself is already felt as a factor in the movement for good roads.  302.  A bulletin of the Bureau of the Census entitled "Manufactures: 1909, Statistics for the Manufacture of Automobiles, Including Bodies and Parts," contains the following: Between 1904 and 1909 the manufacture of automobiles including bodies and parts, advanced in rank among the manufacturing industries of the country from seventy-seventh place to twenty-first with respect to value of products and from seventieth to twentieth with respect to average number of wage earners.  303.  A bulletin entitled "Census of Manufactures: 1914, Automobiles Including Bodies and Parts," contains the following: Comparison with earlier censuses. - Table 2 summarizes the more important statistics relative to the automobile industry (both branches combined) for the censuses of 1914, 1909, 1904, and 1899, and gives the percentages of increase from census to census.  At the census of 1899 the manufacture of automobiles*3879  was reported as a part of the carriage and wagon industry, but the returns of establishments engaged exclusively or primarily in the manufacture of automobiles have since been tabulated separately, and are presented in the comparative table as the statistics for the industry in 1899.  The totals for that year do not include statistics for establishments whose chief products were automobile bodies and parts, but it is doubtful whether there were any such establishments at that time.  Since in 1899 the industry was largely in the experimental stage, a comparison of the figures for that year with those derived from succeeding censuses would possess little significance.  Statistics for 1904, 1909, and 1914, however, are fairly comparable and show a remarkable growth for the industry.  Between 1909 and 1914 the manufacture of automobiles, including bodies and parts, advanced in rank among the manufacturing industries of the country from twenty-first to sixth place with respect to value of products and from twentieth to fourteenth with respect to average number of wage earners.  The much greater advance in rank of value of products than of average number of wage earners is due in part*3880  to the increasing use of highly specialized automatic machinery, requiring comparatively few operatives.  TABLE 2Number or amount1 Per cent of increase 1914190919041899 21909-19141904-19091899-1904Number of establishments1,2717431785771.1317.4212.3Persons engaged145,95185,35913,333(3)71.0540.2Proprietors and firm members760405103(3)87.7293.2Salaried employees18,0999,2331,18126896.0681.8340.7Wage earners (average number)127,09275,72112,0492,24167.8528.4437.7Primary horsepower173,68475,55010,1093,164647.4219.5Capital$407,729,915$173,837,111$23,083,860$5,768,857134.5653.1300.1Salaries and wages$139,452,553$58,173,291$8,416,217$1,615,428139.7591.2421.0Salaries$37,525,679$9,479,424$1,257,259$294,770295.9654.0326.5Wages$101,926,874$48,693,867$7,158,958$1,320,658109.3580.2442.1Paid for contract work$3,954,924$550,329$1,060,576(3)618.648.1Rent and texes (including internal revenue)$5,152,314$1,483,4324 $209,656(3)247.3Cost of materials$356,207,930$131,645,736$13,151,365$1,804,287170.6901.0628.9Value of products$632,831,474$249,202,075$30,033,536$4,748,011153.9729.7532.5Value added by manufacture (value of products less cost of materials$276,623,544$117,556,339$16,882,171$2,943,724135.3596.3473.55 Automobiles made 569,054126,59321,6923,723349.5483.6482.6*3881 *1132  Table 3 gives separate statistics for the two branches of the industry for 1914, 1909, and 1904, with percentages of increase.  Both branches of the industry showed very great increases during the period 1909-1914.  The percentages of increase for this period are not so large as those for the preceding five years, but the actual amounts of the increases are much greater for the later period than for the earlier.  The large relative gains made between 1904 and 1909 were due chiefly to the fact that in 1904 the industry was still in its infancy.  This is particularly the case with reference to the manufacture of bodies and parts in establishments not making the complete machine.  TABLE 3Automobiles1 Per cent of increase 1914190919041909-19141904-1909Number of establishments30026512113.2119.0Persons engaged91,99758,14211,24658.2417.0Proprietors and firm members608353Salaried employees12,6306,76595486.7609.1Wage earners (average number)79,30751,29410,23954.6401.0Primary horsepower104,98350,6417,624107.3564.2Capital$312,875,884$134,592,965$20,555,247132.5554.8Salaries and wages$84,900,520$39,854,578$7,255,375113.0449.3Salaries$17,966,161$6,674,104$1,076,425169.2520.0Wages$66,934,359$33,180,474$6,178,950101.7437.0Paid for contract work$3,768,809$454,850$1,034,646728.6-56.0Rent and taxes (including internal revenue)$3,331,311$798,9542 $166,122317.0Cost of materials$292,597,565$107,731,446$11,658,138171.6824.1Value of products$503,230,137$193,823,108$26,645,064159.6627.4Value added by manufacture (value of products less cost of materials)$210,632,572$86,091,662$14,986,926144.7474.4Number of automobiles made568,781126,57021,692349.4483.5*3882 Automobile bodies and partsPer cent of increase1914190919041909-19141904-1909Number of establishments97147857103.1Persons engaged53,95427,2172,08798.21,204.1Proprietors and firm members70032250117.4Salaried employees5,4692,468227121.6987.2Wage earners (average number)47,78524,4271,81095.61,249.6Primary horsepower68,70124,9092,485175.8902.4Capital$94,854,031$39,244,146$2,528,613141.71,452.0Salaries and wages$54,552,033$18,318,713$1,160,842197.81,478.1Salaries$19,559,518$2,805,320$180,834597.21,451.2Wages$34,992,515$15,513,393$980,008125.61,483.0Paid for contract work$186,115$95,479$25,93094.9268.2Rent and taxes (including internal revenue)$1,821,003$684,4782 $43,534166.0Cost of materials$63,610,365$23,914,290$1,493,227166.01,501.5Value of products$129,601,337$55,378,967$3,388,472134.01,534.3Value added by manufacture (value of products less cost of materials)$65,990,972$31,464,677$1,895,245109.71,560.2Number of automobiles made27323*3883 *1133  This bulletin further states: The tendency toward greater regularity of employment in the industry is indicated by the fact that in 1914 the minimum number of wage earners represented 85.5 per cent of the maximum, as compared with 69.8 and 66.1 per cent. respectively, for 1909 and 1904.  304.  The bulletin of the Department of Commerce entitled "Census of Manufactures: 1914, Carriages, Wagons and Materials," contains the following: The growth of the industry was consistent and compared favorably with that of other industries up to 1904, but since then there has been a gradual decline, the decrease from 1909 to 1914 being 7.9 per cent in number of establishments and 17.7 per cent in value of products.  The decline is due to the rapid development of the automobile industry.  Many establishments formerly engaged in the manufacture of carriages and wagons and materials were reported as either engaged in the manufacture of automobiles or as having discontinued business.  305.  This bulletin shows the number and value of vehicles of all classes, excluding automobiles, manufactured by makers of carriages and wagons, as follows: *3884 Number of VehiclesValue19041,711,330$96,955,01819091,519,23890,694,14519141,124,90369,324,182306.  General business and market conditions from January 1 to March 1, 1913, were uncertain and somewhat depressed.  The general trend of prices on the New York Stock Exchange since about the middle of 1912 had been downward.  The decline continued until May, 1913.  The number of transactions on the New York Stock *1134  Exchange in February, 1913, was the smallest of any month, save two, for twelve years.  The Balkan war, the sale in American markets of securities held by European owners, the situation in Mexico, the campaign and election of President Wilson, were regarded by some bankers as factors tending to bring about lower prices of stocks and securities on the New York Stock Exchange.  307.  On October 13, 1915, the resignation of James Couzens as vice president and treasurer was presented to the board of directors and was accepted, to take effect November 1, 1915.  In January, 1919, Norval A. Hawkins, who had been sales manager for the company since 1907, resigned.  308.  On November 2, 1916, John F. Dodge and Horace E. Dodge, stockholders*3885  of the Ford Motor Co., filed a bill of complaint against the company and its then directors praying, inter alia, that the company be required to declare a dividend of its cash surplus.  The following is (as stipulated) an abridged statement of the facts, the issues involved, the opinion and decree of the lower court and the opinion and decree of the Supreme Court of the State of Michigan in the above suit: I.  STATEMENT OF FACTS The complainants, Horace E. and John F. Dodge, each owned 1,000 shares of stock in the Ford Motor Company, a Michigan corporation.  In the arly history of said company the complainants, who owned a manufacturing plant, made a large proportion of the parts required by the Ford Motor Company, but afterwards that company began making what was needed and all contracts with the Dodge Brothers ceased in 1914, when the complainants began the manufacture of automobiles on their own account.  On the starting of this manufacturing John F. Dodge, who had been on the board of directors of the Ford Motor Company, resigned.  The Company met with unparalleled success and from time to time as its cost was reduced by economies the price of the car was lowered to*3886  the general public.  This had been the general policy of the company.  Prior to the inception of this suit the company had for a number of years regularly paid quarterly dividends equal to 5% monthly on its capital stock and other special dividends; the special dividends for the preceding five years aggregating $41,000,000.  The company had been unable to fill the demand for its machines or in a large way enter upon the manufacture of trucks, as it had desired.  For more than a year prior to the filing of the bill in this case the company had been laying plans publicly and openly for the building of blast furnaces, stoves, blow engines, coke ovens, foundry building and equipment, malleable foundries and equipment and necessary accompaniments therefor, for the purpose of producing the iron used in the construction of the cars of said company.  The proposed cost of such smelting plant approximated $11,325,000.00.  At the time of filing the bill of complaint the said company was engaged in practically duplicating its manufacturing plant at Highland Park, the plans for which had been under discussion and had been adopted by the board of directors of that company for practically a year*3887  prior thereto.  The cost of such proposed addition approximmated *1135  $9,895,000.00.  During the fiscal year ending July 31, 1916, the output of the company amounted to approximately 500,000 automobiles.  The Board of Directors on August 1, 1916, reduced the price of the company's automobile $80.00.  On July 31, 1916, Henry Ford, president of the said Ford Motor Company, holder of a majority of its shares, gave out a statement of the then financial condition of said company, wherein, among other things, there was shown cash on hand and in bank of $52,550,771.92, and profits for the fiscal year ending as of such date, of $59,994,118.01, and a surplus of $111,960,907.53 over and above its capital stock of $2,000,000.  Under the law authorizing incorporation of companies for the purpose of engaging in manufacturing in the state of Michigan, the law under which the Ford Motor Company was organized and then existing, it was not permissible to incorporate a corporation having a capital in excess of $25,000,000.  At that time the Ford Motor Company had an authorized capital of $2,000,000.  The original bill of complaint was filed on November 2, 1916, and an amended and supplemental*3888  bill was filed April 26, 1917, the defendants being the Ford Motor Company and its then directors, namely - Henry Ford, David H. Gray, Horace H. Rackham, F. L. Klingensmith, James Couzens and Edsel L. Ford.  The bill of complaint prayed that the Ford Motor Company and its said directors be enjoined from continuing the expansion of the operations of said company with investment of funds of said corporation except in the ordinary conduct of its present business, and from disbursing the cash assets of the company so that the same might not be available for distribution upon the final decree of the court as dividends to the stockholders; that the company be required by decree of the court to distribute to the stockholders of the corporation as dividends at least 75% of the then present accumulation of cash surplus of the company and for the future that they be required to distribute all of the earnings of the company except such as might be reasonably required for emergency purposes in the conduct of the business.  II.  The issues involved in the litigation were - (1) Is it lawful for a corporation having an authorized capital of $2,000,000 to retain in the business without distributing*3889  as dividends approximately $60,000,000 of profits earned the preceding year, where the corporation has a surplus of approximately $112,000,000, when the laws of the state under which that corporation is organized do not permit incorporation with an authorized capital exceeding $25,000,000?  (2) Is the building and constructing of a smelting plant by the Ford Motor Company, under the facts stated, ultra vires of the corporation?  (3) Was it an abuse of discretion on the part of the board of directors to fail neglect or refuse to distribute the large portion of its cash surplus on hand at and prior to the time of filing the bill of complaint?  III.  The Circuit Court held in its opinion - (1) A corporation may not be permitted, against the stockholders' objections, to hold and not distribute profits which it has acquired in trade where it might not hold such amount of property by contribution at its inception.  (2) That the construction of a smelting plant and blast furnace is not necessarily incidental to the powers of the company and the construction thereof ultra vires.  *1136  (3) That the retention of the cash surplus of the company under the circumstances of*3890  this case, was an abuse of discretion by the board of directors and that complainants were entitled to have 50% of the profits of 1916 declared as special dividends, but that credit should be given for the dividends declared for the fiscal year ending July 31, 1917.  IV.  DECREES OF THE CIRCUIT COURT.  Upon the pleadings and the evidence adduced, the Circuit Court decreed in part as follows: (1) That the defendants, as the Board of Directors of the Ford Motor Company, within thirty days from the entry of this decree, declare a dividend upon all of the shares of stock of such company in an amount equivalent to one-half of, and payable out of the accumulated cash surplus on hand at the close of the fiscal year ending July 31, 1916 (less special dividends declared and paid after the filing of the bill of complaint and during said fiscal year), which amount so to be declared as a dividend is $19,275,385.96.  (2) The defendant, Ford Motor Company, shall pay the said sum of $19,275,385.96 to the stockholders of said Ford Motor Company pro rata to the number of shares of stock held by each as a special dividend out of the accumulated cash surplus on hand of said defendant, Ford Motor*3891  Company, at the close of the fiscal year ending July 31, 1916.  (3) That the owning, holding or operating by such company, and the using or appropriating or incurring obligations which might require or necessitate the using or appropriating any funds for a smelting plant or blast furnace of the character shown by the proofs adduced to be in contemplation near the River Rouge, is without authority of law and is permanently enjoined.  (4) That the increase of the fixed capital assets of such company beyond these at the date of the entry of this decree is without authority of law and is permanently enjoined.  (5) That the holding of liquid assets by such company in excess of such as may be reasonably required in the proper conduct of its business is without authority of law and is permanently enjoined, and such company, and its board of directors, are directed and commanded to declare and distribute, as dividends to the stockholders, any such excess which may now exist or may accrue from time to time hereafter.  (6) That the defendants, Henry Ford, Horace H. Rackham, and Frank L. Klingensmith, shall within thirty days after entry of this decree come to a full accounting for all*3892  sums used since the filing of the bill of complaint in the establishment of a smelting plant.  Within thirty days thereafter they shall pay to such company, in pursuance of their written obligation in that behalf heretofore executed, the amount by such accounting found to be due.  (7) That the aforesaid dividend of $19,275,385.96 shall be paid as follows: (a) $5,000,000.00 within thirty days after date of entry of this decree: (b) the amount found due upon the accounting mentioned in the last preceding paragraph, forthwith upon the payment thereof to such company; (c) one-half of the balance on or before sixty days from date of entry of this decree; and (d) the remainder on or before ninety days from such date of entry.  (8) That, "if an appeal shall be prosecuted herefrom, with stay of proceedings, then if payment of said dividends or any other act required hereby to be done shall be affirmed, unless the Supreme Court shall otherwise direct, all payments and other acts required by this decree to be made or done within a certain time after the entry hereof shall be made and done within the same number of days after the entry of the decree in the Supreme Court." *1137 *3893  V.  OPINION OF THE SUPREME COURT OF MICHIGAN.  (Rendered Feb. 7, 1919) On Appeal, the Supreme Court of Michigan held in its opinion: (1) That the limitation of capital stock of corporations, stated in the act under which the Ford Motor Company was organized, applies to the amount of capital which in the first instance may be employed in the corporate enterprises and not to be the legislature's intent to limit the capital assets of corporations.  (2) That the smelting of iron ore by a corporation engaged in the manufacture of automobiles, so that its castings might be made direct from the ore rather than from pig iron, is not beyond the power of the corporation.  (3) That since the Ford Motor Company would have a surplus of approximately thirty million dollars, after paying for approved expansion and improvement to its plant and reasonably might have expected a profit of upwards of sixty million dollars for the fiscal year ending July 31, 1917: refusal by the board of directors to declare extra dividends was arbitrary and the decree of the court below determining that $19,275,385.96 should be distributed as an extra dividend was affirmed.  VI.  DECREE OF THE SUPREME COURT*3894  OF MICHIGAN.  On appeal to the Supreme Court of Michigan (prosecuted with stay of proceedings) that court made and entered a decree (omitting that part dealing with the costs) as follows: "The decree of the Circuit Court for the County of Wayne, in Chancery, here appealed from is affirmed in so far as the terms and provisions thereof are incorporated herein, but in all other respects and particulars the said decree is reversed, vacated and held for naught.  "The defendants Henry Ford, Edsel B. Ford, Frank L. Klingensmith, Horace H. Rackham and James Couzens, as the Board of Directors of the defendant Ford Motor Company, shall within thirty days from the entry hereof declare a dividend upon all of the shares of stock of said defendant Ford Motor Company, in an amount equivalent to one half of, and payable out of the accumulated cash surplus of said defendant Ford Motor Company on hand at the close of the fiscal year ending July 31, 1916, less the aggregate amount of the special dividends declared and paid after the filing of the bill of complaint in this suit and during the fiscal year ending July 31, 1917, which amount so to be declared as a dividend is Nineteen million two hundred*3895  seventy-five thousand three hundred eighty-five and 96/100 dollars ($19,275,385.96).  "The defendant Ford Motor Company shall pay the said sum of Nineteen million two hundred seventy-five thousand three hundred eighty-five and 96/100 dollars ($19,275,385.96) to the stockholders of said defendant Ford Motor Company, prorata to the numbers of shares of stock held by each, as a special dividend out of the accumulated cash surplus on hand of said defendant Ford Motor Company at the close of the fiscal year ending July 31, 1916, which sum shall be paid within thirty days from the date of the entry hereof.  "Upon the amount of such dividend payable to the plaintiffs there shall be paid to the plaintiffs, at the time of the payment thereof interest at the rate of five per cent (5%) per annum from the fifth day of December, 1917, - the date of the entry of the decree in this cause in the Circuit Court - to the date of such payment." *1138  The opinion of the Supreme Court of the State of Michigan is reported in 204 Michigan 459, et seq., and 170 Northwestern 668, et seq.309.  Under date of December 30, 1918, Henry Ford directed the following letter to the*3896  Board of Directors of the Ford Motor Co.: DEC 30 1918 To the Board of Directors of the Ford Motor Company Detroit, MichGENTLEMEN: I hereby resign the office of president of this company, to take effect at the close of business December 31st, 1918.  As you know, I have intended to take this step for some time past for a number of reasons, the most important of which is that my time must necessarily be given to other work less thoroughly organized than this, and I also wish to be relieved of all responsibilities and obligations arising from holding a salaried office in the company.  It is my desire to devote my time to building up other organizations with which I am connected.  I shall be glad to remain on the board and to assist in an advisory way when requested.  I desire to thank the board and the officers and staff for the cordial co-operation always given me and to which is due so greatly the success of the company.  Yours very truly HENRY FORDPresident.310.  The minutes of a meeting of the board of directors held on December 31, 1918, contain the following: The resignation of Mr Henry Ford as President of the Company having been read, it was moved, *3897  supported and unanimously carried that it be accepted with regrets.  311.  Shortly before March 5, 1919, Henry Ford gave an interview to a reporter of the Los Angeles Examiner.  The following article appearing in that newspaper on March 5, 1919, was written as a result of that interview, and is a true and fair report of the statements made in the interview: HENRY FORD ORGANIZING HUGE NEW COMPANY TO BUILD BETTER, CHEAPER CAR Manufacturer to Join With Son in Constructing Autos for $250 or $350; Devises Machine During "Rest" at Altadena; Plant Will Be Established in CaliforniaBy Otheman Stevens Mr. Henry Ford has under way a business move of the most dynamic importance to the motor car business and to the world of finance.  He is to enter anew the making of cars.  His idea is to make a better car than he now turns out, and to market it at a lower price, somewhere from $250 to $350, and to do it through another company than the Ford Motor Company.  *1139  His son, Mr. Edsel Ford, is president of the Ford Motor Company, but will surely join his father in the new undertaking.  This would mean the abandonment by the Fords of the present company, which without*3898  exaggeration has been about the most phenomenal money maker in the country.  If you had invested $5,000 in the original company it would now represent to you in good red gold or its equivalent something like $8,500,000, besides dividends of close to $4,000,000.  That cannot be done by you in the new company because there will be no stock that you can get.  Mr. Ford believes, knows, in fact, that he can produce the same results with his new company.  What will become of the present enormous company, which in one way or another has about $170,000,000 in capital resources and investment is a question that will prove of great interest to many people.  "I have decided on the new undertaking," said Mr. Ford at his Altadena home yesterday, "and as matters stand intend to go ahead with it.  "This idea developed from the recent court decision whereby I am obliged to distribute about $19,000,000 accumulated profits; my idea of successful business is to have it well heeled with cash.  $19,000,000 Court Decision Induces Financier to Plan New Project.  "And my idea about court decisions is that there never was one that did not help the people; a good decision certainly; a bad*3899  one none the less in the long run.  "Take my own case, the public, because of what I consider apparently a wrong decision, will as a result get a better car, a cheaper car, and one more fully up to date than before or than is now in existence.  The present Ford car was designed twelve years ago.  "That is why I favor the League of Nations idea as a final court of the world; an international court; its decisions would always render the world the best service and thereby the best service to the people.  "Because the court principle is the only supreme principle that the world has; I feel that my contention that decisions always work for the public good will be proved in my own case - that good or bad as the decision may be, the public always reaps the benefits.  "As to the $19,000,000 decision, it caused me to make this move because of my principle to have plenty of ready cash to do business; if you have the cash you discount your bills, you draw interest and its mere presence enables you in many ways to reduce the cost of production and thereby make more profit and pay better wages.  "Of that $19,000,000 I have to distribute to myself about $12,000,000, but I cannot in justice*3900  to myself put that back in the business because I have no way to oblige those who own the other portion to so employ it.  "As I do not believe in subsidiary companies I cannot resort to that method which many financiers employ.  Henry Ford and Son Incorporated Will Own All the Stock.  "My only recourse is to get out, design a new car which can be sold cheaply and which will be in all details up to date.  "The only other venture I have gone into is our Tractor company, and this will be the method of handing the new car; that is called Henry Ford and Son Incorporated.  *1140  "In this company all the stock will be owned by my family.  "For our new project we are already looking about for water power sites; the car itself is well advanced, for I have been working on its while 'resting' here in California.  "We shall have a plant on this coast, all over the country, in fact we propose to dot the whole world with our factories because I believe that every family should have a car and it can be done.  "Our company already has established its tractor business and is paying at the rate of $500,000 to $600,000 a month; it is capitalized at $5,000,000 and has accumulated*3901  $12,000,000 assets.  "The old company?  Why, I don't know exactly what will become of that; the portion of it that does not belong to me cannot be sold to me, that I do know.  "I must do business on the basis I think right; I cannot do it on any other.  I do not like stock companies, I do not think the principle is the best that can be devised, but it is the best system there is at present and we must use it.  "I hope eventually that some system of common partnership wherein those who work as a result of investing their money and those who work otherwise will be the partners." Mr. Ford and his family leave this morning for home; he has enjoyed his vacation by his rest in devising a new car, and returns to his work with a larger perspective, a larger grasp on his potential qualities than ever.  Articles of similar import appeared in the Los Angeles Evening Herald on March 5, 1919, in the Detroit Free Press on March 6, 1919, in the Detroit Journal on or about March 11, 1919, and in Los Angeles Sunday Times on March 16, 1919.  The last named article purported to report an interview with Henry Ford's private secretary and was similar to the article quoted above.  Several of the*3902  articles stated that two big sites, one in New York and another at Hamilton, Ontario, had already been purchased.  312.  At the time of the publication of the article quoted above, John W. Anderson was in California.  He saw the article and clipped it from the paper as he did with several of the other articles.  313.  The following article appeared in the Detroit Free Press on Tuesday, March 11, 1919: FORDS TO BUILD NEW CAR ALL RIGHT, BUT IT IS YET ONLY DREAM All of the readers of the Kansas City and Los Angeles newspapers, and perhaps those of a few other towns in which Henry Ford and his son, Edsel Ford, so-journed or "en routed" seem to know all about the new motor car which Mr. Ford and Edsel will make - but Edsel Ford said Monday night he didn't know a darned thing about it - or words to that effect.  What Edsel Ford really said, when he was asked about interviews from Los Angeles, Kansas City and way ports, telling about his hopes, plans and aspirations for the new child of Henry Ford's brain was: Why Are Interviews.  "I'd like to see the interview before I discuss them, and I did talk with a newspaperman in Kansas City, but if he sent out a story that our new*3903  car was going to compete with street cars, he didn't write the interview like I expected he would.  "*1141  You see, we have no definite plans for our new car, except that we are going to build a new car.  "We have been working on that idea for a long time; we are going to build the car, but beyond that there is nothing definite.  "Is it true that you and your father are going to withdraw from the Ford Motor Company" was asked.  Going to Build Car.  "We are going to build a car of our own, separate entirely from the Ford Motor company, but we will protect our interest in the Ford company," was the reply.  Informed that Attorney Elliot G. Stevenson was reported to have stated that Henry Ford and Edsel Ford would be prevented from withdrawing from the Ford Motor company, as they were tied to that concern by contract, and Mr. Ford's inventions were subject to contract with the Ford Motor Company, Edsel Ford said he had no knowledge of any such contemplated step by stockholders of the big motor car company.  "I don't see how they could prevent us from following out our plans to make a new car of our own," he said, "but, of course, that may be a question for the lawyers*3904  to decide." 314.  On March 21, 1919, the following letter was sent to all Ford dealers: On account of recent newspaper articles and the many rumors circulating over the country concerning a proposed new car to be manufactured by Mr Henry Ford, we believe it advisable to inform our dealers generally, in order that you may intelligently and uniformly answer all inquiries.  In the first place, a large majority of the reports afloat are greatly distorted and exaggerated.  A new car may be manufactured but as to when it will be manufactured we are not in position to say, except that we do know a new car could not possibly be designed, tested out, manufactured and marketed in quantities under two or three years' time.  There is nothing, however, indefinite about the present Ford car.  There are over three million in daily use at the present time; and every one of our dealers, through their continued enthusiastic efforts, can dispose of our product as rapidly as manufactured.  We intend to continue the production of the reliable Model T as aggressively as in the past, and feel that we have the cooperation of our entire sales organization in forcibly impressing upon prospective buyers*3905  the exceptional high quality and dependability of the present Ford car, backed up by the entire strength of an organization already established.  Our factory and assembly plant production is being pushed to the limit, with the thought in mind of reaching our normal capacity of three thousand cars per day as quickly as possible, in order that the demands of prospective buyers might be met to the fullest possible extent and that our dealers might increase their profits proportionately.  We are also taking important steps to expand and extend our business abroad, especially in European countries including Russia.  With the above information, you should quickly offset any rumors which might tend to delay immediate sales.  Yours very truly FORD MOTOR COMPANY EDSEL B. FORD President*1142  315.  The Detroit Free Press on March 23, 1919, carried an article to the effect that such a letter had been sent to all Ford dealers.  316.  The general balance sheet, factory and branches, of the Ford Motor Co. on June 30, 1919, was as follows: ASSETSWorking - Cash on Hand and in Bank$70,641,023.23Bonds29,131,631.77Accounts Receivable16,820,286.30Merchandise and Supplies53,459,737.58Investments - Outside126,814.85Expense Inventories802,934.70Plant - Land7,310,094.62Buildings and Fixtures21,565,640.00Machinery and Power Plant19,550,965,34Factory Equipment6,628,401.42Dies, Punches, Jigs and Fixtures3,129,531.06Patterns217,902.89patents70,700.04Office Equipment483,964.44Construction - Buildings24,959,090.25Construction - Equipment4,499,111.28U.S. Gov't. Plant Accounts2,167,583.86Total Assets$261,565,413.63LIABILITIESWorking - Accounts Payable$15,281,042.06Accrued Pay Rolls2,833.942.82Accrued Salaries67,565.37Accrued Expenses5,478,856.48Contract Rebates36,646.66Reserves - For Insurance86,950.82For Depreciation of Plant12,808,176.59U.S. Gov't. Suspense Account535,263.04Total Liabilities$37,128,443.84Surplus222,436,969.79Capital Stock2,000,000.00$261,565,413.63*3906  317.  Article VII, section 4, of the by-laws of the Ford Motor Co. is as follows: No sale of stock shall be made or caused to be made by any Stockholder to any person who is not a stockholder of said Corporation except in pursuance of the following terms and conditions, which terms and conditions shall be binding upon all the Stockholders of the Corporation who may now be or may hereafter become such: *1143  First: That in event of any Stockholder desiring to make a sale of his stock, or any portion thereof to any person who is not a Stockholder of said Corporation, he shall first submit to the Stockholders of said Corporation satisfactory evidence of the agreement to purchase said stock by such third person and the price agreed to be paid therefor.  Second: That in event of the remaining Stockholders agreeing to purchase said stock at the same price the aforesaid evidence shows that said Stockholder can receive for said stock from a third party, then said stock shall be sold to said Stockholders of said Corporation in such proportionate amounts as their respective stockholdings bear to the entire stock held by the Stockholders of said Corporation.  Third: In event*3907  of any of the Stockholders not desiring to purchase said stock, then such stock shall be sold at the price aforesaid to such of the Stockholders who may desire to purchase the same and in the same proportion as above specified.  Fourth: No stock shall be sold to any person other than the Stockholders of the Corporation until each of the Stockholders shall have had an opportunity afforded them to purchase said stock at the price evidenced as aforesaid and declined to do so.  Fifth: Notice in writing to the Stockholders of said Corporation of the desire of any Stockholder to sell his stock shall be given by such Stockholder, and at the same time, satisfactory evidence shall be furnished to said Stockholders as to the price as hereinbefore set forth.  Stockholders shall have five days' time after the receipt of said notice within which to elect in writing whether they shall purchase said stock or decline so to do.  318.  These provisions of the by-laws were printed on the reverse side of each certificate of stock of the Ford Motor Co., together with the following: Paragraph 3, of the Agreement of December 5th, 1908, entered into by and between FORD MOTOR COMPANY and its STOCKHOLDERS. *3908  (3) That at any time hereafter should any of us hypothecate or pledge any of the certificates of stock in said Corporation issued to us that we shall as a condition of such pledge exact from the pledgee thereof an agreement that before such pledgee shall sell or cause to be sold any of said certificates of stock so pledged with him by any of us or any future stockholder of this Corporation such pledgee shall first give a written notice of the time and place of said proposed sale of said stock, whether said sale be at public auction or private vendue, and in case such sale is at private vendue, shall give the name and address of the proposed purchaser and the price proposed to be paid by said purchaser at such private sale for said certificates of stock so pledged as aforesaid, said notice to be in writing and addressed to the Secretary of the Ford Motor Company at its principal office in the City of Detroit, Michigan, and delivered at least ten (10) days prior to the time of such proposed sale, it being understood that the Secretary shall forthwith, on the receipt of any such notice, immediately send a copy thereof to each of said Stockholders of said Corporation at the date of*3909  its receipt.  319.  The stock could not have been listed on the New York Stock Exchange under these restrictions or with those by-laws in existence.  320.  Some time in 1916 one of the Dodge brothers asked Henry E. Butler of the firm of Charles D. Barney & Co., investment bankers, if the firm would be interested in the purchase of a block of Ford stock.  It was the understanding of Butler that the stock had to be offered *1144  to Henry Ford.  He inquired whether that was true and upon being informed that it was, he stated he did not believe the firm would be interested.  He did not see the restrictions on the stock and was not informed as to what they actually were.  321.  The certificates of stock in the Ford Motor Co. of Canada had similar restrictions thereon, requiring five days' notice to other stockholders, with the right to purchase at the same price offered by a third party in accordance with the by-laws.  The stock of this company was accepted by at least two banks as collateral for loans, and was freely traded in in the City of Detroit before and after March 1, 1913.  The stock was not listed on the Detroit Stock Exchange at that time.  Whenever a stockholder*3910  offered his stock for sale and a purchaser was found, the Ford Motor Co. of Canada was notified and notices were sent by it to its stockholders.  If they desired to purchase the stock it was sold to them.  If not, the company notified the broker that he was at liberty to sell stock and it would be sold to the third party.  Stockholders experienced no difficulty in disposing of their stock.  There were always those who were anxious to secure the stock and who would purchase it subject to the restriction.  322.  Before the stock of the Ford Motor Co. of Canada was listed on the stock exchange the restrictions were removed from the stock.  323.  In the spring of 1916, John W. Prentiss, a partner in the firm of Hornblower & Weeks, investment bankers, suggested to Henry Ford that the Ford Motor Co. be recapitalized on the basis of $500,000,000, and stated that his firm would take any part of it.  No action was taken on the suggestion.  324.  In the fall of 1916, John W. Anderson received an offer of $13,500 a share for his stock in the Ford Motor Co.  He refused to sell.  325.  Beginning December 14, 1915, to and including November 6, 1916, W. H; Humphrey, an investment banker of*3911 Detroit, Mich., negotiated with certain investment bankers for the sale of 500 shares of stock of the Ford Motor Co. of Michigan, owned by James Couzens, but was unable to dispose of it at a price agreeable to both Couzens and the bankers.  326.  On some date subsequent to October 23, 1916, and prior to November 6, 1916, Humphrey, on behalf of himself and certain New York investment bankers, offered to buy and James Couzens agreed to sell 500 shares of the stock of the Ford Motor Co. of Michigan at a price of $13,500 a share.  The transaction was not consummated because Couzens demanded full payment therefor in cash immediately, whereas Humphrey and his associates agreed to deposit $500,000 as a partial payment and to pay the balance within 10 days, the *1145  $500,000 to be forfeited if complete payment in cash were not made prior to the expiration of the 10 days.  327.  In February, 1917, Horace E. Dodge and John F. Dodge gave an option to S. K. Rothschild to purchase their stock for $18,000 a share.  In asking for the option Rothschild stated that he had associates in New York who he thought would be interested in taking over the interests of the Dodge brothers, forming*3912  a holding company, and selling stock in the holding company.  He later surrendered the option because statements of Henry Ford that he was going to turn his plant over to the Government caused the prospective purchasers to become disinterested.  328.  Some time prior to March 1, 1919, Luman W. Goodenough, representing Paul R. Gray, David Gray and Philip H. Gray, discussed with W. H. Humphrey, at the latter's instance, a proposal that Humphrey sell the stock of the Ford Motor Co. held by the Grays.  On March 14, 1919, there was a meeting in Goodenough's office of Goodenough, Humphrey, and Charles R. Talbot, vice president of the National Bank of Commerce of Detroit.  Goodenough represented that he had a power of attorney covering all the stock of the Grays, and that while he would not give a written option he would give an oral option for 15 days to purchase the stock of the Grays at a price of $9,000 per share, less any dividends which might be declared.  He stated at that time that he was disturbed and alarmed by the statements of Henry Ford as reported from California.  The alleged option was given, apparently to both Talbot and Humphrey.  There was no consideration for the option. *3913  It was further understood that should any of the then stockholders of the Ford Motor Co. purchase the stock the price should be $9,000, plus 2 per cent thereof, the 2 per cent to be paid to Humphrey for his services.  Humphrey did not sell the stock during the period specified.  329.  On April 3, 1919, Horace E. Dodge and John F. Dodge gave options to E. T. Berger, an associate of S. K. Rothschild, to purchase their stock at $12,500 a share and all income and profits taxes and surtax levied on account of the transaction.  This price was ex any dividends to be declared as a result of the suit brought by them against the company and its directors.  330.  In 1919 a block of stock in the Ford Motor Co. was offered to the firm of Dominick & Dominick, investment bankers of New York, at a price of $9,000 a share.  The offer was rejected.  331.  In 1925 John W. Prentiss, through one Bonbright, communicated with Edsel Ford, stating that if the Ford Company were recapitalized the firm of Hornblower & Weeks would be prepared to form a banking syndicate and pay the Fords one billion dollars for their business.  Edsel Ford declined the offer.  *1146  332.  Within a month prior to*3914  the hearing of this appeal Prentiss heard a rumor that the Fords were considering recapitalizing the company.  He called Bonbright on the telephone, repeated his offer, and requested that he communicate it to Ford.  Bonbright saw Edsel Ford the same day and advised Prentiss that there was nothing to it.  333.  On November 30, 1912, the Ford Motor Co. filed with the Secretary of State of the State of Michigan its annual report as of September 30, 1912.  In this report in the place provided for reporting the value as near as may be estimated, of all property owned by the corporation, it reported that it had no value for patent rights, copy-rights, trade-marks, formulas and good will.  On November 25, 1913, it filed a similar report as of September 30, 1913, reporting no value for such assets.  334.  The fair market price or value on March 1, 1913, of the 2,180 shares of stock in the Ford Motor Co. which were owned by petitioner on that date and sold by him in September, 1919, was $21,800,000.  OPINION.  STERNHAGEN: The petitioner, in September, 1919, sold 2,180 shares of stock in the Ford Motor Co. of Michigan for $29,308,857.90, an average price of $13,444.43 a share.  The gain*3915  derived from this sale was subject to tax in accordance with the Revenue Act of 1918, which took effect February 25, 1919, and which provided in section 202(a): That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition or property, real, personal, or mixed, the basis shall be - (1) In the case of property acquired before March 1, 1913, the fair market price or value of such property as of that date; * * * This stock was acquired by petitioner before March 1, 1913, for not more than $44,900, and it is stipulated that the cost was less than the fair market price or value on that date.  Hence the cost is of no concern, cf. Goodrich v. Edwards,255 U.S. 527">255 U.S. 527. In order to determine the gain to be included in gross income under section 213(a) so as to compute the tax under sections 210 and 211, it was necessary to determine in the first instance "the fair market price or value" on March 1, 1913, of the property sold.  When, in March, 1920, the petitioner filed his return for 1919, he showed thereon a gain computed upon the basis of a 1913 value of $9,489.34 a share as stated in the letter of former Commissioner*3916  Roper.  This gave a basis of $20,686,761.20 for the 2,180 shares sold and a gain of $8,622,096.70.  Omitting for the present any intervening events, the respondent, in March, 1925, made two assessments against the petitioner aggregating $10,909,588.08, which were to some extent based upon a new computation of gain derived from such sale, taking a fair market *1147  price or value of said stock on March 1, 1913, of $2,634 a share.  This value was later raised to $3,547.84 a share, the result of which is that instead of a gain of $8,622,096.70 as returned by petitioner, the respondent fixed a gain of $21,574,406.70, thus increasing petitioner's income by $12,952,310 and bringing about an increased tax.  The petitioner contests this, not only because he insists that the true value of the stock of March 1, 1913, was at least $9,489.34 as stated by Commissioner Roper and as used by petitioner, but also because, as he argues, the respondent was without power to determine any other value, even if correct in fact, and was without power to make the 1925 assessments, and because under all the circumstances the United States has no valid demand for any tax arising from a change in valuation. *3917  He contends that respondent was by established law restrained from entertaining any question as to valuation, and hence that the United States was effectually precluded from collecting the additional tax even if the amount thereof was no more than could have been collected had timely demand been made.  These question of the effect of the Roper valuation and of the respondent's power are presented generally in each of these associated cases, and most of the facts and contentions are common to all petitioners.  But there are also differences in the conduct of the individual petitioners and of the respondent as to each, and these must be recognized to the extent that they may affect the final disposition of each proceeding.  For the function of the Board in these cases is not primarily to declare a rule, but to determine the issues presented in each case in the light of the evidence therein, to the end that the individual present tax liability of each petitioner may be settled.  We take up first for consideration whether the respondent had power to make the determinations of fair market price or value of the Ford stock on March 1, 1913.  If, for any reason, he had no such power, *3918  his determinations of deficiencies, whether assessed or not, were pro tanto void - not merely incorrect, but utterly void; and irrespective of what they were or what factors of computation they embodied, it is unnecessary to adjudicate their soundness.  The petitioners contend that the so-called Roper valuation of $9,489.34 was official and authoritative and had the effect of a closed determination of fact; that it is binding upon the respondent and the Government by way of estoppel or necessary administrative practice; that, further, even if this be not so of the Roper valuation taken by itself when made, the subsequent actions in respect thereof by later Commissioners, prior to the respondent's present assessments and notices, were such as to bind the respondent to its correctness; and as to the cases involving jeopardy assessments, it is said that such assessments are invalid for want of cognizable circumstances *1148  denoting the essential jeopardy and for want of bona fides.One of the arguments vigorously pressed in behalf of all the petitioners is that the doctrine of equitable estoppel (which it is contended may properly be invoked against the Government) *3919  interposes to prevent a change in the Roper valuation to their detriment.  It is said that the conduct of each petitioner and Commissioner Roper contains all of the necessary elements of estoppel - that is to say, Commissioner Roper, as Commissioner of Internal Revenue, was advised that his valuation was necessary before petitioners would sell; that, being aware that it would influence petitioners' conduct, Commissioner Roper in his official capacity made the valuation and communicated it to petitioners; that petitioners relied upon the valuation and acted in the light of it as they would not otherwise have acted, and that the change from such valuation would operate to their detriment and hence would work an injustice.  The nature of this argument is such as to omit any consideration of the measure of petitioners' tax liability had timely demand been made, and strikes only at the respondent's right at this time to assert such liability as might otherwise exist - an argument finding its basis, not in the express terms of the statute by which tax liability is commonly measured, but in the conduct of the parties.  Such an argument must be treated with the utmost caution, since its sanction*3920  in any case would result in having individual tax liability depend, not upon the factors and measures prescribed by Congress as applicable to all, but upon the statements and conduct of a particular Government officer in respect of each individual.  While some of the facts in the argument of estoppel vary in the case of some of the several petitioners, all assert two factors, viz., Commissioner Roper's valuation and their reliance upon it in making the sale.  It is clear that if Commissioner Roper's valuation lacked force, it receives no greater sanction from the fact that petitioners relied upon it; and it also seems clear that if petitioners' reliance is not legally cognizable, the argument of estoppel must fall.  If Commissioner Roper's valuation was not a binding valuation and petitioners therefore had no "right to rely on it," their voluntary election to rely upon it and to continue to rely upon it does not make it bindings.  That there was no obligation to rely on Commissioner Roper's valuation is manifest.  Petitioners as substantial stockholders in the Ford Company could have examined its books and records just as Talbert did and could have made whatever investigation of*3921  market value they deemed advisable to convince themselves of the true value of the stock.  If their opinion of value differed from Commissioner Roper's, they were nevertheless free to use their own *1149  valuation in their returns, and if they desired to protect themselves against any doubt of the accuracy of their figure, they were at liberty to take such measures in their sale contract, or otherwise, as would be most likely to afford them such protection.  Of the several courses open to them, they chose to adopt Commissioner Roper's valuation.  In such circumstances, we are of opinion that their reliance upon the Roper valuation, whether in making the sale, making their returns, making charitable contributions, or submitting to State inheritance taxes, gives it no greater authority than it otherwise has.  It may be said that in the particular case of Senator Couzens there is no clear evidence that he actually relied upon the Roper valuation, and but slight evidence from which such reliance might be inferred.  It appears that sometime before June 14, 1919, he learned somehow of the Fords' desire to by the stock and somehow saw Commissioner Roper's letter to Ballantine; that*3922  on June 14, 1919, he gave an option to Edsel Ford, and that on September 2 he sold his stock.  In giving his option and making his sale he might or might not have relied upon the Roper valuation, and for the purpose of working an estoppel more would be required than an assumption that he did.  There is vigorous dispute as to Commissioner Roper's authority to make the valuation or to give it force, and counsel for petitioners, while insisting that the valuation was authorized, recognize that if it was not authorized much of their argument falls.  The duties of the Commissioner of Internal Revenue are simply and broadly stated in section 321, Revised Statutes, 13 Stat. at Large 233, as follows: The Commissioner of Internal Revenue under the direction of the Secretary of the Treasury shall have general superintendence of the assessment and collection of all duties and taxes now or hereafter imposed by any law providing internal revenue * * *.  This statute was enacted June 30, 1864, and has remained unchanged.  There appears to have been no occasion for judicial construction and we have found no decisions of the courts interpreting it.  The language itself is reasonably clear, and*3923  since it has served without any disturbing exposition for more than sixty-three years, we should refrain now from affecting it unnecessarily.  But broad as the language of section 321 is, it is difficult to see by what reasonable interpretation it can comprehend a duty to make an official appraisement of property before there is any certainty that there will be any assessment or collection of a tax to superintend, or indeed any certainty that there will be any transaction within the purview of a taxing statute.  Such a duty, if it existed under this general statute, would be available equally to all, for it is not conceivable that any Commissioner would have the power to grant for some the request for the anticipatory appraisal and to refuse it to others.  Nor *1150  would he have the power by his own fiat to exercise the duty for a time as a matter of policy and then to discontinue it.  By section 250(b) of the Revenue Act of 1918 and the Revenue Act of 1921, and section 271 of the Revenue Act of 1924 and the Revenue Act of 1926, the Commissioner is required as soon as practicable after the return is filed to examine it and determine the correct tax.  This more particular*3924  definition of his duty as to income tax clearly adds nothing to the authority derived from section 321, Revised Statutes.  The evidence shows that at the time of the valuation there was in the Bureau of Internal Revenue a policy of being helpful to taxpayers in adjusting them to the new tax law, but that this policy interfered with the administration of the assessment and collection of taxes and was soon restricted.  Petitioners refer to this policy of helpfulness as giving force to the Roper valuation.  We think it has no such effect.  It should not be understood that the law forbids a helpful policy.  There is a public interest in cooperation by the Bureau of Internal Revenue, and it should be given as freely as efficiency and good administration permit.  But it can not go so far as to fix a responsibility beyond that contemplated by the statute, and it would be unjustified to stifle a spirit of helpfulness with a caution against binding and irrevocable action.  So without passing upon the Commissioner's right to be incidentally helpful to taxpayers and without reviewing his discretion as to its form or extent, we think that it adds no force to a particular act.  Petitioners*3925  say, too, that the Commissioner's act tended to promote a larger revenue and thus was in the line of his official duty and among his implied powers.  Duty is all we need consider, for the latitude of his power may be wider than the boundaries of his duty.  We can find no duty of the Commissioner to promote transactions from which revenues may be derived.  He does not create revenues nor decide the sources from which they are to be derived, nor can he be expected officially to encourage or discourage one source as against another or to supervise activities of private citizens except to see that duties and taxes imposed are properly assessed and collected.  The fact that he may have been willing to do so or that petitioners were willing to have him do so, does not bring the matter within the scope of his official duty and hence lends no sanction to his valuation.  Whether in fact Commissioner Roper intended to establish a definitive valuation or to be understood as binding or estopping the United States is far from clear.  In Government dealing, words of liability should be carefully chosen.  It seems to us unwarranted to import judicial finality into the statement that the Bureau, *3926  whose practice was recited as not to determine such questions in advance, "is disposed to regard $9,489.34 as a fair valuation of the stock on *1151  March 1, 1913, and one which should be used in computing any profits made from the sale." This language was used in a letter to a lawyer acting for a trust company in connection with a matter involving large sums and, as stated, affecting an important industry.  We can not escape the brief that if legal finality had been intended to be accomplished and assured by way of estoppel or judicial determination, words more positive and decisive would have been insisted upon and found.  It is unnecessary to discuss other considerations in the study of estoppel except to say that even if Commissioner Roper's act were authoritative and the argument of reliance were available to petitioners, there would be other questions requiring examination: such as, whether there was such privity between Commissioner Roper and any of the petitioners as to make the valuation a representation to them; whether the valuation, based, as it was, solely on book figures, carried on its face by clear implication a reservation as to true "fair market price or*3927  value"; whether in fact the alleges reliance of any of the petitioners was on Commissioner Roper's statement or on Webb's assurance; whether mutuality of binding force is inherent in estoppel, and, if so, whether there was in petitioners a right to claim refund had the true value been better for them than Commissioner Roper's figure.  It is our opinion therefore that, without looking into other considerations than those discussed, there is no estoppel in the present case in favor of any of the petitioners based upon the Roper valuation, because such valuation was neither authorized nor intended to be binding and there was no necessary or justifiable reliance thereon.  We are not called upon to determine whether in any case the doctrine of estoppel can shield the citizen against a demand by the United States for taxes.  Petitioners cite many decisions to the effect that in various situations the Government may be estopped in a proper case.  Whether there is an estoppel must always be answered in the particular, and must depend on a consideration of the circumstances; and there is no reason here to attempt to comprehend all situations in a general rule.  But, however it may be in*3928  cases involving contract or other situations where the Government deals on an equality with its citizens, there is a necessity inherent in its sovereign power of taxation which the doctrine of estoppel can resist in only the most extraordinary case.  Whether there may be such a case is not now within our power to know.  If so, it must arise from circumstances more favorable to the taxpayer than those of the present petitioners.  The respondent conceives the petitioners' argument to be founded in contract and upon this conception argues that no contract could arise because the Commissioner had no power to make such a contract *1152  expressly and that from his duties and authority none could be implied.  The foregoing considerations as to estoppel seem to support this view, but since the petitioners expressly disclaim any reliance upon the principles of contract, we deem it unnecessary to consider or pass upon the argument.  There is, say petitioners, a rule applicable to all departments of the Government long recognized by the courts and arising from administrative necessity or expediency by which, irrespective of estoppel, the respondent Commissioner was constrained to treat*3929  the value arrived at by his predecessor as an established and unalterable fact.  This rule, it is argued, requires that the Roper valuation should not have been disturbed by respondent and should not now be disturbed by the Board.  The rule relied upon is said to be found in many decisions cited, and its application to the present cases is sought to be demonstrated by reasons of justice and convenience.  The respondent denies the rule and that there is any reason to support it in tax cases generally and in these cases in particular.  Looking alone at Commissioner Roper's valuation, it has already been stated that it was not required and was entirely gratuitous.  Clearly, if Commissioner Williams, immediately upon receiving the return, had actively questioned the gain or had actively undertaken by hearing or otherwise to verify the value, the Roper valuation could not have been forced upon him.  Nor could it have been forced upon petitioners.  However persuasive it may have been because of the confidence in the men concerned with it and the reported extent of their investigation, it had no official status.  Even if it be given weight as evidence, this is less than calling it such*3930  a judicial or quasi-judicial determination as an executive officer may sometimes make.  It is of no avail that the actual scope of the investigation and valuation may have been exactly the same as if they had taken place under a duty.  Its binding force depends upon the legal authority behind it.  Anything which affects its weight has no place in the consideration of its inherent nature and force.  We hold that the Roper valuation was a voluntary, gratuitous act outside the scope of the Commissioner's official duty, and that it was not a judicial or quasi-judicial determination of fact and had no force.  Whatever may be the rule about reopening matters once determined, it has no application to Commissioner Roper's statement, and his successors in office were free to consider the value de novo. And it follows that such subsequent consideration was not restricted or otherwise affected by the fact that Commissioner Roper had considered and stated a value, and that there was no presumption as to its correctness.  Petitioners say, further, that irrespective of the inherent force of Commissioner Roper's valuation, it became official and bound all subsequent Commissioners when Commissioner*3931  Williams made the *1153  initial assessment after the returns were filed.  Commissioner Williams came into office April 1, 1920, and the Couzens return, which had been filed in Detroit on March 15, together with payment of the first installment, arrived in Washington in ordinary course May 11, 1920.  On June 8, 1920, formal assessment was made of the amount shown on the face of the return.  This assessment was the usual perfunctory act of the Commissioner and, clearly, it did not amount to an adoption or fixing of this value or any other item stated or implied in the return.  The contention is made, however, that Commissioner Williams established the value of $9,489.34 when the Deputy Commissioner, in the letter of February 8, 1921, after the Phillips audit, set forth the return "as corrected" and indicated no change in the Ford stock gain but only a change in the treatment of the dividend resulting from the Ford-Dodge decree of distribution.  There is in our opinion no merit in the contention.  The Phillips audit of 1920 was, as shown by the evidence, a "superficial" or "desk audit" as distinguished from an "intensive audit," and was made so that revenue clearly due would*3932  be quickly made available.  It did not purport to consider or adopt doubtful items but only to lay them aside for a time until in due course they could be given proper attention.  As to the Ford stock value, Phillips saw Talbert's valuation and let it stand for what it was worth without passing upon its correctness.  There was no active determination of this item or of the correctness of the return as a whole.  Petitioner recognized this and immediately sought a hearing as to the items proposed to be changed.  The only other circumstance during Commissioner Williams' administration or that of Acting Commissioner West was that a field examiner made an investigation in Detroit as to petitioner's liability for 1916, 1917, 1918, and 1919, and, although he considered the Talbert valuation, left it unchanged.  There is no evidence of any consideration of his report by Commissioner Williams or Acting Commissioner West, or during their terms, and there is no basis for attributing to either of them an official approval of its contents.  So far as this record shows, there was nothing done by Commissioner Williams or Acting Commissioner West in respect of this matter different from the usual*3933  conduct as to all taxpayers and their returns.  If this conduct is to be given the force of an adjudication of every fact in the return which was not expressly modified, it must be by virtue of a standard applicable to all.  Such a standard would be at variance with an experience well known since the adoption of the complicated war-tax acts, and its recognition now would imply that for the ten most troublesome years of tax administration a ready means of settlement has been permitted to lie dormant and be ignored.  We are *1154  unwilling to indulge such an assumption and we find nothing in the revenue acts to indicate that it was within the intendment of the revenue system.  Nor do we find in the decisions of the courts anything compelling the view that the audit of a return by one Commissioner precludes a modification by a succeeding Commissioner of the facts upon which the computations were based.  It seems to us that in the nature of a function so complicated in performance, so comprehensive in its effect upon the whole people, and so undiscriminating in its burdens, there is a strong necessity for freedom of investigation.  One Commissioner must take up the function as*3934  another leaves it, and the continuity of the office should be preserved so far as possible, irrespective of the incumbent.  When Commissioner Blair took the office, the petitioner's returns were under consideration for one reason or another, partly because the Bureau had found reason to demand further taxes and partly because petitioner had sought credits and abatements, and it would be an artificial rule which drew a line between items on each return which were open for his consideration, and those which were either entirely closed from consideration or were open only for the benefit of the taxpayer.  As to Senator Souzens, there was pending at the time Commissioner Blair took office an investigation of the returns of all years back to 1916, and Commissioner Blair assumed authority and responsibility in respect thereof.  It seems clear that in determining liability for all of these years he was not arbitrarily limited unless the rule as to such limitation was definitely known and quite impelling.  The petitioners cite many decisions from which they say the rule is derived.  After considering all the cases cited and recotnizing as we must that there are, in cases involving other*3935  executive departments, judicial expressions so general in scope as to seem to comprehend the situation before us, we have found no authoritative decision so closely applicable as to require the conclusion that Commissioner Blair could not treat the value as an open and unsettled question.  Cases arising out of the necessity of quiet title under a Government contract or grant, or which are founded in long, continuous and positive acquiescence in an isolated fact, or in the doctrine that respect will be given by the courts to accepted executive construction of law, or that one executive office should accept the finding of another executive office, or involving a statute expressly committing the final decision of a fact to the executive officer, all seem to us to rest upon reasons not present here.  Much of the doctrine of the finality of executive action is born of the need to prevent unending doubt.  It is prompted by the view that, if choas is to be avoided, there must be an end of controversy and uncertainty so long as fraud is not involved, and recognizes that ordinarily the Government is not otherwise restricted by a statute of limitations.  Congress has, however, in the *1155 *3936  revenue act, provided a system which in the legislative judgment meets these needs and gives such assurance of certainty and termination as Congress deemed expedient.  This system includes a statutory period of limitation, an opportunity for a written agreement binding both the taxpayer and the Government, and a definitive proceeding before the Board before payment can be required.  Thus, we think that the matter has been so fully taken hold of by Congress that there is no room for a judicial standard like that recognized as to some other executive departments.  Of general interest upon this subject is Wickwire v. Reinecke,275 U.S. 101">275 U.S. 101, holding that a determination by the Commissioner that a transfer was made in contemplation of death was not conclusive and was open to attack.  The rule in the Wickwire case was applied as to a finding of fact supporting an internal tax and is therefore germane here.  How far, if at all, it affects the general rule heretofore recognized in respect of other executive departments, as illustrated by *3937 Bates & Guild Co. v. Payne,194 U.S. 106">194 U.S. 106; Silberschein v. United States,266 U.S. 221">266 U.S. 221, and others, is not a question within the province of our present consideration.  The two decisions of the District Court in Penrose v. Skinner,278 Fed. 284; 298 Fed. 335, in which the rule is considered, were rendered prior to the Wickwire decision and the obiter expressions therein seem to us to be inconsistent with the higher authority.  The significance of the Wickwire decision may also be indicated by the citation therein of Fidelity & Columbia Trust Co. v. Lucas, 7 Fed.(2d) 146, in which the District Court expounded the view that the rule applicable to other departments is not embodied in the taxing system.  See also Dallas Brass & Copper Co.,3 B.T.A. 856">3 B.T.A. 856. The next restriction upon the respondent is said to be found in his own official regulation.  By Treasury Decision 3240, of October 31, 1921, and an office order of June 20, 1923, the Commissioner, it is said, was required to treat this case as closed and not available for further consideration.  There are, it seems*3938  to us, several reasons against this view.  What was a "closed" case within the meaning of the orders was shown by the evidence to be an intra-Bureau question as to which the practice was in great confusion.  The practical construction of its own order by the department charged with its administration being so ambiguous, there is no guide for one outside the Bureau to determine its meaning or intended effect.  It seems to us that the Board should refrain from so interpreting an executive order as to include within it a situation not clearly covered by its terms either expressly or by usage within the department.  Again, it seems to be agreed that even a "closed" case could be reopened if gross error or "error in calculation" were discovered.  *1156  This can only mean that the Commissioner may at any time entertain the idea of reopening, and may examine the case to determine whether such error has been committed.  Whether there has been such error must in the first instance rest with him.  This implies the very power which petitioners contest, namely, the power to disturb a finding already assumed to be correct.  The question whether the error was such as to justify the inquiry*3939  deals not with the power to reopen but with the wisdom of reopening and the correctness of the determination.  But even if this Board is to judge after the event whether there was in fact such evidence of error as to justify reopening, we can not say that there was not.  A calculation which appears to the executive officer to be based upon an incorrect formula and which appears to him to deprive the Government of an amount of tax strikingly large and which would move a reasonable man to immediate inquiry, seems to the Board to be sufficient to justify him in reopening a case.  At least the Board can not say there was not sufficient evidence of error to move the Commissioner to inquire.  Whether in fact the calculation turned out to be error, and if so to what extent, are questions which depend on the evidence and do not touch the present question of the respondent's power.  Lastly, as to the effect of the departmental orders, we are of opinion that they may not go so far as either to impose upon a taxpayer more than his statutory tax or to relieve him from its full burden.  Congress, as we have said, has prescribed a system for closing cases by limitation, agreement, or legal proceeding, *3940  and this must be held to be all comprehensive.  It does not admit the view that the Commissioner may by regulation or ruling in a particular case close it from further consideration.  We have seen from the Wickwire decision that his ruling does not foreclose the taxpayer, and it is but reasonable to hold the door open as well to the United States.  It is said further that as to Senator Couzens the Commissioner's statement in 1923, after conferences, to the effect that the cases "had been closed" as set forth in his previous letter, and the petitioner's payment in October, 1923, amounted to such a closing agreement as was contemplated by the revenue acts.  The Revenue Act of 1918 contains no provision for a closing agreement.  The Revenue Act of 1921, section 1312, the Revenue Act of 1924, section 1006, and the Revenue Act of 1926, section 1006, provide for an agreement in writing between the taxpayer and the Commissioner with the approval of the Secretary that a determination shall be final.  Petitioner made no such agreement clearly in terms, but up to the last has "saved his rights" to protest or litigate certain items of the adjustment which went against him.  It is a strained*3941  construction of these statutory provisions which applies them to the conduct of the parties as to *1157  certain items, holding them to be settled, and yet saves petitioner's right to contest certain other items.  In our opinion, these sections of the statute provide for a clear and unequivocal agreement as prescribed therein, manifesting the intention finally to dispose of all controversy as to the years in question, and nothing less can by construction be held to take its place.  And after careful consideration we are constrained to this view notwithstanding the decision of the learned Court of Claims in Botany Worsted Mills v. United States,63 Ct.Cls. 405 (now pending on certiorari in the Supreme Court of the United States). The petitioner contends also that the assessment made by the respondent in March, 1925, and which gave rise to this proceeding was void because it purported to be a jeopardy assessment when in truth the statutory conditions for such an assessment did not exist.  The assessments as to Senator Couzens were made on March 11 and 13, 1925, and the five-year period of limitation for assessment would have expired two days later on March 15, 1925. *3942  Acting solely on the belief that because of the imminent bar of the statute of limitations the assessment and collection of the tax was jeopardized by delay, Commissioner Blair, by his authorized assistant, made the assessment by virtue of section 274(d), Revenue Act of 1924.  That section is as follows: If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay such deficiency shall be assessed immediately and notice and demand shall be made by the collector for the payment thereof.  In such case the assessment may be made (1) without giving the notice provided in subdivision (a) of this section, or (2) before the expiration of the 60-day period provided in subdivision (a) of this section even though such notice has been given, or (3) at any time prior to the final decision by the Board upon such deficiency even though the taxpayer has filed an appeal.  If the taxpayer does not file a claim in abatement as provided in section 279 the deficiency so assessed (or, if the claim so filed covers only a part of the deficiency, then the amount not covered by the claim) shall be paid upon notice and demand from the collector.  The petitioners*3943  contend in effect that the Board may entertain the issue as to whether the Commissioner's belief of jeopardy was well founded, and that when it appears that the only foundation for such belief is the fact that the statutory limitation period is about to expire the Board must hold that this is not sufficient and hence that the assessment is unauthorized and void.  Furthermore, it is contended that since the evidence discloses by the testimony of the respondent Commissioner himself that when he made the assessment he was in doubt about the value of the stock, and discloses further that there was no new evidence of value which had not been known within the Bureau for several years, it must be held that the alleged deficiency was not bona fide determined but was arbitrary, unwarranted, capricious, and an abuse of discretion, and hence no ground *1158  of assessment.  It is feelingly urged that such a situation can be called a determination in form only and lacks the substance to entitle it to respect, and it is said to place an intolerable burden on taxpayers that they should be required to contest it in litigation before the Board and give bond pendente lite, and that an*3944  unnecessary burden is placed upon the Board that it should be required to redetermine it.  The jeopardy assessment thus being void, it is said that there can be no deficiency, since the procedure under section 274(a), providing for an ordinary notice of deficiency, has lapsed.  The effect of such a reading of the statute is that when the Commissioner determines that a deficiency exists and at the same time believes that delay will jeopardize its collection, his election to assess is at the peril of losing the tax entirely, for even if the deficiency be clear, it would be lost if the belief of jeopardy proved to be mistaken.  Such a construction demonstrates with increased force the wisdom of the rule stated in California Associated Raisin Co.,1 B.T.A. 1251">1 B.T.A. 1251, that the Board is without power to adjudicate whether the circumstances upon which the Commissioner acted were such as to denote jeopardy and justify his belief.  We adhere to that decision.  But since it may still be doubtful, notwithstanding our own view, whether the Board is required to review the evidence to determine whether in fact "the assessment or collection of a deficiency [would have been] jeopardized*3945  by delay," we have examined the question.  Our conclusion is that, since the expiration of the period limited by the statute does indubitably destroy the right of assessment and collection, its imminence within a time too short for the normal operations of the Bureau of Internal Revenue is a fact which may reasonably cause the Commissioner to believe that assessment and collection will be jeopardized by delay and justify him in making an assessment.  We find no occasion to construe section 274(d) as excluding such a situation from its ambit.  Nor do we think that the legal validity of the determination or assessment is to be measured by the intent, motive, or method of reasoning of the respondent.  It is only the official exercise of power manifested in the form prescribed by the law that this Board is to review, and since the taxpayer has full opportunity to have this judged by the standards of the statute, it would be improper to judge it by the depth of respondent's personal conviction.  This Board is not sitting in judgment upon the person who holds the office of Commissioner of Internal Revenue, but only to redetermine the correctness of alleged deficiencies.  We must assume*3946  without inquiry the bona fides of the determination and that it represents the Commissioner's official judgment of a deficiency.  There is nothing in the *1159  statute which indicates that the Board's function should go beyond this.  We are therefore of opinion that the respondent had full power and authority to make such determination of deficiency as he did, and that he was not precluded from so doing by reason of the prior action of any Commissioner, including himself, and that the determination of deficiency was valid, subject only to redetermination by this Board.  We refrain entirely from considering or expressing any view upon the several suggestions made as to the moral aspects of the matter or the criticisms urged as to the wisdom or ethics of the respondent's conduct, since we regard such considerations as not within the domain of our official judgment.  Since the respondent's determination and assessment were authorized, it is within the jurisdiction of the Board to redetermine the deficiencies, and we proceed now to consider the merits of the opposing contentions in respect of the fair market price or value of the stock of petitioners in the Ford Motor Co. *3947  on March 1, 1913.  Questions as to the burden of proving the value, the presumptions as to correctness of one or the other of the several figures used by the Government, or other dialectic considerations, have been fully discussed in other decisions heretofore rendered by the Board and need not be here considered.  The merits of the substantive question of valuation have been pleaded and evidence pro and con has been introduced by all parties at great length.  With the task before us of weighing this evidence, we have not regarded it as essential to discuss in detail the place given to well-known standards of judicial consideration.  The respondent has, however, presented a view which can not go unnoticed, for it seems to us to be at variance with the long-existing system of tax administration and contrary to the intention of Congress as to the function of the Board.  The determination of questions related to tax liability is now, as for a long time it has been, in the first instance to be made by the Commissioner of Internal Revenue.  There is no indication anywhere in the statute that that officer has been relieved of this duty.  On the contrary, the statute clearly contemplates*3948  that before notifying a taxpayer of a deficiency and hence before the Board can be concerned, a determination must be made by the Commissioner.  This must mean a thoughtful and considered determination that the United States is lawfully entitled to an amount not yet paid.  If the notice of deficiency were other than the expression of a bona fide official determination, and were, say, a mere formal demand for an arbitrary amount as to which there were substantial doubt, the Board might easily become merely an expensive tribunal to determine moot questions and a burden might be *1160  imposed upon taxpayers of litigating issues and disproving allegations for which there had never been any substantial foundation.  In this case, the respondent has testified that when he made the jeopardy assessments he "was not clear in his own mind that any tax was due." The figure used as the basis for computing the gain upon which the jeopardy assessment was based was almost the lowest of all those mentioned during the controversy.  The jeopardy assessment was partially abated on the basis of a higher figure.  Some of respondent's evidence was directed toward a still higher figure.  In their*3949  brief, respondent's counsel say: The members of this Board are themselves, by experience, experts in valuing securities and in deciding the questions of judgment involved in translating undisputed facts into terms of value.  * * * The Government is in the position of contending for no specific value and for no specific method of valuation; its sole contention is that the value of $9,489.34 on the basis of which taxes have already been paid, is grossly excessive.  This, in our opinion, discloses a misapprehension.  The Board and its members do not have, and are not expected to have, peculiarly expert knowledge upon the value of securities or any other of the multitudinous questions of fact which arise in the vast number of cases before it.  It can only decide the issues in any case by giving judicial consideration to the evidence properly in the record.  Such evidence is not to be regarded, as expressed by respondent's counsel, as an "assistance" to the Board in discharging a duty imposed upon it, but as the proof and substantiation by the parties of the positions which they respectively present for adjudication.  The function of the Board should not be confused with that of the*3950  Commissioner of Internal Revenue.  The Commissioner's determinations are in aid of his administrative duty to see that taxes imposed are assessed and collected, and there are no methods prescribed for the ascertainment of the facts upon which such administrative determination must be based.  The Board is outside this organization with a duty to hear and decide as between the taxpayer and the Commissioner upon a record publicly made in accordance with rules of evidence and procedure and subject only to appellate review by the courts of appeal.  Aside from general matters well recognized as subject to judicial notice, it has in any proceeding no official knowledge except as gathered from the evidence therein, and its decision must reflect the preponderance of such evidence.  To the extent that presumptions are considered, it is not because the Board chooses to employ them but because they are established in the law.  We approach the problem of value, therefore, not as experts with the aid of the parties, but to judge impartially of the issue between conflicting interests, in the light of all the evidence.  *1161  Throughout the course of the trial, an objection was interposed*3951  repeatedly by counsel for petitioners to evidence tending to recognize that there might be a difference in valuation of a share of stock when grouped with a minority interest, from that of a share grouped with the majority.  In support of the objection, it is urged that to value a share of stock differently for tax purposes when of the minority than when of the majority is to make an unconstitutional classification.  The objection was consistently overruled.  It seems clear to us that what the Board is called upon to do in the present case is not to assess an ad valorem tax upon property but to redetermine the gain derived from the sale of specific, identified property - 2,180 shares of stock.  We must determine the issue as to the fair market price or value on March 1, 1913, of the very property sold.  This value may or it may not, as a matter of fact, be arrived at by finding a proportionate value of its 2,180 component items, and we find nothing which requires us as a matter of law thus to compute it.  If, as we must be ready to consider, it should appear by competent evidence that a block of ten shares were worth more than ten times one separate share, the law would not close*3952  its eyes to that truth.  There may be, in the quantity, advantages which would actually affect value, and proof on the subject is at least as good as the multiplication table, and must be weighed with all the other evidence.  While reason does not admit that a block of stock would be worth more when bought from A than when bought from B, it is altogether possible that such a block would command a higher yet fair price if it represented the balance of power or control over the corporate business.  Whether it does or not requires evidence to determine, and in our opinion so long as the problem is to determine true value such evidence is admissible for whatever weight it may have.  In any case such as this, requiring the determination under the income-tax laws of value of property on March 1, 1913, the problem of valuation is approached with little or no restriction arising from the purpose of the litigation.  It is, for example unlike a proceeding to determine the value is respect of which an interstate carrier or local utility is to have its rates regulated, the theory of valuation in such a case being considered in the light of its effect upon the more important ulterior problem*3953  of public rate regulation.  Under section 202 of the revenue laws, the value to be ascertained is, in terms, absolute, the only purpose being to measure the tax by the gain above the value on March 1, 1913 (where higher than prior cost), Goodrich v. Edwards,255 U.S. 527">255 U.S. 527; Walsh v. Brewster,255 U.S. 536">255 U.S. 536; and see United States v. Flannery,268 U.S. 98">268 U.S. 98, which value the taxpayer is entitled to treat as capital reserved from tax.  Lynch v. Turrish,247 U.S. 221">247 U.S. 221; Southern Pacific v. Lowe,247 U.S. 330">247 U.S. 330; Lynch v.*1162  Hornby,247 U.S. 339">247 U.S. 339. The method of valuation is in itself unimportant, so long as it gives due regard to all the facts and relevant evidence, and results in a value which has a reasonable relation thereto.  There may be no slavish adherence to a formula, Minnesota Rate Case,230 U.S. 352">230 U.S. 352; Georgia Ry. Co. v. R.R. Comm.,262 U.S. 625">262 U.S. 625, and whether the method should proceed from a definite study of, say, original cost, see *3954 Donaldson Iron Co.,9 B.T.A. 1081">9 B.T.A. 1081, or cost of reproduction new less depreciation, see Paducah Water Co.,5 B.T.A. 1067">5 B.T.A. 1067, and compare Rockford Malleable Iron Works,2 B.T.A. 817">2 B.T.A. 817, or from general opinions of qualified witnesses, or from book value, or from recognized market quotations or other data, must depend upon the nature of the property under consideration and the extent to which such evidence bears a relation to its value.  Moreover, since it is the stock we are considering and not the corporation's tangible or intangible assets, we are not directly concerned with a method, like, for instance, that set forth in A.R.M. 34, 2 C.B. (1920) 31, for arriving at the value of good will or other intangibles separately from the tangible or other assets, or a method for classifying or segregating the constituent parts which are reflected in the value of the stock representing the whole.  In the foregoing findings we have set forth all the significant facts which in our opinion can be fairly ascertained from the evidence.  The evidence has all been considered and weighed.  Obviously it is impractical to assign to any fact a precise*3955  weight or to define its relative emphasis or importance.  The most that can be done is to indicate generally the extent of our consideration in arriving at a conclusion.  It has been said that value is the price at which a willing seller and a willing buyer would agree to trade if they both were aware of the facts.  As to a completed transaction, this is a simple statement.  But there is a great difference between finding value from an actual transaction and finding it by assuming from the circumstances a hypothetical transaction from which value is to be inferred.  Here the problem is to determine as of a past date the fair market price or value of property the like of which was not involved at that time in any transaction, and as to which there was no willing seller or willing buyer and no direct evidence of the considerations which would actually have moved them to buy or sell such property.  We have sought to place ourselves on March 1, 1913, - recognizing all the facts in existence or in contemplation on that date as shown by the evidence, and from them attempting reasonably to predict those to come, being neither unduly skeptical nor unduly optimistic, we have sought to determine*3956  what an intelligent and reasonable seller and an intelligent and reasonable buyer would in their fairly mercenary interests have been most likely willingly to agree upon as a price for the property *1163  in question.  Clearly opinions might differ as to such price.  A common figure must be agreed upon.  This stock was not listed nor dealt in on any stock exchange and it can not be known how its value would have been affected if it had been.  Numerous witnesses whose opinions were given as to the value made it apparent that they were to some extent applying to the problem the considerations applicable to a freely marketable listed stock.  Such opinions are weakened to that extent.  On March 1, 1913, no attempt had been made to list the stock on an exchange and, if an application had been made to the New York Stock Exchange, it would not have been listed because of its restricting provisions.  For this reason the problem of valuation is kept free of the elusive factors which bring about the variations in daily stock quotations.  The stock was all held by persons whose interest in it was identified with their interest in the Ford Company.  There is no suggestion in the evidence*3957  that up to that time they regarded it as anything but an investment in the automobile manufacturing business of the corporation, uninfluenced by the chances of stock market rise or fall.  Since it had not been offered or bid for on an open market, was not listed for trading and was not available for listing, and there was no prospect that it would be in the future, it is of little interest to speculate upon its price if it had been so marketed.  So far as the evidence indicates, a transaction in respect of this stock would, in 1913, have been governed largely by the situation of the corporation.  This might not have been so with a listed stock, for it sometimes happens that such a stock is traded in within a range of prices having but little perceptible relation to the commercial or financial standing of the corporation represented.  The explanation for this is happily not necessary to be sought in this case, but it is sufficient to realize that the valuation of such listed stocks is a problem which may involve substantially different considerations from the valuation of unlisted stock held by a small group of persons.  The respondent has referred to the provisions of the stock appearing*3958  on each certificate restricting its sale to a stranger at any agreed price until existing stockholders were given an opportunity to buy it at the same price.  This, it is urged, restricted the market and hence must be regarded as tending to depress the value.  The testimony of dealers in stocks as to this was conflicting as between those who believed such a restriction would necessitate a lower price than if it were not present and those who believed that the value would be unaffected.  In our opinion the latter view is entitled to greater weight.  The provision on the certificate does not prohibit sale nor limit price, but purports to give priority of purchase to certain persons, then stockholders, at the best price obtainable.  If the stock have any value whatever the owner is entirely free to sell it at his *1164  own price or hold it.  If stockholders decline to buy at his price and others will, he may sell to the latter.  He may shop around for a price, and his only constraint is that he must give stockholders the first opportunity to buy at his price.  His stock seems to us to be worth no less, irrespective of who may have the right to be first in line to buy it at the*3959  highest price bid.  It is said that the provision involves a cumbrous and inconvenient method of disposing of the stock, and that this takes from its value.  This reasoning confuses two propositions - the value of the stock and the method of realizing it by sale.  If the apparent value of the stock and the price offered by an outsider were so slight as to be not worth the trouble of going through the prescribed method in order to sell it, it might well be that the owner would demand more or refuse to sell, just as the buyer would offer less or refuse to buy.  It seems to us wholly impossible to appraise such a situation in terms of money value.  Our problem requires the assumption of a fair and willing seller and a fair and willing buyer under all the circumstances.  The stock provision does not prevent a transaction between such persons and it is the value arrived at in a free and open transaction between them which must be determined.  This can not be checkmated by a statement at the outset that the stock is not readily marketable.  We do not construe a fair market as meaning that the whole world must be a potential buyer, but only that there are sufficient available persons able*3960  to buy to assure a fair and reasonable price in the light of the circumstances affecting value.  That the stock was on March 1, 1913, very valuable is clear and is not denied.  Throughout the trial the evidence on both sides was given in terms of superlatives.  Although in our findings of fact we have attempted to strip these from the narrative, leaving only enough to indicate truly the reputation and good will of the company in so far as they affect value of the stock, there still remains from the naked facts an inescapable realization that here was a story of fortune that could be told only by adding rhetoric to statistics.  The lowest value suggested is $2,055.79 a share, and opinions have varied upward to more than $13,000 a share.  These differences are the result of wide disagreements as to the relative importance to be attached to the facts.  Nothing could better reveal the lack of a recognized standard for ascertaining value than this record.  Opinions were as freely sought from and given by witnesses who could only give a categorical answer to the ultimate question of value with no supporting reasons for their opinions as those who had by a meticulous analysis assigned*3961  a relative weight or significance to each fact or assumption and arrived by mathematical processes at a figure of value.  These witnesses included executive heads of automobile manufacturing corporations, *1165  accountants, engineers, economists, statisticians, bankers, brokers, and teachers.  This testimony was all treated by counsel as expert testimony.  The opinions were received in evidence in the light of the qualifications which the examinations of the witnesses disclosed.  The conflict of opinion however and the diversity of reasoning by which such opinions were arrived at indicate that the problem of valuation of the common stock of a closely owned manufacturing corporation has not yet been developed so far that any particular method of reasoning in respect of it is authoritative or any particular class of persons may be recognized as experts.  There is likewise no method of arriving at such value which, so far as our research and the briefs of counsel show, has been established in the law as controlling.  The facts and circumstances must be fully known in each case together with any available evidence of their interrelation and importance, and from this in its entirety*3962  the independent judgment of the Board must be derived.  Serious objection was urged by respondent to the admission in evidence of data as to events which occurred after March 1, 1913.  It was urged that such facts were necessarily unknown on that date and hence could not be considered.  It was apparent that there was a fear that the Board would in reaching its judgment be influenced toward a higher value if it were permitted to see the evidence of increasing value after the date in question.  The evidence was nevertheless admitted.  It is true that value on March 1, 1913, is not to be judged by subsequent events.  There is, however, substantial importance in the reasonable expectations entertained on that date.  Subsequent events may serve to establish both that the expectations were entertained and also that such expectations were reasonable and intelligent.  Our consideration of them has been confined to this purpose.  Such subsequent events as have no reasonable relation to the considerations of the date in question have been disregarded.  We have not, by looking at the subsequent events now known, found what the value would have been had they been definitely known on March 1, 1913. *3963  The only facts upon which our judgment of value has been predicated are those reasonably known on that date.  These included not only those which had completely occurred, but also those which were in process and those which were reasonably in contemplation.  The respondent's argument for the exclusion of subsequent facts is curious in its inconsistency with the method actually adopted by the Bureau in arriving at the value upon which the jeopardy assessments were predicated.  This method as set forth in Finding P133 was to ascertain the mathematical relation between the actual sale price in 1919 ($266,400,000) and the average annual income of 1916, 1917, and 1918 ($43,400,000) and then to apply this ratio to the average *1166  income prior to 1913 ($8,602,000), the resulting figure ($52,680,000) being the value of all the stock for March 1, 1913, or $2,634 a share.  This figure was raised later by respondent by a different method, but that he still clings to the same idea is clear from the brief, where the following appears as an "analysis and comparison showing that the Roper valuation is grossly excessive": The value of $9,489.34 per share, or a total value of $189,786,800, *3964  reflects a value of $167,113,239.67 in excess of the net tangible assets of the company as of March 1, 1913.  That is, a value equal to 8.38 times the net tangible assets.  As shown by the sale in July, 1919, the company was worth its tangible assets of $225,000,000 plus $30,000,000 in intangibles, or 1.13 times the net tangibles.  Again, the value as shown by the 1919 sale was 4.4 times the earnings for the year preceding the sale, while the claimed value of approximately $190,000,000 is 11.2 times the earnings for the twelve months preceding March 1, 1913.  Thus, if the 1919 sale be used as a proper basis of comparison it is manifest that the valuation of $9,489.34 per share as of March 1, 1913, is indefensible.  Similar computations are also presented taking as a basis the figure in the Humphrey negotiation of 1916.  If negotiations and sales taking place three and six years after are demonstrative of value, as respondent contends, there can be no force in the general contention that subsequent events are per se irrelevant and hence inadmissible.  But we have deemed it wiser in this case to admit the evidence and deliberate upon its true significance than to treat the question*3965  as one of admissibility involving a hasty judgment during trial.  The most striking and outstanding impression derived from the evidence as to value is that all the facts and circumstances point upward and are in favor of a high price rather than a low price.  The history of the business from the beginning showed steadily and greatly increasing success.  There is in this record no evidence of a mistake in policy or management which had substantially impaired the company's efficiency or retarded its growing earnings.  In the ten years of its existence, during which its policies were governed and its operations were conducted and managed by the same men, it had consistently planned, developed and adhered to a single method of doing business the wisdom of which they had never had cause to doubt.  The only variation in the otherwise uniform history is the experimentation with and temporary production of several models in the early days before Model T was adopted in 1908 as the single product.  From that time there was a deliberate and persistent adherence to a policy of uniformly manufacturing Model T cars in as great quantities as practicable, with the utmost efficiency and the minimum*3966  cost, and selling them in increasing numbers by reducing the price.  There was nothing haphazard in the company's experience.  The success was the outcome of reasoned judgment, faith of its managers in the soundness *1167  of its policy, and courage and pertinacity to carry it through and reject all others.  By 1913 there was no occasion for trepidation.  The risk was not in the automobile industry, for that was then established and recognized, nor was it in this particular company, for that also was on the highroad to great fortune.  Apparently only a catastrophe could obstruct its progress, and no one has suggested what sort of catastrophe might then reasonably be feared.  The Government stresses as "the greatest risk of the Ford Motor Co." the vagaries of Henry Ford and the chance of his sudden death.  These were, of course, risks which would be considered by a reasonable seller and buyer.  The difficulty is in measuring them.  There is nothing in the record to suggest the view that in 1913 Henry Ford had been unfavorably disposed toward the business or had done anything detrimental to its advancement, and there was no reason to infer that he ever would.  If, as is suggested, *3967  he was eccentric or had the proverbial unreliability of a genius, there are no illustrations of these characteristics in this record prior to March 1, 1913, and nothing to indicate that they were latent.  Nor is there any reason in the record to fear his untimely death or, if it occurred, that it would threaten the future of the business.  He dominated the company and controlled its policies.  But these had been fixed and the channel of the company's progress still lay in the same direction as it had originally.  The remainder of the management were not stupid or helpless, they knew the policies and were heartily in accord with all of them, and it is not reasonable to suppose that they would not carry along ideas and methods that had already proven so highly profitable and were still filled with rich prospect.  Whether they could have done it as well or as profitably without Ford as with him is doubtful and this doubt presents a risk which must be considered.  The remaining risks observed by the Government are those faced by all business and rest in the uncertainties inherent in the future.  Whether there was danger in the policy of confining the business to a single model instead*3968  of diversifying the output could depend only upon the intelligence and care with which appraisal had been made of the field of demand, the company's ability to supply it, and the practicability and likelihood of competition.  The evidence indicates that by March 1, 1913, research and experiment had established a growing demand in the largest class of possible buyers, i.e., those of small and moderate incomes, and experience had shown that Model T was satisfactory, that a change in style was then beyond the horizon, that the company was fitted to supply the market rapidly enough to keep the demand active, and that the obstacles confronting any *1168  competitor were such as to give the company a clear field for a long time to come.  In such circumstances, an owner or a prospective buyer of the stock who knew the facts would not in our opinion say that there was great risk because the company had departed from the more conventional policy of diversification of product.  It is said there was risk to a minority stockholder that the earnings might not be distributed in dividends, and this proceeds from the observation that many of the dividends which had theretofore been declared*3969  were special, as distinguished from regular, and hence there was no established dividend policy to rely upon.  But to a stockholder who receives regular and frequent distributions of a substantial portion of his corporation's earnings and profits there is hardly enough importance in knowing whether they are regular or special dividends to affect the risk of his investment.  From the facts it appears that the company had each year distributed the following percentages of its net earnings: 1908, 51 per cent; 1909, 57 per cent; 1910, 48 per cent; 1911, 40 per cent; 1912, 27 per cent; 1913, 42 per cent, and, as will be seen from Facts P268, the amount left in the business had been earning considerably over 100 per cent.  From this it could be seen that there was neither an unreasonable withholding of profits by the directors nor a prodigal distribution in disregard of the future welfare of the company or the stockholders.  The genesis of the suit of the Dodge brothers in 1916 to compel a further distribution does not appear as early as 1913.  The reducing-price policy was not a means of diverting profits from stockholders to customers but was, so far as appears, used only to expand sales*3970  and increase profits.  We can find no warrant for an apprehension on March 1, 1913, that the dividend policy would be inimical to a stockholder.  Giving to the risks adverted to by the Government the full measure of weight to which we think them entitled by the evidence, they serve to bring down the value only to the figure we have determined.  A circumstance urged as adversely affecting value is the relative condition of the world, the country, and the market for money and securities on March 1, 1913.  It is not entirely clear whether these conditions were thought to affect all commerce and finance, including the affairs of the Ford Company, or more directly the price of stocks on the New York Stock Exchange.  The Balkan war, the uncertain political situation in Mexico, the sale in the United States of foreignowned securities, and the election of Woodrow Wilson are all referred to in connection with an alleged decline in stock exchange prices.  From a graphic chart (Exhibit U5) it appears however that on March 1, 1913, the downward movement of twenty industrial common stocks had started in the late summer of 1912 and having reached a point no lower than approximately it had reached*3971  sometime in each of the years since 1907, it was already beginning to swerve.  It carries no *1169  indication on that date of a trend, upward, downward, or straightaway.  It does not appear what effect these conditions would have upon the Ford stock, or why its value should be seriously affected.  Aside from the view which we have expressed that the valuation of listed stocks is not an adequate criterion here, we include these circumstances among those imponderables which serve to fix the value at the figure herein determined.  Looking backward from March 1, 1913, over the entire history of the business, it appears that there had been a consistent and expanding development.  The condition of the business on that date had evolved systematically.  It can not be looked upon as transitory or one of the high spots of a sporadic career.  It was but a day in an enterprise which had steadily grown and which might reasonably be expected to continue to grow.  It is in this light that the data must be regarded, and not as if they were isolated from the life of the enterprise.  Thus regarded, the history of the company is a forerunner of the future and not merely the explanation of the*3972  present.  It enables us to say that the value of this stock is to be measured not only by the accounts of the day but also by the prospects of the morrow.  And these prospects were entirely favorable.  The evidence shows that by March 1, 1913, the automobile industry as a whole was an established industry which, although it had progressed rapidly, was reasonably sure of an important and increasing place in commerce.  Production by all manufacturers had grown from 65,000 cars in 1908 to 378,000 in 1912.  Imports dropped from 1,624 cars in 1909 to 963 in 1912, and exports increased steadily from 2,477 in 1908 to 21,757 in 1912, with a correlative shifting of imports and exports of parts.  The official bulletins of the Bureau of the Census indicate how definitely the automobile industry was established.  See also the opinion of the Circuit Court of Appeals in Columbia Motor Car Co. v. Duerr,184 Fed. 893, 895. Clearly it had passed the incipient stage and in 1913 its only uncertainty was the breadth of its future expansion.  In this industry the Ford Company had already taken its place as a leader.  From 1909 to 1912, inclusive, the proportion of its sales to*3973  total production of all manufacturers increased from 10 per cent to 22 per cent, and in 1913 was to be almost 40 per cent.  In the field of low-priced cars it was practically alone, and this was the most stable field of demand with the widest market and the greatest assurance of profits.  Hence whatever prosperity was in store for the automobile industry was to be shared in great measure by this company, and when an examination is being made into the particular data of the Ford Company, it is necessary to bear in mind the favorable relation which the company bore to an expanding industry.  *1170  The evidence throughout the proceeding indicates what would otherwise seem reasonably clear, that the primary data from which value of this stock should be judged are those relating to the corporation's earnings, and especially those affecting the extent of earnings which might reasonably be expected in the future.  All other data are apparently probative only in so far as they help to measure future earnings.  Standing alone, the entire past history of the company means nothing as to money value except as it has become embodied in convertible assets at the date in question.  To liquidate*3974  a business or its assets requires no knowledge of its history.  But in a case such as this, the historical facts are considered because the prospects must be gauged; and they are relevant only in so far as they illumine the future.  There is nothing dogmatic about it.  The conventional statistical studies covering five years preceding the date in question have no sanction per se, but only if, sensibly considered, they provide some index of wealth to come.  So the trend of past events and statistics is important in a business such as this because it helps to indicate whether the business is expanding, and, if so, how rapidly.  The rapid advance of this company's business is indicated by the statistical tables set forth in the findings.  Production, employees, orders, sales, inventories and net tangibles increased, roughly, two-fold each year after mass production of Model T began in 1908.  Net earnings for the calendar year increased from $1,168,953.55 in 1908 to $14,119,989.87 in 1912, with no let-up in sight.  To take an average of these five years as a forerunner of the annual achievements to come would obviously be unsound, for it would conceal the progress of the period. *3975  The business was advancing so rapidly that, measured by achievement, five years in its history was equal to a much longer period in many another enterprise, and 1908 had already become a remote year of its infancy.  In our opinion, therefore, the principal significance of looking backward as far as 1908 is that it shows the rate of the more recent growth and thus gives some indication of the probable future growth.  Since it appears clearly from the evidence that the earnings are entirely consistent with all the other data, earnings may firly be looked upon as reflecting the financial progress and condition of the business.  They are a financial compendium of the several factors which otherwise indicate the trend.  The purpose of a business such as this is to make profit, and its stock should be appraised with reference to this.  Primarily, the earnings are the test of success of the past and the indication of the future.  The other statistics - of production, sales, &c. - and the description of the management and its methods and plans, serve to give depth and perspective to the earnings.  Such other facts help to indicate the safety with which the earnings may be relied upon as*3976  indicating a normal or healthy condition.  *1171  They are significant not of their own weight or force but only in their relation to earnings.  Expanding production and sales, the constant presence of orders waiting to be filled, a quick inventory turnover, might conceivably, each standing alone, be of little or no advantage.  But when they are shown to be in the hands of good managers and have been part of a process which has resulted in large and expanding profits they are important.  This is likewise true of the tangible assets.  In a growing business, the purpose of which at the time under consideration is to make profits rather than to liquidate or to preserve the property, the actual value of the tangible property is relatively unimportant.  No one would relate the value of the stock to the tangibles, where earnings each year are considerably in excess of the entire value of the tangibles, notwithstanding depreciation, replacements and additions.  In a case where the return on the investment were smaller so that the value of the tangibles would to some extent measure the security of the investment, such value would have a more prominent place.  The net earnings adjusted*3977  to calendar years prior to 1913 were: 1906$175,615.2419071,001,767.4419081,168,953.5519093,176,007.181910$4,145,901.7419117,541,493.01191214,119,989.87They had increased more than twelvefold in the last five years.  The last year's earnings of $14,000,000 were almost twice those of $7,500,000 for the preceding year and over thrice those of $4,000,000 for 1910.  For the fiscal years ending September 30 (Facts P265), the ratio of advance is substantially similar.  January, 1913, produced net earnings of $2,249,685.70, the largest of any month in the company's history, over five times as large as the preceding January of 1912 and almost ten times those of January, 1911.  February, 1913, with $1,723,210.47, was three times February, 1912, and over four times February, 1911.  The experience of the company indicated that the earnings of every year had been more than eight times the earnings of January and February combined, so if this experience were to be taken as giving a normal ratio, the entire year 1913 would yield over $30,000,000.  The price of the car had been reduced and the year 1913 had begun with more unfilled orders on hand (24,765) *3978  than at any previous time February began with 6,690 unfilled orders and ended with 20,275.  All of the activities of the company had been accelerated to accomplish more than it ever had before.  The new buildings W and X were about ready for construction and plans were afoot for producing 200,000 cars in the year, instead of 75,000 which had been planned for 1912, 80,957 which had been manufactured in that year, and *1172  78,611 which had been sold.  Assembly plants had been tried and found advantageous and extensive plans were made to establish them at new places.  Everything was going ahead at an increasing rate, and so far as appears no one looked ahead to any less achievement than that of the past.  On March 1, 1913, profits were being earned at the rate of $24,000,000 and we are of opinion that the expected annual net earnings would be no less than $25,000,000 for many years to come.  The period of the company's success during which such earnings could be expected could not be measured by any evidence in existence on that date.  There was no limit that could be seen.  The demand was increasing, and the field of possible purchasers was very large.  There was no comparable*3979  substitute and no competitor was nearby.  In such circumstances, it is extremely difficult to fix a period of earning power.  The extent of the company's plans and investment for the future indicate that the managers looked forward to a long period of prosperity, and we are of opinion that ten years or longer could be regarded as a period of earnings at the rate of approximately $25,000,000 a year.  This means that, since all the stock was common and involved an equal distribution of interest, the earning prospect was at the rate of $1,250 a share.  In the past, the directors had indicated a dividend policy involving a reasonable distribution and a reasonable addition to surplus which had been compounding at strikingly high rates.  Looking at this in the light of all the circumstances and considering not only the bright factors but also the uncertainties and the risks which were inevitable, we are of opinion that the fair market price or value of the stock owned by this petitioner in the Ford Motor Co. on March 1, 1913, was at the rate of $10,000 a share.  While we have not arrived at this value by the application of any mathematical formula, because we believe that there is*3980  no authoritative formula available, we have given careful consideration to the several methods suggested in the course of the trial, and have not been unmindful of the aid to be derived from the use of such tests.  The comparative studies which have been submitted of the Ford Company and numerous other industrial corporations, from which the market value of the Ford stock has been deduced were in some instances found to be of little help because they involved assumptions or collateral matters which were not cognizable here, or were based on unsubstantiated hypotheses, or for other reasons were found of little weight.  We think it would unjustifiably deflect this opinion from its proper course to set forth a critical analysis of all of the evidence and methods by which the numerous witnesses arrived at their various opinions as to value.  *1173  There is also an inquiry which naturally arises as to why, since the stock was worth $10,000 a share in 1913, the petitioners were willing to sell in 1919 for $12,500, $13,000, or $13,444 a share.  This, too, is not within the scope of this proceeding.  Seemingly the stockholders in 1919 sold for less than what a careful study would*3981  have shown to be the full value of their stock.  The only two of the petitioners who testified, John W. Anderson and Horace H. Rackham, indicated that there were considerations of sentiment which moved them to accept the offer without weighing the values too carefully.  The Los Angeles interview may have caused some to feel that new dangers had developed.  But whatever that situation was, it does not affect the inferences to be drawn from the circumstances of March 1, 1913.  The fair market price or value on March 1, 1913, of the petitioner's 2,180 shares of stock was $21,800,000.  This is the basis prescribed by section 202(a) of the Revenue Act of 1918 for ascertaining the gain upon the sale in 1919 for $29,308,857.90, and the gain is $7,508,857.90.  From the facts it appears that the jeopardy assessments of March, 1925, aggregating $10,909,588.08 were attributable to the respondent's change in the computation of this gain.  Of this assessed amount of $10,909,588.08 respondent has already abated $1,454,284.98, and it is clear that in accordance with our decision the remaining $9,455,303.10 should also be abated.  Whatever additional results for 1919 are derived from the decision*3982  in accordance with the Revenue Act of 1926 will require a further detailed computation.  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.  VAN FOSSAN VAN FOSSAN, concurring: Whatever may have been in the minds of the parties who initiated the correspondence with Commissioner Roper, a reading of the Roper letter does not convince one that that official intended to make a final and conclusive determination of value.  Had he intended to give his letter such force and sanction as petitioners ask for it, it would seem but reasonable that he would have employed language that was clearly and unequivocally final in character and calculated to be impossible of misinterpretation.  Instead he used language that evinced the tentative character of the valuation.  He stated that the department was "disposed to regard $9,489.34 as a fair valuation of the stock." Though certain other expressions in the letter are susceptible of a contrary interpretation and lend some vigor to petitioner's contention the fact remains that *1174  in the most crucial*3983  phrase of the entire letter the writer chose an expression which does not support a claim of intended finality of action.  Placing, as I do, this construction on the Roper letter, the cornerstone of the argument based thereon is effectually removed and the entire structure is correspondingly weakened.  Viewed in the light of later events, the parties addressing the Commissioner were attempting to shift to him a burden placed upon them by the law, i.e., the duty of making the original determination of value and computation of profit essential to the preparation of their tax returns.  That millions of dollars in taxes were involved was immaterial, nor did the fact that a great business transaction was said to depend on the Commissioner's action give the parties any higher rights in law than were the due of every taxpayer.  If the Commissioner lacked the power to act with finality in advance of the event there was an end of the matter.  An attempted exercise of power not possessed is an obvious nullity.  On the other hand, assuming the existence of power, if the Commissioner did not intend to act with finality and evidence his real intention by his letter, there again was an end of*3984  the matter.  On both grounds my conclusion is against the contention of petitioners.  A contrary ruling would mean that a taxing official who, as a courtesy to a taxpayer, rendered him aid in such a situation, would thereby and to that extent effectually tie his official hands and render himself impotent to perform the duties placed on him by the taxing statutes.  The practical consequences of such a condition would be far reaching and fundamental in tax administration.  The successful accomplishment of such an effort as was here made would so effectually circumscribe the powers of review vested by law in the Commissioner as to defeat the well considered purpose of the law.  I can not believe that such a holding is justified either by the facts in the case or by the applicable law.  Passing to the question of a proper valuation on March 1, 1913, of the Ford stock, we engage ourselves in an undertaking which is at once complex and simple.  Complex in the factors and formulae that are presented for consideration and simple in the realization that, in its essence, the determination of value is merely a matter of judgment.  Many factors must be weighed, and in this process various*3985  theories and formulae may be employed, but in the end the value determined on must comport with sound and well reasoned judgment.  It follows that the accuracy of the valuation is directly proportionate to the soundness of the judgment.  I have no desire to repeat or comment upon the many considerations that have led us to find the value indicated by my associate.  I wish merely to record the fact that after hearing, pondering and weighing the evidence the conviction is to me inescapable that the fair market *1175  price or value of the stock of the Ford Motor Co. on March 1, 1913, was not less then $10,000 per share.  This valuation I deem equally fair and just to the taxpayers and to the Government.  It is fully justified by the record and satisfies every reasonable and applicable test of valuation.  LANSDON (Dissenting in part) LANSDON, dissenting in part: As I view this proceeding there are not two, but three major questions submitted for our decision, viz., (1) whether the Commissioner was estopped from reopening the controversy with the petitioner at the date of the deficiency notice; (2) if there was no estoppel, whether such controversy was reopened, the*3986  deficiency determined, and the jeopardy assessment made in conformity with the law at that time; and (3) if the Commissioner had the authority to reopen and exercised such authority in conformity with law, whether he erred in his determination of the value at March 1, 1913, of the stock which was sold by the petitioner in the taxable year.  Notwithstanding some decisions of the courts that seem to support the petitioner's contention of estoppel, I am convinced that the Commissioner had the legal right to reopen this controversy and has such right to reopen any controversy over the tax liability of taxpayers at any time prior to the expiration of the statute of limitations, or to a stipulation of the parties in writing that the case is closed.  Such authority is as helpful to citizens as to the Government since in every nominally closed tax controversy its absence would necessarily deprive taxpayers of the right to further consideration and redetermination of tax liability, even though new and conclusive evidence of overpayments or overassessments should be discovered.  Nor do I believe that the fact that a controversy has been closed by one Commissioner and reopened by a successor*3987  is in any way material.  The official acts of the Commissioner are not personal, but public.  There may be changes in the incumbency of an administrative office, but the functions of such an office are continuing.  Whatever is lawful for one Commissioner as to his own acts is equally lawful for his successor in respect of the same acts.  Having reached the conclusion that there is no estoppel as to Commissioner Blair in this proceeding, even though his act was a review of a determination made by his predecessor, it is necessary next to inquire whether the reopening of this controversy was in conformity with law.  The statute which governs here provides that the Commissioner's right to assess and collect taxes in addition to the amount shown in the tax return of a taxpayer shall expire five years after such return is filed in the office of the collector for the district in which the taxpayer is liable for Federal taxes.  Unquestionably this provision was included in the taxing statutes for the purposes *1176  of setting a limit to the duration of tax controversies and to relieve taxpayers, after a reasonable time, of the menace of additional claims against income long since*3988  spent or capitalized.  This purpose is more definitely and certainly accomplished by the Revenue Act of 1926, which provides that after the expiration of the statutory period both the liability of the taxpayer and the remedy of the Government are extinguished.  Methods of business and of accounting are so diverse and complex that it is unavoidable that the most efficient and conscientious administrators of the tax laws and the most scrupulous and painstaking of taxpayers should arrive at different results, and long continued conferences for adjustment logically and necessarily follow.  Without some statutory provision for terminating such disputes few men or corporations in business in any large way could make any definite plans for future operations.  Congress has recognized this situation and provided for a time limit within which further claims of the Treasury must be made and has also taken notice of the fact that in many controversies the issues are so involved and the facts are so obscure and difficult of proof that a final and true determination of tax liability within the statutory period is impossible, and has provided that the time in which additional taxes may be assessed*3989  and collected may be extended by a written consent properly executed by the parties.  It is clear that it was intended that such an extension should be the voluntary agreement of the parties and the word "consent" used in connection with the provision supports this view.  If the statute has run the power to collect is gone unless there is a properly executed voluntary agreement for extension.  The petitioner in this proceeding had been in controversy with the Commissioner over his return for 1919 for nearly five years.  At a time when he believed that his tax liability for the taxable year, if any, was about to be tolled by the statute of limitations which would simultaneously bar him from making further claim for refunds and abatements and the Commissioner from further assertion of deficiencies, he was asked to enter into an agreement or consent for the extension of the time in which deficiencies could be determined, assessed and collected against him.  Had he so agreed the Commissioner would have had sufficient additional time in which to audit the petitioner's return, redetermine his tax liability and assert a deficiency, but his own right to claim a refund of taxes overpaid or*3990  to the abatement of overassessments for such year would not have been preserved.  In these circumstances it is not strange that the petitioner refused to consent to an extension that would have protected the Treasury but which included no provision for keeping alive his own rights that might be established by a further consideration of the controversy.  It is a fair inference from the record that the Commissioner accompanied his request for the consent to extension by an intimation that *1177  if not agreed to it would be necessary to make an immediate jeopardy assessment of a very large deficiency.  I believe that even if the consent had been signed by the petitioner the circumstances would have deprived it of the voluntary character contemplated by the law and in effect converted it into an agreement entered into under duress.  The petitioner refused his consent and the Commissioner, no doubt believing such procedure necessary to protect the public interest and required by his official oath, within the remaining unexpired time made the jeopardy assessment which he believed was authorized by section 274(d) of the Revenue Act of 1924.  The effect of such an assessment was an*3991  indefinite extension of the statutory period of limitations provided for tolling tax claims made by the Government, not by the voluntary consent of the parties in writing but by the unilateral act of an administrative officer.  Can it be argued that the Congress on the one hand provided that the statutory period for the determination of tax liability should be extended only by the voluntary consent of the parties and on the other hand clothed one of the parties with discretion to completely abrogate the statute without the consent of the other?  The only basis upon which such an interpretation of the law can be defended is that there was jeopardy.  What in jeopardy and what was the jeopardy?  The law says "If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay sucn deficiency shall be immediately assessed * * *." Admittedly there had been no immediate reconsideration of the pending controversies.  The Commissioner or his agents had repeatedly acquiesced in and acted on the so-called Roper valuation of the stock here involved.  Mr. Blair did not know, and so stated, whether there would be any further tax liability against*3992  the petitioner disclosed by the proposed reinvestigation.  No deficiency based upon a study of the evidence and the law had been determined.  How could something not known and that possibly did not exist be in jeopardy? Personally, I am strongly of the opinion that Congress never intended that the authority it vested in the Commissioner to make so-called jeopardy assessments should be used to deprive taxpayers of their right to have tax controversies terminated by a statutory period of limitations, without their voluntary consent to such extension.  To my mind the statute puts the Government as well as the taxpayer on notice that deficiencies must be finally determined within the five-year period.  It is only because this practice has long been followed by the Commissioner and has not been taken from him by Congress in any of the taxing statutes enacted since it was adopted and because I do not know upon what facts the Commissioner decided that there was jeopardy that I reluctantly concede that the jeopardy assessment constituted a legal reopening of the controversy in question and prolonged its life and justiciability beyond the expiration of the statutory period of limitation.  *3993 *1178  I am convinced that the evidence amply sustains the valuation made by Roper.  On the evidence I do not feel that we should go further than to adopt such valuation as our own.  I believe that the only logical disposition of this controversy that we are called on to make, is to find that the stock of this petitioner now in controversy had a value at March 1, 1913, of $20,686,761.20.  The transaction out of which this proceeding arises was not a simple business deal between this petitioner and the other minority stockholders on the one side and Ford on the other.  It was well known that the stock had greatly increased in value between the basic date and the beginning of negotiations for its sale.  Under the law in the event of a sale, that increase became income to the sellers and taxable to them by the Government in the taxable year in which the sales price was received.  In this situation the Government, through its taxing officer, the Commissioner of Internal Revenue, is a party in interest or at least a party interested in the transaction.  That the Government always has power, within the law, to act in the protection of its financial interests will be conceded by all, *3994  and is in fact the basis for the assessment of the alleged deficiency here in controversy.  The sale could not be made without the participation of the Government in the negotiations to the extent of determining the basis for the taxation of the profits which it was known would flow from the transaction.  Therefore it was essential to ask the Commissioner to determine the value of the stock at the basic date and in the exercise of his discretion he complied with that request.  I believe that section 321, Revised Statutes, 23 Stat. at Large 233, confers ample authority on the Commissioner to do the very thing which is designated in the majority opinion as a wholly gratuitous act, neither prescribed, authorized nor required as a duty.  The law says that the Commissioner shall have general superintendence of the assessment and collection of all duties and taxes now or hereafter imposed by any law providing for internal revenue.  Except as to administrative details and procedure there is no attempt here nor in any other section of the revenue laws to impose specific duties on the Commissioner.  The effect of the statute cited is to authorize him to have general superintendence over the*3995  whole field of Federal internal taxation.  Clothed as he is with the broad general powers conferred by the law, it is clear that the Commissioner need not wait for specific cases after returns are made and controversies have arisen for occasion to exercise his authority.  In H. F. Kerr,5 B.T.A. 1073">5 B.T.A. 1073, this Board neither condemned nor invidiously characterized a far greater exercise of discretion by the Commissioner and a far more liberal interpretation of the law than is involved in the Roper valuation of the Ford stock.  With that decision in our records, unreversed and unchallenged, we can not consistently say that Roper's act was "a voluntary, gratuitous act, outside the scope of the Commissioner's official duty." In any event, I can not agree to any such characterization. *1179  After Roper had made his determination of value and communicated his findings to the owners of the stock, the sale was made and in due course the taxable gain was determined and the tax computed and paid.  I would not say that Roper was a party to a binding contract of which his valuation was one of the terms, or that he had authority to make a contract binding on his successors*3996  in office, but it must be remembered that whatever he did in this matter was not personal to him, but was the official act of the United States of America, working through an officer clothed by law with ample authority to supervise the whole field of internal revenue taxation.  Whether binding in a contractual sense or not, the owners of the stock relied on the Roper valuation because it was an act of the Government, made the sale and paid large taxes that the revenues would not have received had the sale been defeated by a valuation or by any uncertainty as to valuation.  I can not subscribe to the theory that moral considerations are not within the domain of the judgment of this Board and of all governmental agencies.  Such a doctrine has wrecked many nations in the past and if embodied in administrative procedure will destroy this republic and all other states that adopt it.  Moral obligation should be as binding on the government as on its humblest citizen.  There is no charge, nor the slightest evidence that all the interested parties did not act in good faith.  No improper motives are alleged, indicated, or suggested by the record.  Therefore I believe that entirely aside from*3997  any consideration of the contractual phases of the Roper valuation, the Government is under inescapable moral obligation to adopt it as the basis for the settlement of this controversy.  There was an understanding, to which the Government was a party, that the valuation made by Roper should be the basis of a tax to be paid to the Treasury.  The other parties complied with the terms of that understanding.  I believe that the public interest requires that the Government stand by its valuation, which the evidence convinces me is as nearly correct as any jury result that we might be able to base on the facts that we have found.  It is fortunate, of course, that the evidence sustains this result.  This is no mere concidence but is an indication that the Roper valuation was carefully worked out on the basis of facts which we now accept as conclusive evidence that the result reached was in fact quite conservative.  I do not feel that the evidence justifies any higher valuation than was originally determined by the Commissioner and am convinced that our decision here will be much more consonant with just conceptions of public policy if it recognizes the moral obligation of the Treasury to*3998  accept as conclusive the acts of its agents when it is established, as in this proceeding, that there is neither fraud nor gross error either in the method employed or results reached.  Footnotes1. So stipulated. ↩1. 1903 to 1910. ↩1. Loss. ↩1. Includes value of parts. ↩1. A minus sign (-) denotes decrease.  ↩2. Establishments whose chief products were automobile bodies and parts were not included as a part of the industry until 1904.  ↩3. Figures not available.  ↩4. Exclusive of internal revenue.  ↩5. In addition, 3,985 automobiles in 1914, 964 automobiles in 1909, and 1,138 automobiles in 1904 were reported by establishments engaged primarily in other industries. ↩1. A minus sign (-) denotes decrease; percentages are omitted where base is less than 100.  ↩2.  Exclusive of internal revenue. ↩2. Exclusive of internal revenue. ↩