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§ 230

What May Affect the Value of Stock.

504. Facts and Circumstances Which May Affect the Market Value of Stock.

In the Matter of Judson (not reported), affirmed 73 App. Div. 620, the decedent, a resident of Monroe county, owned 2,991 shares of stock of the Rochester Gas and Electric Company, and evidence was produced showing that this stock had sold six months prior to decedent's death at from 90 to 97, and during the year from 95 to 115. Testimony of local brokers was offered to the effect that in small lots the stock was probably worth $90, but if 2,000 shares or over was put on the market for sale it would not bring in their opinion over $60 per share. The appraiser valued the stock at $90 per share, the price for which it had previously sold in the market, and an appeal was taken from the taxing order. The surrogate held that in appraising property at its clear market value all the circumstances must be taken into consideration, including the depressing effect of the death of one holding such a large amount of stock, the fact of competitive companies coming into existence and about to engage in the same business, and whether or not the stock had been dealt in to any considerable amount, and that upon due consideration he believed that $70 per share was as much as this stock can be said to have been reasonably worth, and he amended the taxing order accordingly, which order was affirmed by the Appellate Division.

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Fair Market Value"

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66 "Clear Market Value" Applied to a Large Holding of Unlisted Stock in a Private Corporation.

A decedent owned 3,737 shares common and 2,025 shares of preferred stock of Curtice Brothers Com

"Clear Market Value "Fair Market Value."

8 230

pany, a family corporation engaged in manufacturing catsup, jellies, etc., at Rochester, N. Y. The common stock was appraised at $110 and the preferred at $107.50. The appellant claimed that the valuations should not have exceeded $80 or $90. The entire capitalization was 7,000 shares of preferred and 8,000 shares of common and the company had been in existence for about five years prior to decedent's death. The common stock had paid dividends at the rate of 10 per cent., and the preferred 7 per cent. The stock was an inactive one and did not appear to be listed or dealt in upon any stock exchange or market and only a few scattering sales had been made for a year or more prior to decedent's death. Immediately after his death there was a bid quotation of $110 for the common and $107.50 for the preferred. Aside from the sale of 50 shares of common at 105, there was no evidence of any sales or quotations upon a larger block than from 10 to 20 shares. Witnesses were produced who testified that the fair market value of the stock would be $90 for the common and $80 for the preferred. The Appellate Division fixed the value of the common stock at $100 and the preferred at $107.50 per share, holding that

"the basic issue to be determined by the surrogate was, what was the clear market value' the 'fair market value' of 3,737 shares of the common and 2,025 shares of the preferred stock in question, for the purpose of taxation, with a reasonable time and under fair opportunities for purchase. The executors would not be justified in recklessly and precipitately throwing the stock upon the market in such a manner as would inevitably invite sacrifice. Neither should they be compelled to occupy an indefinite time on the attempt to peddle the stock out in ten share lots. It must be apparent at once that the question thus pre

§ 230

"Brokers Quotations."

sented under the circumstances of this case is a very different one from that of the prices obtained for a few small lots from time to time, and mostly before any possible complications were suggested by the death of decedent."

Matter of Curtice, 111 App. Div. 230; affd., 185 N. Y. 543.

506. "Brokers' quotations"-Not Conclusive as to Value of Stock.

After the appraisal of a decedent's estate a motion was made by the executors to remit the report to the appraiser for a further hearing and consideration in reference to the appraisal of 110 shares of stock of the Knickerbocker Trust Company. The executors submitted affidavits to the appraiser tending to show that the market value of this stock on the day of decedent's death, January 26, 1907, was $1,150 per share, and they afterward discovered that the quotations submitted by them were not based upon any actual sale within three months of the decedent's death (Matter of Cleary, 31 Misc. Rep. 72; Matter of Gould, 19 App. Div. 352; Estate of Ottendorfer, N. Y. Law Journal, January 14, 1903), but that it was based on so-called "brokers' quotations " appearing in the Commercial and Financial Chronicle of February 2, 1907, and that the publishers of said Chronicle advise the executors that such publication does not contain the report of any actual sale of this stock on the exchange since the year 1899. The executors submitted an affidavit of a chartered accountant showing the value of this stock based upon its report filed with the Banking Department December 31, 1906, was $541.19, calculated on book valuations, and $558.72 on market valuations. Surrogate Beckett held that it was only fair

Stocks of Domestic Corporations.

§ 230

and just that the matter should be remitted to the appraiser to give the executors an opportunity to produce any evidence, if any there be, as to the clear market value of this stock at the time of the decedent's death. Matter of Cook, N. Y. Law Journal, January 30, 1908.

507. Stocks of Domestic Corporations Are Appraised at Their Market Value Regardless of Where Their Capital Is Employed.

In Matter of Palmer, N. Y. Law Journal of May 11, 1904, it appeared that the only property of a nonresident decedent taxable under the Transfer Tax Law of this State was certain shares of stock of the New York Central and Hudson River Railroad Company, which stock was appraised at its market value and a transfer tax assessed thereon. The executors appealed on several grounds, one of which was "that said report and order erroneously fix the value of the said property for the purpose of taxation herein, upon the basis of the market value of the stock of the New York Central and Hudson River Railroad Company passing under said will as found by the appraiser herein, without deducting therefrom 35.94 per cent. of the said market value, being the proportion of the capital of the said New York Central and Hudson River Railroad Company employed without the State of New York at the time of the death of the said decedent." Surrogate Thomas of New York county affirmed his taxing order, saying: "The grounds upon which shares of stock in a domestic corporation owned by a nonresident at the time of his death are held subject to the transfer tax, were fully considered in the Matter of Bronson, 150 N. Y. 1."

§ 230

Corporations of Two or More States.

The Court of Appeals affirmed the decision of the Appellate Division and the surrogate, holding that the share of stock of a railroad corporation of this State owned by a nonresident at the time of his death was taxable, and the assessment of the tax was to be based upon the value of the stock without reference to what proportion of the whole capital stock of the corporation was employed here; that a share of capital stock represents the distinct interest which its holder has in the corporation and his right to participate in the distribution of the net earnings of the corporation as a going concern, or in that of its assets upon a dissolution, and is proportionate to the number of shares which he holds; that they evidence the extent of his proprietary interest, and their assessment for taxation purposes must be upon that interest regarded as an entirety and is unapportionable with reference to the situs of the corporate properties. Matter of Palmer, 183 N. Y. 238.

508. Stocks of Corporations Organized in This and Adjoining States When Owned by a Nonresident Decedent Basis of Appraisal.

The Boston and Albany Railroad Company is a consolidation formed by the merger of one or more New York corporations and one Massachusetts corporation, incorporated contemporaneously by the legislatures of the State of New York and the State of Massachusetts. The stock of this corporation was considered the same as that of a domestic corporation when owned by a nonresident decedent and appraised at its market value at the time of the decedent's death, under the Matter of Bronson, 150 N. Y. 1, and the Matter of Palmer, 183 N. Y. 238.

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