*3933 1. March 1, 1913, value of various parcels of real estate determined as a basis for determining the gain or loss from the sale of such real estate during the calendar year 1920.
2. Where the evidence adduced by one party in support of a proposed valuation is clear, convincing and uncontradicted and no reason for disbelieving or discounting such evidence is present, and where the adverse party neither weakens the testimony by cross-examination nor produces any evidence on his own behalf, the party producing the evidence should prevail.
*1199 This proceeding involves respondent's determination of petitioner's income taxes for the calendar years 1918, 1919, and 1920. Respondent determined overassessments of $135,838.80 and $3,176.80 for the years 1918 and 1919, respectively, and a deficiency of $59,248.40 for the year 1920. Of the total deficiency asserted for the year 1920, the sum of $57,239.30 is in controversy.
The issues raised under the amended pleadings are: (1) Whether the petitioner is entitled to a deduction*3934 for the year 1920 of the sum of 18,006.97, representing administration and miscellaneous expenses incurred and paid that year in connection with petitioner's ranch operations; and (2) the amount of the taxable gain on real estate sales made by petitioner during the year 1920.
FINDINGS OF FACT.
The petitioner is an individual and a resident of Santa Anita, Calif. She is a daughter of E. J. Baldwin, who died in Los Angeles County, Calif., on March 1, 1909. In his will the decedent devised and bequesthed practically his entire estate in equal undivided interests to his two daughters, Clara Baldwin Stocker and Anita M. Baldwin, the latter being petitioner herein. The estate was in process of administration from decedent's death, March 1, 1909, until July, 1913, at which time the assets were distributed to the petitioner and her sister in accordance with decedent's will. After distribution the two sisters effected a partition in kind of their undivided interests in the estate by exchanging deeds of real estate, by which transaction each became the owner in severalty of one-half of the property in which theretofore she had been a joint tenant. In this exchange no consideration*3935 passed between the sisters except a deed of land from one for a deed of land from the other.
During the administration of the estate of E. J. Baldwin, an inventory and appraisal was filed in his estate as required by the laws of California, in June, 1910, which fixed the value of the estate as of March 1, 1909, the date of testator's death, at an aggregate amount of $10,611,025.61.
During the year 1920 petitioner sold various parcels of the real estate owned by her. The date of sale, description of property sold, the net selling prices and estate appraisal value of March 1, 1909, of the parcels of real estate sold were as follows: *1200
| Date of sale, 1920 | Description | Net selling price | Appraisal value (cost to petitioner) as of 3/1/09 | March 1, 1913, value established by evidence | Taxable gain | |
| Jan. 8 | Lot 26, block 66, Arcadia tract | $88.70 | $100.00 | $400.00 | 1 $11.30 | |
| 14 | Lots 9, 10, 11, 12, block O, Lucky Baldwin tract | 6,056.50 | 2,600.00 | 5,200.00 | 856.50 | |
| 17 | Lots 1 to 9, inclusive, block E, Lucky Baldwin tract | 20,000.00 | 7,450.00 | 13,530.00 | 6,470.00 | |
| 17 | Lots 19, 20, 21, 22, block 70, Arcadia S.A. tract | 1,413.50 | 375.00 | 1,630.00 | * | |
| 17 | 3.118 A., part of blocks 55, 56, south of A., T. & S.F. R/W of Santa Anita tract | 1,765.26 | 1,085.00 | 2,330.00 | * | |
| 26 | Lots 19, 20, 21, block 72, Arcadia S.A. tract | 1,488.50 | 300.00 | 1,280.00 | 208.50 | |
| Feb 6 | Lots 19, 20, 21, 22, block 65, Arcadia | 1,413.50 | 375.00 | 1,630.00 | * | |
| 19 | Lot 3, block 75, Arcadia | 889.00 | 200.00 | 450.00 | 439.00 | |
| 24 | Lots 15, 16, 17, 18, block 70, Arcadia | 1,412.00 | 375.00 | 1,630.00 | * | |
| Mar. 8 | Lots 15, 16, 17, 18, block 65, Arcadia | 1,413.50 | 375.00 | 1,630.00 | * | |
| 11 | Lots 15, 16, 17, 18, block 64, Arcadia | 1,413.50 | 375.00 | 1,520.00 | * | |
| Apr. 28 | Lots 14 and 15, block 72, Arcadia | 653.00 | 175.00 | 800.00 | * | |
| May 8 | 2.025 A., part blocks 52, 53, Santa Anita tract | 1,132.75 | 270.50 | 2,530.00 | * | |
| June 17 | Lots 19, 20, 21, 22, block 64 1/2, Arcadia | 1,698.00 | 375.00 | 1,630.00 | 68.00 | |
| 17 | Lot 23, block 65, Arcadia | 369.50 | 100.00 | 400.00 | * | |
| 17 | Lot 24, block 65, Arcadia | 369.50 | 100.00 | 400.00 | * | |
| July 6 | Lots 28, 29, block 67 1/2, Arcadia | 654.00 | 200.00 | 800.00 | * | |
| 1 | Part lot 2, tract No. 951 | 169.23 A. | ||||
| Lots 1, 2, 3, 4, E. J. Baldwin's addition No. 1 to Santa Anita colony | 41.591 A. | 166,716.40 | 100,144.60 | 156,850.00 | 9,866.40 | |
| 210.821 A. | ||||||
| Part of lot 2, tract 951 | 46.707 A. | |||||
| 1 | 75.232 A., part of lot 3, tract 950 | 59,950.30 | 53,360.70 | 52,652.00 | 7,298.30 | |
| Sept. 18 | Lot 25, block 65, Arcadia | 369.50 | 100.00 | 400.00 | * | |
| 18 | Lot 9, block 65, Arcadia | 369.50 | 100.00 | 400.00 | * | |
| 18 | Lots 15, 16, 17, 18, block 64 1/2, Arcadia | 1,698.00 | 375.00 | 1,630.00 | 68.00 | |
| 29 | Lots 23 to 32, inclusive, block 70, Arcadia | 3,784.00 | 1,000.00 | 4,000.00 | * | |
| 275,118.41 | 169,910.80 | 253,722.00 | 25,274.70 | |||
The petitioner determined a total value of these properties on March 1, 1913, of $253,722, and a total profit upon their sale of $25,274.70. In the computation of this profit, petitioner made no deduction for losses aggregating $3,878.29, in sales wherein the selling price, although lower than the March 1, 1913, value, was higher than the cost of the property on March 1, 1909. The respondent determined a total value of these properties on March 1, 1913, of $169,910.80, being the same as the 1909 appraisal, and found a total profit upon their sale of $105,207.61.
Petitioner also sold on April 28, 1920, a lot located in Claremont, Berkeley, for $3,321.50. This lot was purchased by petitioner in 1909 for $3,000. Both petitioner and respondent determined a profit upon the sale of this parcel of property of $321.50.
In connection with the sales of property in $1920, petitioner received in that year title expense refunds of $32.80.
The various properties described in the foregoing schedule are all located in Los Angeles County, Calif. The "Lucky Baldwin" tract is located in the City of Los Angeles. The "Arcadia" *3937 tract is located in the town of Arcadia, which is about nine miles northeast of Los Angeles. Both the Santa Fe Railroad and the Pacific Electric Railroad run through Arcadia. The acreage comprising "Tracts 950, 951 and the addition to Santa Anita Colony," is located near *1201 Arcadia but seven miles from Los Angeles. These properties, with the exception of the lands situated in the City of Los Angeles, are all located in the foothill district of that city. All the lands were plotted and subdivided prior to 1909.
During the period from 1909 to 1913, inclusive, there was a general and progressive increase in real estate values in both the City and County of Los Angeles.
OPINION.
VAN FOSSAN: At the hearing respondent's counsel conceded that the income of petitioner as computed by respondent for 1920 was overstated in the amount of $18,006.97, thereby disposing of the first issue raised by the pleadings.
It not appearing that the overassessments for either of the years 1918 or 1919 arose upon the denial of claims in abatement of additional assessments, this proceeding is dismissed in so far as those years are involved. *3938 . As to the year 1920, the record in this case raises but one issue - the value of certain real estate on March 1, 1913.
As said by Mr. Justice Brewer in :
At best, evidence of value is largely a matter of opinion, especially as to real estate.
Petitioner introduced as an expert witness a man of long experience, evident ability, high local repute, and thorough familiarity with the property. His qualifications were not questioned nor was the merit of his opinion weakened by cross examination. In the opinion of this witness the fair market value of the Los Angeles County properties was $253,772 on March 1, 1913. On this opinion petitioner rests her case. As observed by Justice Brewer in the above cited case:
It is fully open to the adverse party, if not satisfied with the values given, to call witnesses in the extent of whose knowledge and weight of whose opinion it has confidence.
This respondent did not choose to do. We are thus confronted with a record in which not merely the preponderance but all of the evidence of value supports petitioner's*3939 contention.
It would seem to be a reasonable proposition that if the evidence adduced by one party in support of a proposed valuation is clear, convincing and uncontradicted and no reason for disbelieving or discounting such evidence is present, and if the adverse party neither weakens the testimony by cross-examination nor produces any evidence on his own behalf, the party producing the evidence should prevail.
*1202 The evidence in this case convinces us that on March 1, 1913, the aggregate value of the land in question was not less than $253,722, the figure contended for by petitioner, which value we allow. The sale price of the land was $275,118.41. Under section 202(a)(1) of the Revenue Act of 1918 and , and , the gain derived on the sale of these properties in 1920 was $25,274.70.
There is, in addition to the above, a profit of $321.50 on the sale of the lot in Claremont, Berkeley, and a profit of $32.80 attributable to title expense refunds received in 1920.
The deficiency should be recomputed in accordance with this decision.
Judgment*3940 will be entered on 15 days' notice, under ruel 50.