*1252 Before JAMES, LITTLETON, and TRUSSELL.
This is an appeal from the determination of a deficiency in estate tax amounting to $376.58.
FINDINGS OF FACT.
Albert H. Stearns died a resident of Boston, Massachusetts, on June 6, 1921. At that date he was the owner of 363 shares of the capital stock of the A. T. Stearns Lumber Company, of Boston, Massachusetts. The net profits and rate of dividends of that company for the calendar years 1913 to 1923, inclusive, were as follows:
| Year. | Net profits. | Dividends. |
| Per cent | ||
| 1913 | $38,405.00 | 22 |
| 1914 | 36,312.00 | 19 |
| 1915 | 20,088.29 | 20 |
| 1916 | 75,039.47 | 17 |
| 1917 | 90,534.29 | 22 |
| 1918 | 56,289.20 | 34 |
| 1919 | $76,750.11 | 27 |
| 1920 | 121,057.86 | 30 |
| 1921 | 1 38,384.99 | 20 |
| 1922 | 62,912.27 | 20 |
| 1923 | 59,650.24 | 22 |
*1253 The assets and liabilities as of December 31 of the years 1918 to 1921, inclusive, were as follows:
| 1918 | 1919 | 1920 | 1921 | |
| ASSETS. | ||||
| Cash | $24,076.32 | $23,760.07 | $33,018.07 | $36,034.24 |
| Accounts receivable | 158,824.21 | 172,667.98 | 174,278.64 | 145,759.18 |
| Notes receivable | 38,219.90 | 34,614.77 | 32,040.93 | 27,694.59 |
| Inventory-merchandise | 518,777.61 | 472,249.63 | 510,392.92 | 471,966.85 |
| Liberty bonds (employees) | 7,331.79 | 938.03 | ||
| Insurance fund (investment) | 52,550.81 | 57,472.45 | 62,392.58 | 67,772.69 |
| Real estate equities | 11,840.00 | 6,780.00 | 200.00 | 3,449.07 |
| Real estate | 182,631.56 | 187,631.56 | 185,413.94 | 185,609.06 |
| Machinery | 35,546.93 | 35,546.93 | 62,185.05 | 72,200.06 |
| Equipment | 31,387.13 | 31,350.00 | 31,747.21 | 31,747.21 |
| Autos and trucks | 6,175.00 | 6,798.00 | 7,366.15 | 1,836.60 |
| Horses and wagons | 11,650.00 | 11,487.50 | 11,912.50 | 12,069.92 |
| Railroad side track | 2,810.44 | 2,810.44 | 2,810.44 | 2,810.44 |
| Total assets | 1,081,821.70 | 1,044,107.36 | 1,113,758.43 | 1,058,950.45 |
| LIABILITIES. | ||||
| Current liabilities: | ||||
| Accounts payable | 81,638.21 | 13,939.15 | 18,655.27 | 10,645.21 |
| Notes payable | 115,000.00 | 125,000.00 | 115,000.00 | 142,476.19 |
| Total current liabilities | 196,638.21 | 138,939.15 | 133,655.27 | 153,121.40 |
| Reserves: | ||||
| Bad debts | 20,000.00 | 20,000.00 | 25,000.00 | 25,000.00 |
| Depreciation | 6,647.79 | 17,789.14 | 29,941.44 | |
| Taxes | 12,000.00 | 12,000.00 | 22,500.00 | 3,924.81 |
| Insurance | 52,550.81 | 57,472.45 | 62,392.58 | 67,772.69 |
| Inventory | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 |
| Capital stock | 150,000.00 | 150,000.00 | 150,000.00 | 150,000.00 |
| Surplus | 600,632.68 | 609,047.97 | 652,421.44 | 579,190.11 |
| Total | 1,081,821.70 | 1,044,107.36 | 1,113,758.43 | 1,058,930.45 |
*2604 The taxpayer filed an estate-tax return placing a value of $300 per share on the aforesaid 363 shares of stock. The Commissioner in revising the said estate-tax return placed a value upon the said stock of $351.94 per share.
DECISION.
The determination of the Commissioner is approved.
OPINION.
JAMES: The taxpayer bases his entire claim for a valuation of $300 on the average dividends declared and paid from 1913 to 1923. The corporation, however, has declared over that period only approximately 63 per cent of its net profits in dividends, and the balance sheet as of the close of 1921 shows an actual net worth in capital stock, surplus, and surplus reserves of $871,962.80, or $581.31 per share.
The company has followed a conservative policy in respect of the payment of dividends, and, under such circumstances, the dividends paid are only one, and in this particular case a somewhat unimportant, criterion of the value of the stock. The value determined by the Commissioner is fully warranted by the facts.
Footnotes
1. Deficit. ↩