*1282 1. Fair market value at March 1, 1913, of cemetery lots sold by the petitioner in the taxable year determined.
2. A cemetery corporation sold mausoleum crypts under terms contained in its deeds obligating it to "perpetually maintain in good order the space above described," without expense to the purchaser. In order to provide for such perpetual maintenance, the petitioner created a reserve account into which it deposited 10 percent of all sales receipts for crypts sold. Held, that petitioner may not treat such deposits as allowable reserve charges and deduct them from its current income in the year made. Acacia Park Cemetery Assn., Inc.,27 B.T.A. 233">27 B.T.A. 233.
*741 In the proceedings here consolidated income tax deficiencies of $7,545.99, $4,637.34, $5,433.67, and $5,153.17, respectively, for the years 1927, 1928 1929, and 1930 are in dispute. The assignments of error upon which the petitioner bases its several appeals relate to the question of whether or not the respondent (1) correctly found the fair market value as of March 1, 1913, of*1283 its cemetery lands sold in the tax years; (2) correctly determined the cost base for computing gain on sales in 1930 of burial crypts in a mausoleum erected on cemetery lands acquired prior to March 1, 1913; and (3) properly denied deduction claimed for payments to a so-called trust fund established to maintain its mausoleum. An additional assignment of error relating to maintenance deductions for cemetery lots was abandoned by the petitioner at the hearing.
FINDINGS OF FACT.
The petitioner is a Colorado corporation engaged in operating the Fairmount Cemetery and the Fairmount Mausoleum, in the immediate vicinity of Denver, Colorado. It was incorporated in 1890 and, in the same year, acquired its present cemetery site, including some 560 acres of land which it caused to be platted and made available for cemetery purposes.
The preliminary development of petitioner's properties consisted of such general work as surveying, laying out roads, irrigation canals, and reservoir sites, and in dividing and subdividing the available residue into blocks and burial lots. Some 265 block subdivisions in varying sizes were thus provided for, all of which were respectively marked and identified*1284 by letters and numbers of the cemetery plat as adopted.
General improvements related to the project as a whole, made prior to March 1, 1913, included items and expenditures, as follows: Reservoir construction, $5,873.15; chapel and gate lodge, $29,567.65; various small buildings, $2,332.99; providing electrical railway connection with the city of Denver and transportation contract with DenverTramway Co., $10,591.32; artesian well, $1,836.42; greenhouse, $15,391.17; water mains, $13,662; office and waiting room, $5,353.50. Some other expenditures for landscaping and drainage were made during this preliminary development period, which brought the gross expenditures for improvements prior to March 1, 1913, to $130,347.29.
The main entrance to Fairmount Cemetery is located near the northwest corner of the main tract, being approximately the point *742 nearest the city of Denver; and it was at and in this immediate vicinity that the petitioner began the development of burial lots. This development consisted of grading, draining, sodding, and landscaping a sufficient number of blocks and lots to meet petitioner's immediate needs and putting them in condition for sale, as*1285 contrasted with the general improvements hereinbefore mentioned, which made little or no change in the topography of the lands and left them, practically speaking, in their original state.
Prior to March 1, 1913, the petitioner fully improved some 37 cemetery blocks located in the vicinity of its main gate. From these improved blocks, in the same period, it sold burial space, measured in square feet, as shown in the following table:
| Block No. | Sale price | Sq. ft. |
| A | $1,000 | 515 |
| B | 810 | 1,060 |
| 1 | 2,725 | 2,066 |
| 2 | 775 | 383 |
| 4 | 725 | 416 |
| 5 | 1,000 | 660 |
| 6 | 100 | 160 |
| 8 | 125 | 128 |
| 10 | 75 | 64 |
| 12 | $65 | 80 |
| 13 | 275 | 205 |
| 15 | 250 | 240 |
| 63 | 3,500 | 1,520 |
| 77 | 145 | 158 |
| 24 | 1,390 | 822 |
| 22 | 8,150 | 11,547 |
| 57 | 1,030 | 1,384 |
| 23 | 14,820 | 13,051 |
| 55 | $580 | 1,120 |
| 32 | 11,295 | 10,664 |
| 70 | 2,495 | 2,330 |
| 33 | 11,480 | 14,103 |
| 56 | 16,796 | 29,288 |
| 61 | 2,300 | 3,093 |
| 62 | 1,750 | 1,840 |
| 62 | 4,660 | 4,174 |
| 71 | 2,850 | 4,056 |
In the same locality, but not included in the above, petitioner in 1911 sold an unimproved tract of 15 acres of its cemetery to a Jewish cemetery association for the price of $15,000, reserving to itself certain valuable commercial rights connected with interments*1286 and greenhouse service, the value of which is not shown.
In 1931 the petitioner completed a mausoleum at a cost of $714,864.37, plus the March 1, 1913, value of the lot upon which it was located. This lot was not otherwise specially improved.
In the tax years petitioner sold burial space from cemetery blocks, some of which had been wholly improved prior to March 1, 1913, and some only partly improved, and the remainder were without any individual improvement prior to that date. These sales by class and years were as follows:
| Condition March 1, 1913 | 1927 | 1928 | 1929 | 1930 |
| Sq. ft. | Sq. ft. | Sq. ft. | Sq. ft. | |
| Improved | 2,124 | 2,858 | 1,678 | 1,857 |
| Partly improved | 6,490 | 5,229 | 3,959 | 4,612 |
| Unimproved | 72,864 | 68,594 | 83,313 | 57,298 |
In its returns for the taxable years the petitioner claimed March 1, 1913, values ranging from 40 cents to $1.93 per square foot for lots sold, and for block No. 90, upon which the mausoleum was *743 constructed and which was unimproved in 1913, it claimed a basic value of 80 cents per square foot. Upon audit of such returns the respondent determined the 1913 values of improved, partly improved, *1287 and unimproved lots in the respective amounts of 80 cents, 40 cents, and 3.968 cents per square foot.
On April 9, 1927, certain real estate operators retrospectively appraised the value of petitioner's unimproved lands as of March 1, 1913, at 78 cents per square foot.
In 1930 the petitioner sold mausoleum crypts for an aggregate amount of $113,900. These sales were made under written agreements in which the petitioner obligated itself, upon full payment of the purchase price, to deliver to the purchaser a warranty deed containing a condition requiring it to perpetually care for the mausoleum. The agreement also provided that no oral representation made by the sales agent could vary or change its terms. The deeds delivered to the purchasers contained a maintenance clause under which the petitioner agreed to "perpetually maintain in good order", without expense to the purchaser, the mausoleum structure and space sold.
On or about March 11, 1930, by proper corporate action, the petitioner created and caused to be set up in its books a so-called endowment fund account for the purpose of providing for a perpetual trust fund to take care of its maintenance obligations contained*1288 in its mausoleum deeds, as aforesaid. To this account it deposited in 1930 a total of $11,390, this being equal to 10 percent of petitioner's gross mausoleum sales in that year.
In making out its income tax return for 1930 petitioner deducted from gross income the sum of $11,390 as an allowable reserve cost claim, which deduction the respondent has rejected in his audit.
In its 1930 return the petitioner used as one element of cost of its mausoleum crypts sold a proposed March 1, 1913, value for its cemetery block No. 90, upon which the mausoleum is located, which value the respondent has rejected and substituted in lieu thereof a base value of 3.968 cents per square foot for determining taxable gain.
OPINION.
LANSDON: The petitioner acquired 560 acres of land in 1890, at a cost per acre not disclosed by the record. Carved out of such land it sold certain cemetery lots in 1927, 1928, 1929, and 1930 for amounts which the respondent has determined resulted in large profits. In substantially identical sections, the Revenue Acts of 1926 and 1928 provide that the basis for determining gain or loss from the disposition of property acquired before March 1, 1913, shall be cost, *1289 or fair market value at that date, whichever is greater. Although *744 not proved for the record, all the circumstances indicate that the lands here involved had a fair market value at the basic date greatly in excess of their cost, and we so find.
The land in question was bought by the acre and sold by the square foot. The petitioner bases its claim on an average value at March 1, 1913, of 78 cents per square foot, which was the value fixed upon unimproved lands by the retrospective appraisal made in 1927. The respondent has classified the lands as to their condition on the basic date into improved, partly improved, and unimproved categories, and has determined fair market values thereof in the respective amounts of 80 cents, 40 cents, and 3.968 cents per square foot. Based on the value claimed by the petitioner, its 540 acres of lands not then sold or improved for burial purposes had a fair market value at March 1, 1913, of approximately $34,000 per acre, or $18,000,000 for the entire tract, which seems a little high even for acreage located 10 miles from Denver. The values per square foot as of March 1, 1913, determined by the Commissioner give the acreage values*1290 as of that date in the respective amounts of $1,102, $11,020, and $22,040.
It is clear that the value claimed by the petitioner results in an absurdity which impeaches the credibility of all the evidence adduced in its support. The meaning of fair market value is well fixed. It is what property can be sold for at a given date in a transaction in which vendor and vendee are equally free to act. It is true that petitioner has proved some sales of improved lots about two years before March 1, 1913, at prices approximating the values here claimed. The record discloses, however, that at the basic date the land owned by petitioner was sufficient to supply all its demands for burial lots for 200 years. The appraisal of 78 cents per square foot and the expert evidence offered in connection therewith by the petitioner ignores this situation. If it be assumed that all the lots on hand would be sold over a period of 200 years, it follows that on an average the receipt of the sales price by the petitioner would be deferred for 100 years. It would then become necessary to determine the present worth of $34,000, the value per acre claimed in 1913, but not realizable until 2013, which, *1291 at a discount rate of 6 percent, would be $100.20.
The facts disclose that in 1911 the petitioner sold 15 acres of its then unimproved land for use as a Jewish cemetery for $15,000. Just what consideration impelled the purchasers to pay $1,000 per acre when similar land just across the road could have been bought for a fraction of that price, is not disclosed by the record, but that is immaterial, since the price so paid was approximately equal to the value of the land at March 1, 1913, as determined by the respondent.
*745 In rebuttal of the testimony of petitioner's experts, the respondent called two real estate dealers who were familiar with land prices at the basic date. They testified that acreage prices in that neighborhood were not in excess of $500 per acre at that time. Undoubtedly the dedication of petitioner's land to cemetery purposes increased its value as compared with nearby agricultural or grazing tracts in the same neighborhood, but respondent has recognized this in his determination of a value for unimproved cemetery lots somewhat in excess of $1,000 per acre. In our opinion the petitioner has failed to overcome the presumption of correctness which*1292 attaches to the determination of the respondent.
The basic value of block No. 90, upon which the mausoleum stands, is also an issue in connection with the computation of profit realized from the sale of mausoleum space in the year 1930. This block was unimproved at March 1, 1913, and its fair market value at that date is settled by our affirmation of the respondent's determination as set out above. .
The remaining issue relates to petitioner's right to have excluded from its taxable income of the years involved the payments made into a reserve fund, so-called "in trust" to maintain mausoleum properties under contracts with space purchasers.
The exact legal question involved in this last issue was before this Board in different form, but under almost identical facts, in , wherein that taxpayer contended that it had the right to add to the cost of cemetery lots sold the sums paid in to a bank as a "perpetual care fund." Its theory was that its contractual obligation with lot purchasers to perpetually maintain and care for the properties had the effect of*1293 imposing a trust upon so much of the purchase payments as was necessary to guarantee its fulfillment. In our discussion of that case we distinguished between sales contracts which provided that a specified portion or percentage of the purchase payments should be segregated as a separate fund and used for perpetual care and those, as then involved, in which the company merely agreed to perform such services. The Board held that in the latter class of cases there was no trust impressed upon any part of the payments reserved, even though the selling agents had represented, orally, to the purchasers that 10 percent was to be held in trust for that purpose; and that such payments not impressed by a trust at the time they were made could not be changed in such respect by any subsequent contract which the cemetery corporation might make with a bank or trust company for its own convenience in carrying out its obligations to its customers. This decision was affirmed by the United States Circuit Court of Appeals for the Seventh Circuit in *1294 .
*746 This decision and others equally in point settle the law upon this last issue, and upon authority thereof we affirm the determination of the respondent.
Decision will be entered for the respondent.