— The executrix appeals from an order fixing the cash value of the property of the decedent, the transfer of which is subject to the tax imposed by the act relating to taxable transfers. (Tax Law, art. X, § 232, being Laws of 1909, chap. 62, and constituting Consol. Laws, chap. LX.)
The decedent at the time of his death was a stockholder and officeholder of the corporation known as William S. Hedges &• Company. The capital stock of this corporation consisted of 2,000 shares, having a par value of $100 each, of which the holding of the decedent amounted to 635 shares. About 1,100 shares were owned by the president of the company and the remaining shares were owned in various amounts by three other stockholders of the corporation. All of the stockholders of the corporation were also officers of the corporation and were actively engaged in its business.
In arriving at the value of the said shares of stock for purposes of taxation, the appraiser declined to permit a deduction of $20,000, called a “ surplus reserve ” and being a deduction of ten per cent, from the face value of the assets, and he also *353placed a value on the good-will of the business of the corporation and by so doing assessed each share of stock owned by the decedent at $159.61.
The appellant raises two questions on her appeal. She claims that it was an error to include the said $20,000 in arriving at a valuation of the shares of stock of the corporation and that it was also error on the part of the appraiser to place any value upon the so-called good-will of the business. The amount fixed as a possible depreciation in the value of the stock and to cover losses due to bad debts and other contingent causes was no doubt a wise precaution adopted to ascertain a conservative value of the property of the corporation; but' there is no proof that there was any depreciation in the value of the stock or that there were any bad debts or contingent losses' other than those for which allowance has been made, and the arbitrary deduction of this amount from the assets of the corporation is therefore not justified in my opinion.
The. corporation was engaged in buying and selling pearls and precious stones and conducted almost exclusively a wholesale trade, the testimony being that only fifteen per cent, of the sales were made at the place of business of the corporation. Its president received a salary of $5,000 a year. The decedent, who was vice-president and treasurer, received a salary in 1912 of $3,200, and in 1913 a salary of $2,933.32. The second vice-president received a salary of $7,314.81 in 1912 and $7,752.70 in 1913. The secretary received a salary of $5,828.70 in 1912 and.$5,938.17 in 1913, and the assistant secretary received a salary of $3,500 in the year 1912 and $4,200 in 1913. The appraiser in arriving at the good-will of the business took the profits of the last three years and deducted therefrom the interest on the average working capital at six per cent, per annum from that time and made an allowance of loss for bad debts and thereby arrived at the figure $42,915.69 as the value of the good-will, amounting to $21.46 per share.
*354That the good-will of a business, if such there be, is subject to a tax, I think is settled. (Matter of Vivanti, 138 App. Div. 281 ; 146 id. 942 ; affd., 206 N. Y. 656 ; Matter of Ball, 161 App. Div. 79 ; Matter of Keahon, 60 Misc. Rep. 508.)
The appellant claims, however, that the appraiser erred in arriving at his valuation for good-will, because the president and the decedent owned the bulk of the stock, and for that reason did not draw salaries which were proper compensations for their respective services, but permitted the difference between what they did receive as a salary and what they should have received to accumulate. The subordinate officers of the corporation owning but a small amount of stock, she claims, drew about what their services were worth. The testimony is that the value of the services rendered by the president was at least $15,000 a year and that if he had drawn the same instead of allowing it to accumulate, and the decedent had been paid a salary commensurate with the service - rendered by him instead of permitting a like accumulation, the profits would thereby have been materially less and the good-will of the business, calculated upon a basis of profit, would be valued at nothing.
The corporation was a close one. The stock was not listed and no sales of it had ever occurred prior to the death of the decedent, other than those when the corporation was originally formed. Where such a condition obtains, it is difficult to'fix the value of the stock, and it is often possible to get at it only by ascertaining the value of the property which it represents, (Matter of Jones 172 N. Y. 575), and even then it can be ascertained only with reasonable, certainty. (Matter of Rees, 208 N. Y. 590, affg. order of surrogate without opinion.)
After the death of the decedent, however, and within a few months thereafter, the executrix sold 57 of the 635 shares that had been owned by the decedent to three of the other stockholders of the corporation at $120 per share. The testimony is that this amount was the fair and reasonable market value *355of the stock at that time and, if nothing occurred to depreciate the value of the stock between the death of the decedent and the date of the sale, it is fair to assume that if the sale price was the fair and reasonable value of the stock at the time of sale, it was also the fair and reasonable value at the date of the death of the testator. It is conceded by the appellant, however, that between the date of the death of the testator and of the sale a dividend of four per cent, was paid, and it is urged upon her behalf that the value of the said shares should therefore have been assessed for purposes of taxation at $124. This figure was arrived at after the deduction of ten per cent, from the book value, being a proportionate share of the “ surplus reserve ” of $20,000 above referred to, and without such deduction the petitioner concedes that the book value of the shares was about $138 per share. The reason given by the petitioner, however, for the apparent profits upon which the appraiser bases his valuation of good-will, namely, that the two main stockholders failed to draw salaries commensurate with the services rendered by them and permitted the difference between what they earned and what they received to accumulate and thus appear as profit, when in truth and in fact it was not profit but represented the saleries of the two respective officers, seems reasonable to me, particularly so when viewed in the light of the salaries paid to subordinate officers who, as shown by the testimony, rendered no more valuable services to the corporation than did the two main stockholders and officers thereof. A fair deduction from apparent profits as a salary for services rendered seems to be justified. (Matter of Crerand, N. Y. L. J., June 30, 1914.)
Considering the nature of the business, before alluded to, the testimony as to such good-will given by the witness and making an allowance for salaries to the president and to the vice-president and treasurer, for their services, I reach the conclusion that the good-will was of no value. If I am right in my *356conclusions it follows that the appraiser should not have added the item of $21.46 to each share as representing a proportionate part of such good-will. I am of the opinion that a fair valuation of these shares for purposes of taxation should have been fixed at the sum of $138.15 per share, being the book value thereof, without any assessment for good-will, and being also about the sale price thereof, plus the allowance made as a part of the “ surplus reserve ” and plus the dividend declared after the death of the testator.
The report is therefore remitted to the appraiser for correction in accordance with this opinion.
Report remitted to appraiser for correction.