Bartram v. Graham

Full title: Joseph Burr BARTRAM, Mary Sheppard Bartram, Eleanor Bartram Radley, and…

Court: United States District Court, D. Connecticut

Date published: Sep 30, 1957

157 F. Supp. 757 (D. Conn. 1957)

Opinion

Civ. A. Nos. 5955-5958.

September 30, 1957.

Cummings Lockwood, Stamford, Conn. (Morgan P. Ames and Francis P. Schiaroli, Stamford, Conn., of counsel), for plaintiffs.

Jerome Fink, Tax Division, Dept. of Justice, Washington, D.C., Simon S. Cohen, U.S. Atty., Henry C. Stone, Asst. U.S. Atty., Hartford, Conn., for defendants.

J. JOSEPH SMITH, Chief Judge.

Finding of Facts

1. These are civil actions which arise under the laws of the United States of America providing for internal revenue in that they seek the recovery of monies representing gift taxes assessed and collected by the former District Director of Internal Revenue for the District of Connecticut, who is represented herein by the defendants, Helen B. Graham, his administratrix, and Harold All, District Director of Internal Revenue for the District of Connecticut.

2. The plaintiff in Civil Action No. 5955 is Joseph Burr Bartram, a resident of the Town of Greenwich, County of Fairfield and State of Connecticut.

3. On or about December 26, 1950, said Joseph Burr Bartram transferred gifts of 370 shares of common stock, no par value, of Bartram Brothers Corporation to trusts for the benefit of each of his children, Nina Bartram Griswold and Joseph Burr Bartram, Jr.

4. On or about March 13, 1951 said Joseph Burr Bartram filed United States Gift Tax Return, Form 709, for the calendar year 1950, reporting said gifts of Bartram Brothers Corporation stock therein at a value of $114.128 per share.

5. Said Joseph Burr Bartram's wife, Mary Sheppard Bartram, consented to and did report one-half of the said gifts of stock on her individual gift tax return for the year 1950.

6. Said Joseph Burr Bartram and said Mary Sheppard Bartram each reported transfers totaling $42,227.36 based on the valuation of Bartram Brothers stock at $114.128 per share.

7. At the request of the then District Director of Internal Revenue, James J. Graham, said Joseph Burr Bartram executed and filed a waiver of restrictions on the assessment and collection of additional gift tax in the principal amount of $4,746.93.

8. On or about April 29, 1954, said Joseph Burr Bartram paid additional gift tax in the principal amount of $4,746.93 together with interest thereon in the amount of $862.99.

9. On or about July 20, 1954, said Joseph Burr Bartram filed a timely Claim for Refund on Treasury Form 843 with the said District Director of Internal Revenue, claiming gift tax erroneously and illegally assessed and paid in the sum of $5,609.92.

10. The said District Director of Internal Revenue did not render any decision on the Claim for Refund before the expiration of six months from the date of filing such claim.

11. The plaintiff in Civil Action No. 5956 is said Mary Sheppard Bartram, a resident of the Town of Greenwich, County of Fairfield and State of Connecticut.

12. At the request of the said District Director of Internal Revenue, said Mary Sheppard Bartram executed and filed a waiver of restrictions on the assessment and collection of additional gift tax in the principal amount of $1,959.41.

13. On or about April 29, 1954, Mary Sheppard Bartram paid additional gift tax in the principal amount of $1,959.41 together with interest thereon in the amount of $356.22.

14. On or about July 20, 1954, said Mary Sheppard Bartram filed a timely Claim for Refund on Treasury Form 843 with the said District Director of Internal Revenue claiming gift tax erroneously and illegally assessed and paid in the sum of $2,315.63.

15. The said District Director of Internal Revenue did not render any decision on the Claim for Refund before the expiration of six months from the date of filing such claim.

16. The plaintiff in Civil Action No. 5957 is Eleanor Bartram Radley, a resident of the Town of Greenwich, County of Fairfield and State of Connecticut.

17. On or about December 26, 1950, said Eleanor Bartram Radley transferred gifts of 500 shares of common stock, no par value, of Bartram Brothers Corporation to trusts for the benefit of each of her children, Harriet Windsor, Eleanor Bartram Radley and Edith Marguerite Radley.

18. On or about March 13, 1951 said Eleanor Bartram Radley filed United States Gift Tax Return, Form 709, for the calendar year 1950, reporting said gifts of Bartram Brothers Corporation stock therein at a value of $114.128 per share.

19. Said Eleanor Bartram Radley's husband, John J. Radley, Jr., consented to and did report one-half of the said gifts of stock on his individual gift tax return for the year 1950.

20. Said Eleanor Bartram Radley and said John J. Radley, Jr. each reported transfers totaling $114,128.00 based on the valuation of Bartram Brothers stock at $114.128 per share.

21. At the request of the said District Director of Internal Revenue, said Eleanor Bartram Radley executed and filed a waiver of restrictions on the assessment and collection of additional gift tax in the principal amount of $11,005.20.

22. On or about April 29, 1954, said Eleanor Bartram Radley paid additional gift tax in the principal amount of $11,005.20 together with interest thereon in the amount of $2,000.75.

23. On or about July 20, 1954, said Eleanor Bartram Radley filed a timely Claim for Refund on Treasury Form 843 with the said District Director of Internal Revenue, claiming gift tax erroneously and illegally assessed and paid in the sum of $13,005.95.

24. The said District Director of Internal Revenue did not render any decision on the Claim for Refund before the expiration of six months from the date of filing such claim.

25. The plaintiffs in Civil Action No. 5958 are Eleanor Bartram Radley and Joseph Burr Bartram as Executors of said John J. Radley, Jr., who died after the commencement of this action. Prior to his death, John J. Radley, Jr. was a resident of the Town of Greenwich, County of Fairfield and State of Connecticut.

26. At the request of the said District Director of Internal Revenue, said John J. Radley, Jr. executed and filed a waiver of restrictions on the assessment and collection of additional gift tax in the principal amount of $10,677.12.

27. On or about April 29, 1954, said John J. Radley, Jr. paid additional gift tax in the principal amount of $10,677.12 together with interest thereon in the amount of $1,941.19.

28. On or about July 20, 1954, said John J. Radley, Jr. filed a timely Claim for Refund on Treasury Form 843 with the said District Director of Internal Revenue, claiming gift tax erroneously and illegally assessed and paid in the sum of $12,618.31.

29. The said District Director of Internal Revenue did not render any decision on the Claim for Refund before the expiration of six months from the date of filing of such claim.

30. Bartram Brothers Corporation (hereinafter referred to as the corporation) is a corporation organized in 1925 under the laws of the State of Delaware, having its place of business in the City, County and State of New York.

31. On December 26, 1950, the corporation had issued and outstanding a total of 1,370 shares of preferred stock, $100 par value, and 148,235 shares of common stock, no par value. The fair market value of its total assets as of that date was $24,788,341. The book value of its assets as of that date was $21,051,260.

32. The corporation's business has at all times consisted entirely of the investment and management of its security portfolio.

33. At all times in question the corporation was a personal holding company and not a regulated investment company under the revenue laws of the United States.

34. The corporation's stock has never been listed or traded on any recognized securities exchange.

35. Almost all of the shares of stock outstanding have been owned and held at all times by the Bartram family including descendants, relatives and spouses or by irrevocable trusts for the benefit of various family members.

36. The Bartram family control the corporation, and the corporation's directors and officers are chosen primarily from the Bartram family.

37. There have been only approximately twenty-five sales or exchanges of the stock in the thirty-two years of the corporation's existence. All such sales were of small amounts and to or from employees or their estates.

38. As of December 26, 1950 there was no apparent prospect of the corporation's being liquidated in the foreseeable future.

39. Bartram Brothers Corporation List of Stockholders December 26, 1950 Preferred Common

The New York Trust Company, substitute trustee for Howard P. Bartram 1,370 Estate of Joseph Percy Bartram 7,200 John J. Radley, Jr. and J. Burr Bartram, trustees u/deed of Eleanor F. Bartram dated June 26, 1912 for J. Burr Bartram, et al 5,904 Rensselaer W. Bartram 19,650 Rensselaer W. Bartram and Rensselaer W. Bartram, Jr., trustees for Florence M. Booth 500 Rensselaer W. Bartram and Rensselaer W. Bartram, Jr., trustees for Jane Bartram Weed 3,880 Rensselaer W. Bartram and Jane Bartram Weed, trustees for Rensselaer W. Bartram, Jr. 3,880 Rensselaer W. Bartram and Rensselaer W. Bartram, Jr., trustees for Alice Booth Bartram 12,000 Joseph Burr Bartram, John J. Radley, Jr. and Rensselaer W. Bartram, Jr., trustees for Mary Sheppard Bartram 140 Joseph Burr Bartram, John J. Radley, Jr. and Rensselaer W. Bartram, Jr., trustees for Nina Helen Bartram 500 Joseph Burr Bartram, John J. Radley, Jr. and Rensselaer W. Bartram, Jr., trustees for Joseph Burr Bartram, Jr. 500 The Bridgeport Trust Company and Carl Foster, trustees 4,800 King Company 950 The Chase National Bank and Paul Fuller, Jr. trustees for Rensselaer W. Bartram 10,000 Kane Company 10,000 Harriet R. Fischlein 3,200 Arthur W. Fox 3,911 Arthur W. Fox, trustee 150 William Edward Fox 100 Jennie E. Fox 4,161 G. William Fox 4,162 Sigler Company 6,000 Eleanor Bartram Radley 8,000 Joseph Burr Bartram 9,260 Charlotte Pudney Hall 520 Hazel J. Phair 200 Harvey F. Phair 460 Henry F. Hart 365 Henry F. Hart, Laura R. Hart and Rupert T. Zickl, trustees U/I December 31, 1940 500 William Kent Pudney 520

Preferred Common Eleanor B. Radley, J. Burr Bartram and John J. Radley, Jr., trustees for Harriet Windsor 600 Eleanor B. Radley, J. Burr Bartram and John J. Radley, Jr., trustees for Eleanor Bartram Windsor 600 Eleanor B. Radley, J. Burr Bartram and John J. Radley, Jr., trustees for Elizabeth Bartram Radley 600 Eleanor B. Radley, J. Burr Bartram and John J. Radley, Jr., trustees for Edith Marguerite Radley 600 Floy T. Sheldon 160 Margaret Sheridan 500 George E. Warren and Joseph Burr Bartram, trustees for Eleanor Bartram Radley 5,912 George E. Warren and Joseph Burr Bartram, trustees for Winifred D. Douglas 800 George E. Warren, J. Burr Bartram and Chase National Bank, trustees for J. Burr Bartram, et al 3,275 George E. Warren, J. Burr Bartram and Chase National Bank, trustees for Eleanor B. Radley, et al 3,275 George E. Warren, Rensselaer W. Bartram, Jr. and Chase National Bank, trustees for Rensselaer W. Bartram, Jr., et al 5,000 George E. Warren, Rensselaer W. Bartram, Jr. and Chase National Bank, trustees for Jane Bartram Weed, et al 5,000 Rupert T. Zickl 500 _______ _______ 1,370 148,235 ======= =======

December 31, 1943 December 31, 1944 December 31, 1945 December 31, 1946 Value Value Value Value Value Value Value Value Assets Liabilities

Findings No. 40 Bartram Brothers Corporation Comparative Balance Sheets — at December 31, 1943-1950 Book Values vs. Market Values Book Market Book Market Book Market Book Market $ $ $ $ $ $ $ $ Cash 5,751 5,751 6,732 6,732 15,162 15,162 49,599 49,599 Accounts Receivable 193,872 193,872 186,518 186,518 653 653 548 548 Investments: Taxable Bonds 518,230 480,750 723,556 681,672 1,120,460 1,140,056 259,760 204,950 Partially Exempt Bonds 2,428,658 2,459,177 2,404,456 2,459,465 1,782,552 1,864,625 1,330,675 1,377,750 Wholly Exempt Bonds 446,230 447,287 443,849 457,488 557,656 590,038 552,780 564,945 Accrued Interest Thereon 25,867 25,867 21,221 21,221 13,948 13,948 8,577 8,577 Stocks 11,118,488 11,258,619 11,328,101 12,749,656 13,153,055 16,285.983 14,686,175 16,764,758 Insurance Investment 1,012,778 1,012,778 1,009,444 1,009,444 1,006,111 1,006,111 1,002,778 1,002,778 __________ __________ __________ __________ __________ __________ __________ __________ Total Assets 15,749,874 15,884,101 16,123,877 17,572,196 17,649,597 20,916,576 17,890,892 19,973,905 ========== ========== ========== ========== ========== ========== ========== ========== Accounts Payable 138 138 2,146 2,146 53,100 53,100 265,753 265,753 Reserve for Taxes 62,932 62,932 141,751 141,751 432,939 432,939 147,894 147,894 Capital Stock: Preferred [par $100] 137,000 137,000 137,000 137,000 137,000 137,000 137,000 137,000 Common [no par] 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 Less — Treasury Stock [91,720 [91,720] [92,720] [92,720] [94,720] [94,720] [106,666] [106,666] Surplus 158,508 292,735 452,684 1,901,003 1,638,262 4,905,242 1,963,895 4,046,908 __________ __________ __________ __________ __________ __________ __________ __________ Total Liabilities 15,749,874 15,884,101 16,123,877 17,572,196 17,649,597 20,916,576 17,890,892 19,973,905 ========== ========== ========== ========== ========== ========== ========== ========== Number of Common Shares Outstanding Less — Treasury Stock 148,510 148,500 148,480 148,380 December 31, 1947 December 31, 1948 December 31, 1949 December 31, 1950 Value Value Value Value Value Value Value Value Assets Liabilities Book Market Book Market Book Market Book Market $ $ $ $ $ $ $ $ Cash 225,071 225,071 247,372 247,372 105,204 105,204 135,097 135,097 Accounts Receivable 1,579 1,579 371 371 505 505 76,325 76,325 Investments: Taxable Bonds 1,192,313 1,089,656 1,189,626 1,083,266 923,475 889,012 1,076,844 1,070,981 Partially Exempt Bonds 934,376 905,100 927,080 920,850 919,785 958,912 912,490 947,888 Wholly Exempt Bonds 549,064 512,969 548,333 540,530 546,691 545,550 545,050 578,981 Accrued Interest Thereon 10,968 10,968 10,854 10,854 8,568 8,568 9,693 9,693 Stocks 16,381,648 16,971,380 17,145,249 16,719,533 18,086,448 18,961,097 18,915,333 21,969,376 Insurance Investment _ _ _ _ _ _ _ _ __________ __________ __________ __________ __________ __________ __________ __________ Total Assets 19,295,019 19,716,723 20,068,886 19,522,776 20,590,676 21,468,848 21,670,832 24,788,341 ========== ========== ========== ========== ========== ========== ========== ========== Accounts Payable 186,238 186,238 401,165 401,165 214,316 214,316 163,966 163,966 Reserve for Taxes 514,969 514,969 250,499 250,499 235,987 235,987 318,606 318,606 Capital Stock: Preferred [$100 par] 137,000 137,000 137,000 137,000 137,000 137,000 137,000 137,000 Common [no par] 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 15,483,016 Less — Treasury Stock [106,666] [106,666] [120,546] [120,546] [122,139] [122,139] [123,139] [123,139] Surplus 3,080,462 3,502,166 3,917,752 3,371,642 4,642,496 5,520,668 5,691,383 8,808,892 __________ __________ __________ __________ __________ __________ __________ __________ Total Liabilities 19,295,019 19,716,723 20,068,886 19,522,776 20,590,676 21,468,848 21,670,832 24,788,341 ========== ========== ========== ========== ========== ========== ========== ========== Number of Common Shares Outstanding Less — Treasury Stock 148,380 148,260 148,245 148,235 1943 1944 1945 1946 Bartram Brothers Corporation Comparative Statement of Profit and Loss Finding No. 41 for the Years Ended December 31, 1943-1950 Interest Income: $ $ $ $ Taxable Bonds 19,819 13,872 16,332 28,801 Partially Tax-Exempt Bonds 70,354 65,700 49,364 37,638 Less — Amortization of Premiums 25,395 44,959 24,202 41,498 15,775 33,589 11,320 26,318 ______ ______ ______ ______ Wholly Tax-Exempt Bonds 5,438 12,613 13,354 15,580 Less — Amortization of Premiums 847 4,591 2,381 10,232 2,499 10,856 2,851 12,729 _______ ______ ______ _______ Dividends: 594,102 580,725 611,962 644,544 Net Profit on Security Transactions 68,976 446,687 1,606,556 435,643 Income from Insurance Investment 33,522 33,507 33,532 33,537 Miscellaneous Interest [Federal tax refunds] _ 3,841 _ _ Other Interest _ _ _ _ _______ _________ _________ _________ Total Income 765,969 1,130,361 2,312,827 1,181,571 Expenses: Salaries of Officers 59,000 59,000 59,500 68,000 Office Salaries 1,225 1,750 2,115 2,470 Legal and Technical Services 5,100 5,100 13,132 11,100 Expense of Officers 10,924 11,660 11,276 11,588 Directors Fees 440 580 540 600 Collection Expenses 862 789 _ _ Miscellaneous Taxes, etc. 12,722 17,392 14,236 7,320 Interest Paid 2,812 2,703 767 5,313 Amortization of Irrevocable Portion of Insurance Investment 3,333 3,333 3,333 3,333 _______ _______ _________ _________ Total Expenses 96,418 102,308 104,900 109,724 _______ _________ _________ _________ 669,551 1,028,054 2,207,928 1,071,847 Deduct: Provision for Federal Income Taxes 59,382 131,967 420,194 144,394 Less — Refund of Federal Income Taxes Relating to Prior Years 13,486 45,896 321 131,646 _ 420,194 _ 144,394 ______ _______ _______ _______ _______ _________ _______ _______ 623,655 896,408 1,787,734 927,452 Deduct: Amortization of Bond Premiums for the Year Ended December 31, 1942 21,501 _______ _______ _________ _______ Net Profit 602,155 896,408 1,787,734 927,452 ======= ======= ========= ======= 1947 1948 1949 1950 Interest Income: $ $ $ $ Taxable Bonds 15,054 32,750 37,722 28,690 Partially Tax-Exempt Bonds 24,067 23,092 23,108 23,100 Less — Amortization of Premiums 7,516 16,551 7,295 15,797 7,295 15,813 7,295 15,805 ______ ______ ______ ______ Wholly Tax-Exempt Bonds 13,876 16,561 16,588 16,588 Less — Amortization of Premiums 2,510 11,366 1,641 14,920 1,642 14,946 1,642 14,946 ______ ______ ______ ______ Dividends: 847,958 996.955 1,056,579 1,277,353 Net Profit on Security Transactions 1,416,040 824,506 742,671 1,052,416 Income from Insurance Investment 33,417 _ _ _ Miscellaneous Interest [Federal Other Interest _ _ _ _ tax refunds] _ _ _ 885 _________ _________ _________ _________ Total Income 2,340,386 1,884,928 1,867.731 2,390,095 Expenses: Salaries of Officers 68,000 68,250 70,583 71,616 Office Salaries 2,794 4,316 5,859 10,776 Legal and Technical Services 11,123 16,039 11,115 11,609 Expense of Officers 13,036 13,798 13,874 15,570 Directors Fees 560 2,000 3,000 3,100 Collection Expenses _ _ _ _ Miscellaneous Taxes, Etc. 11,628 15,588 16,544 17,782 Interest Paid 8,241 9,449 7,149 3,629 Amortization of Irrevocable Portion of Insurance Investment 2,778 _ _ _ _________ _________ _________ _________ Total Expenses 118,160 129,440 128,124 134,082 _________ _________ _________ _________ 2,222,226 1,755,488 1,739,607 2,256,013 Deduct: Provision for Federal _ Income Taxes 503,919 242,568 228,357 310,518 Less — Refund of Federal Income Taxes Relating to Prior Years _ 503,919 242,568 _ 228,357 1,056 309,462 _______ _________ _______ ________ _______ _________ _______ _________ 1,718,307 1,512,920 1,511,250 1,946,551 Deduct: Amortization of Bond Premiums for the Year Ended December 31, 1942 _ _________ _________ _________ _________ Net Profit 1,718,307 1,512,920 1,511,250 1,946,551 ========= ========= ========= ========= 1943 1944 1945 1946 1947 1948 1949 1950 Finding No. 42 Bartram Brothers Corporation Comparative Statement of Surplus For the Years Ended December 31, 1943-1950 $ $ $ $ $ $ $ $ Balance at January 1 158,626 158,508 452,684 1,638,263 1,963,896 3,080,462 3,917,752 4,642,496 Profit for the year after providing for taxes 602,154 896,408 1,787,734 927,453 1,718,306 1,512,920 1,511,250 1,946,551 _______ _________ _________ _________ _________ _________ _________ _________ 760,780 1,054,916 2,240,418 2,565,716 3,682,202 4,593,382 5,429,002 6,589,047 _______ _________ _________ _________ _________ _________ _________ _________ Dividends Paid: Preferred — 6% 8,220 8,220 8,220 8,220 8,220 8,220 8,220 8,220 Common 594,052 594,012 593,935 593,600 593,520 667,410 778,286 889,445 _______ _________ ________ _________ _________ _________ _________ _________ Balance at 602,272 602,232 602,155 601,820 601,740 675,630 786,506 897,665 _______ _________ _________ _________ _________ _________ _________ _________ December 31 158,508 452,684 1,638,263 1,963,896 3,080,462 3,917,752 4,642,496 5,691,382 ======= ========= ========= ========= ========= ========= ========= =========

43. The fair market value of the common stock of the corporation on December 26, 1950 was $130 per share.

44. The payments of tax and interest referred to herein were received by the named District Directors of Internal Revenue in good faith in the course of their duties.

Conclusions of Law

1. The court has jurisdiction of the parties and of the subject matter of the action.

2. The proper value for gift tax purposes, to be placed upon the common stock of a family corporation is the fair market value of the common stock at the date of the gift.

3. The plaintiffs are entitled to judgment for the portion of the amount of gift tax paid because of valuation of Bartram Brothers common stock at a value in excess of $130 per share with interest as allowed by law.

Discussion

These are four gift tax cases consolidated for trial. The sole issue is the per share value of 2,740 shares of Bartram Bros. Corp. stock on the date of the gifts, December 26, 1950. The gift tax returns valued the stock at a 30% discount from net asset value of the corporation's underlying assets, a securities portfolio, the government assessment at the net asset value of the underlying assets. The corporation is a family holding company of considerable size. The 2,740 shares represented about 2% of the issued and outstanding stock of the company. The corporation is utilized primarily for the benefit of family trusts, whose trustees hold some 60% of its common stock and whose duration is not established, but presumably varies. Most of the individual shareholders, that is, those in the family group, are in the very highest income tax brackets.

The experts' comparisons are not sufficiently like to Bartram to establish a dependable yardstick. The evidence did establish certain elements that would be considered by investors — among them, income, expense, underlying values, probability of early liquidation, breadth of market for the shares, percentage of total shares involved. The opinions of the expert witnesses appear to give too little weight to the excellent portfolio of diversified conservative investments, at small management expense, which was in 1950 and for some years thereafter in the same hands as for many years previously. The corporation's earnings over a five year period might well be taken as a guide to value, and taken alone might justify a valuation equal to net asset value. But uncertainty of ready salability of the shares because of the minority position may well justify a substantial discount to reach fair market value, although a discount of the order of 50% as advocated by the experts appears high.

A buyer would not be confined to a bargain hunting dealer, in view of the demand by small investors for diversification, reflected in the Lehman record, and in view of the number of other Bartram shareholders of great wealth, who would naturally prefer not to have strangers to the family group as minority shareholders. In practice, since the corporation was formed in 1925 no outside sales have occurred, by family or employees.

The defendants make much of Morris' dependence on the unlikelihood of liquidation or distribution of assets in the foreseeable future. The basis of this assumption is not as clear as it might have been had the terms of the trusts been proved, but it appears a reasonable assumption in view of the 25 year history of the corporation and the apparent use of it as an instrument to conserve assets and assure income of the family trusts. The corporation itself was formed under a perpetual charter. Morris had, however, no experience in sale of stock in a family corporation of the size, established history of income, of growth and of reinvestment of capital gains of the Bartram Corporation.

Morrissey's testimony is attacked for failure to analyze the 15 companies used for comparison to determine whether their portfolios and investment policies were comparable to Bartram's, for using a misleading projection of Bartram's net investment income and for ignoring its record of realized and unrealized capital gains. The weight to be given Morrissey's testimony is seriously affected by these defects. Massie's testimony is also of doubtful value without a fuller analysis of the individual examples contained in his two lists, to determine which are more nearly comparable to Bartram in size, portfolio, investment policies and financial history. It may be that the factor of liquidity to which he gives paramount weight is of great importance, but he has failed to give us any reliable scale relating liquidity to price in his examples, upon which we could with any confidence place Bartram.

The most important factors in valuing such a closely held stock in a corporation whose assets are readily marketable are the market value of the underlying assets, its record and prospects of total net earnings and its record and prospect of dividend return. Here the value of the assets per common share is $163.04 on the critical date (December 26, 1950). For the five years ending in 1950 the earnings and dividend record were as follows:

1946 1947 1948 1949 1950

Net investment income per share 3.97 5.12 5.99 6.41 7.75 after preferred dividends ave. 5.85

Net profit per share after 6.20 11.53 10.15 10.14 13.08 preferred dividends ave. 10.22

Dividends per share 4.00 4.00 4.50 5.25 6.00 ave. 4.95

A majority position in the stock, able to control its financial and dividend policies, might well justify a value approaching liquidation value, as of course, would a larger proportionate holding sufficient to force liquidation if desirable. In spite of the excellent record of the corporation, however, the minority position in a closely held corporation not traded in on any market would undoubtedly cause investors generally to seek a discount from liquidating values, and disposal of the number of shares here involved would require some time, effort and expense. It appears probable, however, that a buyer could be found in the family group if not outside, willing to purchase for purposes similar to the existing trusts. A fair valuation would be at a discount of approximately 20%. This results in a price approximately 13 times average earnings for the preceding 5 years or 10 times the earnings for 1950.

It appears to be the Government's contention that since the burden is on plaintiffs, rejection of the experts' valuations requires judgment for defendants. This does not necessarily follow, for there is convincing evidence that a substantial discount should be applied and the percentage arrived at although not testified to by any witness, does not appear excessive on all the factors established by the evidence.

Weighing the opinions of the experts and their weaknesses pointed out above, and the arguments of the government based primarily on liquidating value, our best estimate is that market value per share on December 26, 1950 of the stock subject of gift was $130 per share, and we so find.