Opinion
October 9, 1952 —
November 5, 1952.
APPEAL from an order of the county court of La Crosse county: R. V. AHLSTROM, Judge. Affirmed.
For the appellant there were briefs by Hale, Skemp, Nietsch, Hanson Schnurrer and Lees Bunge, all of La Crosse, and oral argument by Quincy H. Hale.
For the respondent there was a brief by the Attorney General and Harold H. Persons, assistant attorney general, and Neil Conway, inheritance tax counsel, and oral argument by Mr. Persons and Mr. Conway.
The decedent, John C. Michel, and the appellant Carl F. Michel were brothers, each of whom owned a substantial number of the shares of stock of La Crosse Breweries, Inc. Until 1936 all of the stock of the corporation, which had formerly been known as the Michel Brewing Company, was owned by the members of the Michel family, two brothers and two sisters, all of whom had acquired it upon the death of their father, Charles Michel.
On July 21, 1944, after some effort had been made by persons outside the family to gain control of the stock of the corporation, an agreement was entered into between John and Carl by the terms of which John agreed to sell to Carl, and Carl agreed to buy John's seventeen hundred shares of common stock. It was provided that the selling price was to be $25 per share to July 15, 1946; $30 per share to July 15, 1947; $35 per share to July 15, 1948; and $40 per share to July 15, 1949.
On September 30, 1947, the two brothers entered into a new buy-and-sell contract by which they terminated and annulled the existing agreement and entered into a new one wherein it is provided that Carl agreed to buy and John to sell the latter's seventeen hundred shares at $40 per share, the sale to be completed prior to September 30, 1953.
John died on December 2, 1948. His will, by the terms of which he left his entire estate to Carl, was admitted to probate and appraisers were appointed. They placed a value of $4 per share upon the stock. The $4 valuation is actually equivalent to $40 since in 1947 the capital structure was changed by a split of ten for one.
It appeared that the appraisers in fixing the value of the stock took into consideration the fact that such value had been placed upon it by the terms of the contract between Carl and John. The county court subsequently held that the appraisers had erred in giving any consideration to the agreement and ordered that the stock be reappraised at a value reflecting its clear market value without regard to, and irrespective of the terms of the contract between John and Carl. The appeal is from this order.
We have recited only such of the facts as we deem necessary to be considered for a determination of the issue presented.
It appears from the contents of a note found in 5 A.L.R.2d 1122, that unless a peculiar factual situation exists so as to make both inapplicable, two rules have been followed in determining the effect of an agreement such as is present here upon the valuation of property made for the purpose of the assessment of an inheritance or estate tax. The so-called "federal rule" appears to be that the contract price determines the value; the so-called "Pennsylvania rule" is that the contract price does not determine value but requires that the appraisers take it into consideration.
Appellant contends that one or the other of the rules must be applied and that, therefore, the court was in error in requiring the appraisers to ignore the contract price.
The case, because of its peculiar facts, does not require the application of either rule. It will be observed that Carl did not buy the stock. He will acquire it, not by purchase under the provisions of the contract, but as a legatee under the terms of the will. Will of Jones, 206 Wis. 482, 240 N.W. 186. The value of his legacy is not affected by the fact that the contract exists. It is not as though the purchaser named in the contract were a stranger whose right to buy the stock would manifestly affect its purchase price and the amount which might come to the estate as a result of its sale. Nor is the situation the same as would have resulted had Carl exercised his right under the contract to demand transfer of the stock to him and thus bring to the estate an amount less than what appears to be its value. In other words, because of the peculiar facts existing, the value of the stock is not affected by the terms of the contract.
The Wisconsin inheritance tax is imposed by the provisions of sec. 72.01, Stats., upon the clear market value of the property transferred, and "is based on the interest to which the living succeeds," Estate of Ogden, 209 Wis. 162, 167, 244 N.W. 571, and the value of the right which he receives, Estate of Levalley, 191 Wis. 356, 210 N.W. 941, Will of Merrill, 212 Wis. 15, 248 N.W. 909. That value is in this case the clear market value of the stock unaffected by the existence of the contract.
By the Court. — Order affirmed.