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January 7, 1952


Appeals, Nos. 158, 159 and 160, March T., 1951, from decree of Orphans' Court of Venango County, April T., 1949, Nos. 14 and 17, in Estate of Ruth Beers Moffett, deceased. Decree affirmed.


J. Villard Frampton, with him James H. Courtney and Frampton & Courtney, for appellants.

Francis J. Gafford, Deputy Attorney General, with him Robert E. Woodside, Attorney General and Milton W. Rosen, for appellee.

Before Drew, C.j., Stern, Stearne, Bell, Ladner and Chidsey, JJ.

Author: Stearne

[ 369 Pa. Page 161]


The appeals are from an appraisement and assessment of transfer inheritance tax under the Act of June 20, 1919, P.L. 521, as amended, 72 PS section 2301 et seq. The tax is imposed upon "the transfer of any property, real or personal, or of any interest therein or income therefrom in trust or otherwise...." Section 2 of the Act, supra, specifies the rates and how the tax shall be imposed, viz.: upon the clear value of the property subject to the tax. The dispute is how the " clear value " of closely held corporate common stock is to be determined, viz: market, book or intrinsic value.

Ruth Beers Moffett, the testatrix, at her death on August 18, 1947, owned 1666 shares of the common capital stock of a corporation, incorporated to hold and manage the estate of Henry I. Beers. The shares of the corporation (of which the present stock was part) were issued to members of the Henry I. Beers family who were beneficiaries under his will. Ruth Beers Moffett, the present decedent, was a beneficiary and an incorporator.

The appraiser for the Commonwealth appraised the 1666 shares of the Henry I. Beers Corporation, common,

[ 369 Pa. Page 162]

    at $50 per share, or $83,300, upon which a tax was assessed (together with other estate assets) at 2%. The Book value per share was stipulated as $58.29. Appellants in support of their contention that the appraisement was excessive and should not have been over $25 per share, offered testimony that after testatrix's death, the executor sold 200 shares in 1947 at $23.50; 35 shares in 1948 at $25 and 833 shares in 1949 at $24.50. These shares were sold to the corporation itself. No shares were issued by the corporation except to members of the Beers family and none are now held by others.

It is argued by appellants that the above sales at $25 per share (highest price actually received) must be accepted as establishing the market value, which therefore constitutes their clear value. There was also testimony concerning earnings and dividends as well as the opinion of expert witnesses that $25, the market price, was the "clear value" of such shares.

The Commonwealth's appraiser testified that in appraising the stock at $50 per share, he did so under the following considerations: "On a basis of a study of the assets in the corporation, the type of corporation, the dividends, the earnings, the type of market for the stock, and other various factors concerned."

As the Act imposes the tax "upon the clear value of the property subject to such tax", (72 PS section 2302, p. 74) we have been required to define " clear value." According to the definition of "value" in Webster's New International Dictionary 2d Ed., Unabridged, it is: "monetary worth of a thing; marketable price; Estimated or assessed worth." "Clear" is therein defined: Free from burden, limitation, etc.; as: Free from charges, etc.; net ; as, clear profit.

"Clear value" of such taxable property is, therefore, its estimated net worth. It is manifest that such net worth cannot, in every case, be measured by either

[ 369 Pa. Page 163]

    market or book value. In some cases, however, in varying circumstances, either market or book value of property may be its net worth. A stock freely sold on the stock exchange might well have its worth established is such market. But where, as here, stock is closely held and represents but a minority interest, and is rarely sold, (and when sold perhaps under necessity or pressing circumstances) such sales do not fairly establish a true market value. Neither do book values, earnings or dividends alone establish such worth. On corporate books a valuable asset may be listed at a nominal figure. On liquidation or sale of corporate assets, such an asset may realize a large price, not adequately reflected in book value. While earnings and dividends play an important part in determining the worth of a stock, yet this alone is not controlling. This depends upon the ...

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