Appeal, No. 186, Jan. T., 1960, from decree of Orphans' Court of Berks County, No. 47816, in re estate of Mary Whitner Mercer, deceased. Decree affirmed.
George Craven, with him Kenneth W. Gemmill, Henry M. Koch, and Barnes, Dechert, Price, Myers and Rhoads, and McGavin, DeSantis & Koch, for appellants.
Ralph S. Snyder, Deputy Attorney General, with him John D. Rively, Assistant Attorney General, and Anne X. Alpern, Attorney General, for Commonwealth, appellee.
Before Jones, C.j., Bell, Musmanno, Jones, Cohen, Bok and Eagen, JJ.
OPINION BY MR. JUSTICE COHEN.
Appellants, executors of the Estate of Mary Whitner Mercer, complain of a decree of the Orphans' Court of Berks County which dismissed their appeal from the transfer inheritance tax appraisement of 3% non-cumulative second preferred stock belonging to the decedent at its par value of $100 a share.
The Act of June 20, 1919, P.L. 521, as amended, 72 PS § 2301 et seq., imposes an inheritance tax upon the transfer of property by will and provides "All taxes imposed by this Act shall be imposed upon the clear value of the property subject to the tax...."
Appellants contend that the value of the 3% non-cumulative second preferred stock of this closely held corporation, for the purpose of imposing the Pennsylvania Transfer Inheritance Tax, is the market value of the stock. At the trial they produced three witnesses with substantial background in financial matters who testified that, in their opinions, the value of the stock was approximately 25% to 40% less than the value determined by the Commonwealth.
The Commonwealth's testimony pointed out that in 1955 in a recapitalization of the common stock there was issued $700,000 worth of 3% non-cumulative second preferred non-voting stock with a par value of $100 a share. That this recapitalization replaced the equity which the common shareholders had in the capital and surplus of the company and, along with the redistribution of the 6% non-cumulative first preferred and the new common stock of the company, represented a reallocation of the capital and surplus of the company.
Further, the Commonwealth's testimony showed that 4,142 shares of 6% preferred stock at $100 par, and 7,000 shares of the aforementioned 3% non-cumulative second preferred stock were issued, but that only 100 shares of common stock were issued; that the corporation had assets on January 31, 1958 of over $2,052,774.47 and liabilities as of the same date of only $278,362.49; that the average earnings five years prior to the date of decedent's death were $117,243.51, and that ...