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March 31, 1978


The opinion of the court was delivered by: COHILL, JR.


 In this action plaintiff, the Estate of William E. Newcomer, Deceased, William A. Newcomer, Executor, seeks refund of federal estate taxes paid in accordance with an Internal Revenue Service ("IRS") review. The sole issue is to determine the fair market value of 45,955 shares of common stock of Newcomer Products, Inc. ("NPI") on July 6, 1967, the date of death of William E. Newcomer (the "decedent"). This question is one of fact. See, e.g., Diefenthal v. United States, 343 F. Supp. 1208, 1210 (E.D.La. 1972). Jurisdiction is provided by 28 U.S.C. § 1346(a)(1).

 Applicable Law

 § 2031 of the Internal Revenue Code of 1954, 26 U.S.C. § 2031, defines the value of the gross estate of the decedent to include the value of all intangible personal property owned by the decedent at the time of his death. For unlisted stock, in the absence of sales thereof, subsection (b) prescribes that the valuation of such stock shall be determined, inter alia, by reference to stock of similar corporations traded on an exchange.

 Treas.Reg. § 20.2031-2 (26 C.F.R. § 20.2031) provides that the value of stock is the fair market value per share on the applicable valuation date. Subsection (b) thereof fixes the fair market value based on selling prices, and subsection (d) thereof defines the fair market value based on incomplete selling prices or bid and asked prices. The fair market value is "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." Treas.Reg. § 20.2031-1(b).

 Treas.Reg. § 20.2031-2(f) states that, where selling prices and bona fide bid and asked prices are unavailable, the fair market value of stock is to be determined by taking into consideration the company's net worth, prospective earning power and other relevant factors, including:


"The good will of the business; the economic outlook in the particular industry; the company's position in the industry and its management; the degree of control of the business represented by the block of stock to be valued; and the values of securities of corporations engaged in the same or similar lines of business which are listed on a stock exchange."

 In addition, the IRS has outlined factors to consider in valuing stock of closely-held corporations. § 4 ofRev.Rul. 59-60, 1959-1 C.B. 237 provides:


"Sec. 4. Factors to Consider.


It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the fair market value, should be considered. The following factors, although not all-conclusive are fundamental and require careful analysis in each case:


The nature of the business and the history of the enterprise from its inception.


The economic outlook in general and the condition and outlook of the specific industry in particular.


The book value of the stock and the financial condition of the business.


The earning capacity of the company.


The dividend-paying capacity.


Whether or not the enterprise has goodwill or other intangible value.


Sales of the stock and the size of the block of stock to be valued.


The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter."

 Evidence of events subsequent to the date of a decedent's death is irrelevant to the valuation of decedent's property at the time of death. Ithaca Trust Co. v. United States, 279 U.S. 151, 155, 73 L. Ed. 647, 49 S. Ct. 291 (1929); Walter v. United States, 341 F.2d 182, 185 (6th Cir. 1965). Nor, by the reasoning of Ithaca Trust, is such evidence probative of the correctness of an expert's valuation procedure. Although at trial we allowed plaintiff to introduce evidence of a sale shortly after decedent's death, we did not consider any evidence as to post-death events for either of the above purposes.

 Findings of Fact

 After a trial without a jury, the court, pursuant to Fed.R.Civ.P. 52(a), makes the following findings of fact. We adopt in part the statements of facts submitted by the parties.

 On October 3, 1968, the plaintiff filed a Federal Estate Tax Return listing, as part of the gross estate, 45,955 shares of stock in NPI (42.4% of the shares outstanding) owned by the decedent at his death. As reported on the return, the stock was valued at $7.50 per share, for a total value of $344,662.50. The Estate Tax Return was then examined by the IRS, which determined the value of the stock to be $32.50 per share, for a total value of $1,493,537.50. Due to this adjustment, an estate tax deficiency in the amount of $413,167.81 was assessed against the plaintiff. Under § 6166 of the Internal Revenue Code of 1954, the plaintiff qualified to make deferred tax payments of this deficiency. On October 3, 1972, the plaintiff filed a claim for refund in the amount of $194,470.93, being the deferred estate tax payments made to that date. The plaintiff alleges that, on October 6, 1976, the final deferred payment was made and so, as of that date, the entire assessment of $423,591.58 has been satisfied. On April 9, 1973, the plaintiff waived statutory notification of disallowance of the claim for refund and thereafter filed this tax refund suit.

 NPI is a Pennsylvania corporation established in 1948. In its early years the company manufactured both cemented carbide cutting inserts and blanks and the tools holding such inserts and blanks. In the 1950's NPI ceased production of the tools themselves and concentrated its efforts on the cemented carbide cutting blanks and inserts.

 The manufacturing operation was conducted at a special use facility located in Latrobe, Pennsylvania, the present plant being completed in 1964. The majority of capital equipment used in such facility was specifically designed and made for the production of cemented carbide cutting inserts.

 The competitive advantages NPI enjoyed in the industry were 1) the reputation of William E. Newcomer as a founder and innovator in the cemented carbide industry, and 2) the method, once a trade secret, that William E. Newcomer devised to recover tungsten scrap for reprocessing into new cutting edges, thereby reducing raw material costs. This advantage had diminished in the mid-1960's as other competitors began to utilize that process or similar processes to reclaim scrap tungsten as a low cost material for manufacturing new inserts or blanks. Approximately sixty percent of NPI's products were sold to the steel industry, with the balance going to railroad, auto, aircraft and other metal working industries.

  At the time of William E. Newcomer's death, NPI sold its products exclusively through the Greenleaf Corporation, an unaffiliated, independent sales organization. The sales arrangement, which, by contract, was to continue until August 1, 1969, gave Greenleaf a set percentage of gross sales of NPI products. Greenleaf used sub-distributors to market NPI products, and toward the end of the relationship Greenleaf restricted such sub-distributors for one year after a termination of the Greenleaf sub-distributor relationship from dealing in cemented carbide products other than those offered by Greenleaf. Thus, a termination of Greenleaf by NPI would result in a one year separation of NPI from its former Greenleaf sub-distributors, which would be detrimental to such a relationship. Prior to the decedent's death, the relationship between the decedent and Greenleaf became strained, and it appeared that the marketing contract would not be renewed when it expired. During the time Greenleaf acted as sole sales agent for NPI, Greenleaf began its own tool holder manufacturing, and it has since acquired a competing cemented carbide cutting insert and blank manufacturing company. Greenleaf Corporation was owned by Walter J. Greenleaf, Sr. Greenleaf family members and Greenleaf Corporation owned 15,546 shares of NPI common stock (14.3%) as of the date of William E. Newcomer's death. Although NPI's earnings were variable from 1954 through 1967, earnings in the 1960's showed a marked improvement. The Viet Nam war and NASA space program stimulated the steel, aircraft and auto industries, which are the principle users of NPI's products. The following chart shows NPI's improving financial position: YEAR ENDED SALES PROFITS AFTER EARNINGS PER SHARE BOOK VALUE MARCH 31 TAXES (108,300 shares) PER SHARE 1963 $1,538,555 $80,421 $0.74 $ 4.86 1964 1,883,243 118,776 1.10 5.49 1965 2,400,670 210,143 1.94 7.47 1966 3,175,866 379,503 3.50 10.82 1967 4,208,573 529,186 4.87 15.40


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