
    No. 688
    TAX COMMISSION v. JONES, Admr.
    No. 19241.
    Supreme Court
    On motion to certify. Dock.
    July 6, 1925;
    3 Abs. 435.
    630. INHERITANCE TAXES—In absence of a known market value, how is “actual market value” of closed and unlisted shares of stock, to be determined?
    1277. WORDS & PHRASES—What is meaning of “actual market value” under 5341 GC?
   Arthur Jones died intestate on Dec. 14, 1921 and Thomas Jones, a brother, was appointed administrator by the Probate Court. Jones, the administrator, thereafter filed his petition in the Cuyahoga Probate Court asking for a determination of the inheritance tax due the State from those entitled to succeed to the property of the said Arthur Jones.

The auditor of the county, in compliance with 5341 GC., was ordered to appraise and fix the actual market value of the estate of Arthur Jones which consisted principally of 1200 shares of capital stock of the W. M. Pat-tison Co. The auditor found the value to be $463,500. Exceptions were filed to this report and on hearing in the Probate Court, the value of the stock was fixed at $269,868.

Proceedings were appealed to the Cuyahoga Common Pleas where it was conceded that the Pattison Co. was a close corporation, its shares of stock not being listed on any stock market, and that no sale of stock had taken place for many years before or since the death of Jones. The Common Pleas adopted the value fixed by the auditor and rendered judgment in favor of the Tax Commission reversing the Probate Court. The Court of Appeals reversed the judgment of the Common Pleas and affirmed that of the Probate Court in favor of Jones and the heirs.

The case is taken to the Supreme Court, where it is contended that the phrase “actual market value” as used in 5341 GC., should be given the construction that in the absence of an open and notorious market, the net worth of the assets of the corporation, after making due allowances for depreciation and adding thereto the value of the good will, represents the actual market value of shares of stock having no known market value. It is claimed that to permit any other construction would be to open the door to excessive or low valuations and even perhaps to fraudulent assessments.

Attorneys—Edward C. Stanton, and Guy R. Wheeler, Asst. Pros. Atty., for Tax Commission; Herrick, Hopkins, Stockwell & Benesch for Jones; all of Cleveland.

It is further contended, that affidavits of a statistician setting forth a comparison of the earnings of the Pattison Co. with the earnings of other corporations having a known market value as showing probable market value of the Pattison Company’s stock, was unfair and unjust comparison. It is alleged that a comparison of a closed corporation to other corporations does not take into consideration the character of management, conditions of stock, ability and extent of a market for corporate products etc.

The Commission contends that the Legislature intended “actual market value” to be synonymous to “actual cash value,” and under this interpretation, an appraisal of closely held stock in a corporation with a large capitalization is no different from the assessment of a business with large assets owned by an individual. It would he impossible, in order to ascertain the assets of the individual business to compare its inventory with any other thing. It is claimed that the meaning of “actual market value” in absence of a known market value, is the value .of the corporate assets.  