
    Blue Ridge Overalls Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 10210.
    Promulgated May 13, 1927.
    Value of property on March 1, 1913, determined.
    
      Peter Peeh, Esq., for the petitioner.
    
      Robert A. Littleton, Esq., for the respondent.
    This is a proceeding for the redetermination of a deficiency in income and profits tax for the year 1919 of $9,381.4?. Only such portion of the deficiency is contested as results from the determination by the Commissioner that petitioner realized a profit of $8,165.80 from the sale of certain real estate in Roanoke, Va. Petitioner denies that it realized this profit and claims that the fair market value of the property on March 1, 1913, was greater than the price for which it was sold in 1919, and that, in the manner and to the extent indicated, the Commissioner committed error.
    
      FINDINGS OF FACT.
    The petitioner is a Virginia corporation engaged in manufacturing overalls at Eoanoke. In 1905 it purchased a lot on the southwest corner of Eoanoke Street and Salem Avenue, Eoanoke, Va., paying therefor $2,800, and in 1907 it erected a building thereon at a cost of $15,000. Thereafter, and prior to March 1, 1913, petitioner found it desirable and necessary to install an electric elevator, change the first floor, and to erect fire escapes, etc., for the proper carrying on of its business, and for such additions expended $7,500.
    At the time of the purchase of the real estate in question property values in Eoanoke were not high, but real estate values increased considerably from 1905 to 1914 due to the construction of the Virginia Eailway Co., which afforded considerable railway terminal facilities, and to the establishment there of other manufacturing enterprises. From 1914 to 1919 real estate values declined. There was little activity in the sales or dealings in real estate in Eoanoke from about 1914 to 1919, both rental and sales conditions being better in 1913 than in 1919. The drop in real estate values in Eoanoke from about 1914 to 1919 and 1920 was due in large measure to the fact of the existence of the World War; practically no war supplies were being manufactured or furnished by Eoanoke enterprises, and due to the ability of skilled and unskilled labor to obtain better pay elsewhere a great number of mechanics and persons engaged in other trades left Eoanoke and many of the young men entered the military service. Salem Avenue was at one time the main business thoroughfare of Eoanoke but subsequent to 1913 ceased to be such, due to the fact that Campbell Avenue and Jefferson Street were opened up and traffic and business, after 1913, largely diverted to Campbell Avenue. In 1916 liquor was voted out of Eoanoke and this fact tended to cause the value of real estate on Salem Avenue to decline, for the reason that a number of business houses were thrown on the market for rent and for sale. At the end of 1919 and early in 1920 when the men were discharged from military service and began to return to Eoanoke, business and property values began to increase and business conditions there in manufacturing and other lines continued to improve. The fair market value on March 1,1913, of the lot with the improvements thereon, situated on Eoanoke Street and Salem Avenue, Eoanoke, Va., was $35,000.
    The petitioner sold the property in 1919 for $31,000. The Commissioner determined that the fair market valué thereof on March 1, 1913, was $25,000; the petitioner claims the value of $35,000 on that date.
   OPINION.

Littleton:

Petitioner introduced the testimony of two witnesses in support of its claim that the property in question had a fair market value on March 1, 1913, of $35,000. The first witness had been actively engaged in the real estate business in Roanoke for forty years. He was thoroughly familiar with real estate market conditions during the period of his experience. He was, also, thoroughly familiar with the property owned by the petitioner, the value of which is here in controversy, as well as other business properties located in Roanoke. He gave it as his opinion that the fair market value of the property in question on March 1, 1913, was between $37,000 and $38,000. The other witness had been actively engaged in the business of buying and selling real estate and in building construction since 1897. He was thoroughly familiar with petitioner’s property and the market value of real estate in Roanoke on March 1, 1913. He gave it as his opinion that the fair market value of the property in question on March 1, 1913, was between $36,000 and $37,500.

Upon the consideration of the testimony of these witnesses and the reasons given by them in support of their opinions of the values, the Board is of the opinion that the fair market value of petitioner’s property on March 1, 1913, was $35,000 as claimed by the petitioner.

Judgment will be entered on 15 days' notice, under Rule 50.  