# Buckeye Internatl., Inc. v. Limbach

> Ohio Supreme Court · August 4, 1992 · 1992 Ohio 55

URL: https://www.frixlaw.com/law-library/cases/11147373

## Case

- **Court:** Ohio Supreme Court
- **Decided:** August 4, 1992
- **Citations:** 1992 Ohio 55
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

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Buckeye International, Inc., Appellant, v. Limbach, Tax
Commr. of Ohio, Appellee.
Taxation -- Valuation of taxable property -- APB 16 valuations
are probative and competent evidence -- Taxpayer may
challenge APB 16 valuations -- Notice of appeal to Board
of Tax Appeals -- In resolving questions regarding
effectiveness of a notice of appeal, Supreme Court not
disposed to deny review by a hypertechnical reading of the
notice.
[Cite as Buckeye Internatl., Inc. v. Limbach (1992),
Ohio St.3d .]
(No. 91-1541 -- Submitted May 5, 1992 -- Decided August 5,
1992.)
Appeal from the Board of Tax Appeals, No. 87-D-970.
In December 1979, Worthington Industries, Inc. set in
motion the purchase of Buckeye International, Inc. ("Old
Buckeye"), a manufacturer of steel castings for the railroad
industry and injection-molded plastics for the automotive
industry. Worthington Industries established a wholly owned
subsidiary, Worthington International, Inc. ("International"),
appellant, to purchase Old Buckeye's stock. 733,128 shares
were purchased at $25 per share, giving International a
forty-four percent interest in Old Buckeye. On April 15, 1980,
the boards of directors of International and Old Buckeye agreed
to merge Old Buckeye into International by exchanging 1.5
shares of Worthington Industries common stock for each share of
Old Buckeye. In May 1980, Old Buckeye's shareholders approved
the merger. It became effective, retroactively, on April 20,
1980. Old Buckeye ceased to exist, and International changed
its name to Buckeye International, Inc. ("Buckeye").
In reporting the economic substance of this purchase to
its shareholders, Worthington Industries allocated the purchase
price according to (1970) Accounting Principles Board Opinion
16, in 1 Financial Accounting Standards Board, Accounting
Standards, Original Pronouncements (1982) 242-265 ("APB 16").
Worthington Industries added the cash initially paid for the
shares of stock and the over-the-counter market price of the
shares it issued for Old Buckeye stock to determine the price
it paid for Old Buckeye. Worthington Industries then
determined and added the value of the current and long-term
liabilities that it assumed and allocated this total under APB
16 categories of fixed assets. The fixed assets include real
estate and personal property. Worthington Industries derived
the ratios used to make the allocation from appraisals of Old
Buckeye's property. Old Buckeye had obtained the appraisals in
1979 for financing reasons.
According to Buckeye's outside accountant, who authorized
the signing of the auditor's opinion in Worthington Industries'
1980 annual report, APB 16 merely allocates the purchase price;
it is not designed to determine the fair value of assets.
However, according to this witness, APB 16 normally applies
only to arm's-length transactions between a willing buyer and a
willing seller. Further, this witness believed that
Worthington Industries correctly applied APB 16.
Worthington Industries, in reporting its assets in accord
with APB 16, allocated to its personal property a portion of
the purchase price. Thus, the amount reported for its personal
property was in excess of the historic book value of that
property. Notwithstanding this allocation, Buckeye, the
subsidiary, valued its personal property for the tax years
1982, 1983 and 1984 on the basis of the book values that Old
Buckeye had recorded. The subsidiary failed to account for the
allocated excess. Nor did the subsidiary produce any evidence
of value other than the book values.
On audit, the Tax Commissioner, appellee, added the
allocated excess amount to the book costs. In determining
value, she added (1) the $27,205,229 which represented histori-
cal book cost as listed by Buckeye on its 1982 tax return and
reported on the May 31, 1981 balance sheet attached to the
return, (2) the surplus from the sale and assigned by Buckeye
to personal property on its 1982 return ($9,819,000), and (3)
equipment additions since May 31, 1980 ($8,104,833). She
determined that the total true value for all personal property
was $45,129,062. Next, she calculated ratios, based on the
previously returned, book-cost values, to allocate this amount
to the various categories of equipment and to the taxing
districts containing the property. She also performed these
calculations for the 1983 and 1984 returns.
On appeal, the Board of Tax Appeals ("BTA") found that the
purchase was at arm's length and that Worthington Industries
had properly allocated the purchase price. Accordingly, the
BTA affirmed the commissioner's order.
In affirming, the BTA ignored a double-counting question
posed by Buckeye and declined to rule on several constitutional
questions raised by Buckeye. Further, the BTA did not rule on
Buckeye's claim that the commissioner included exempt property
in making the valuations.
Buckeye's claim of double counting relies upon the
following evidence. In Exhibit 10, it displayed net equipment
additions for 1980 and 1981. It had included this equipment in
its 1982 personal property tax return. These additions are
included in the $37,024,229 reported on its May 31, 1981
balance sheet, which was the starting point for the
commissioner's calculations. Buckeye says that the
commissioner added these same additions to that starting
point. Thus, Buckeye claims that these additions were counted
twice. Furthermore, the agent testified that these additions
were counted for all three years of the audit.
This cause is before this court upon an appeal as of right.

Vorys, Sater, Seymour & Pease, Raymond D. Anderson, Anker
M. Bell and Eric A. Pierce, for appellant.
Lee I. Fisher, Attorney General, and James C. Sauer, for
appellee.

Per Curiam. Two issues are presented for review. We
address them separately.
I
The Allocation Issue
Buckeye argues that APB 16 does not fairly value its
property and that the property should be valued based on its
depreciated book value. The commissioner responds that her
valuation comports with case law.
According to Tele-Media Co. of Addil v. Lindley (1982), 70
Ohio St.2d 284, 24 O.O.3d 367, 436 N.E.2d 1362, syllabus:
"The best evidence of the 'true value in money' of
tangible personal property is the proper allocation of the
purchase price of an actual, recent sale of the property in an
arm's-length transaction. (Conalco, Inc. v. Monroe Cty. Bd. of
Revision [1977], 50 Ohio St.2d 129 [4 O.O.3d 309, 363 N.E.2d
722], approved and followed.)"
Thus, if the sale is arm's-length, actual and recent, and
the purchase price is properly allocated, the BTA may adopt the
allocation as the true value.
Buckeye's witnesses admitted that the transaction was
arm's length. The arm's length nature of the sale was a
precondition for Worthington Industries' application of APB
16. The sale was actual and recent since it occurred one year
prior to the valuation date. Finally, Buckeye admitted that
the allocation was proper since it reported the sale on this
basis to its shareholders in its annual report. Thus, the BTA
reasonably and lawfully valued the property.
However, Buckeye contends that neither we nor the BTA has
approved the application of APB 16 in prior cases. Indeed, the
BTA rejected, until this case, all previous applications of APB
16. However, the BTA did find a proper allocation in this
case, and it has wide latitude to so find in valuation
matters. Snider v. Limbach (1989), 44 Ohio St.3d 200, 202, 542
N.E.2d 647, 649.
It is significant that Buckeye presented no evidence
(other than historic book values) of value to contradict the
allocation it made under APB 16 and which it publicly
represented to its shareholders. This failure is significant
when we consider whether the BTA's decision is supported by the
evidence. Book values may have little relation to current
values. Apparently, Old Buckeye did have appraisals made
shortly before the purchase. Thus, Buckeye presumably could
have produced evidence of the value of the personal property in
question had it chosen to do so.
Buckeye also contends that requiring it, a publicly traded
company, to value its property under APB 16, while privately
held companies may ignore APB 16 and value their property based
on depreciated book value, denies Buckeye of equal protection.
Under Allegheny Pittsburgh Coal Co. v. Cty. Comm. of
Webster Cty. (1989), 488 U.S. 336, 343, 102 L.Ed.2d 688, 697,
109 S.Ct. 633, 637, "[t]he Equal Protection Clause 'applies
only to taxation which in fact bears unequally on persons or
property of the same class,'" quoting Charleston Fed. S. & L.
Assn. v. Alderson (1945), 324 U.S. 182, 190, 89 L.Ed. 857, 863,
65 S.Ct. 624, 629. However, Buckeye presented no evidence to
"in fact" prove this treatment. Thus, Buckeye has not met its
evidentiary burden. Bank One Dayton, N.A. v. Limbach (1990),
50 Ohio St.3d 163, 172, 553 N.E.2d 624, 632. Moreover, we have
not held that Buckeye, or any other taxpayer, is bound by APB
16 valuations. Our holding is simply that the APB 16
valuations are probative and competent evidence. A taxpayer
may challenge such valuations. Snider v. Limbach, supra, at
201-202, 542 N.E.2d at 649. The decision of the BTA would then
be reviewed to determine whether it was reasonable and lawful.
II
The Double-Counting Issue
Buckeye claims that the auditor double counted personal
property additions and included exempt property as a part of
the excess amount allocated to personal property. The
commissioner maintains that Buckeye did not raise this error in
its notice of appeal to the BTA. The commissioner also argues
that Buckeye failed to establish the extent of that double
counting.
Failure to include errors in the notice of appeal to the
BTA results in the BTA's lack of jurisdiction over the errors
and the court's inability to review such errors. Osborne
Brothers Welding Supply, Inc. v. Limbach (1988), 40 Ohio St.3d
175, 178, 532 N.E.2d 739, 742. In response, Buckeye contends
that paragraphs one, six, and seven of its notice of appeal did
notify the BTA of these errors. Paragraph one states:
"(1) The commissioner erred in failing to follow the
general requirement of R.C. 5711.18 that in valuing 'personal
property used in business, the book value thereof less book
depreciation at such time shall be listed, and such depreciated
book value shall be taken as the true value of such property.'"
In Manfredi Motor Transit Co. v. Limbach (1988), 35 Ohio
St.3d 73, 77, 518 N.E.2d 936, 940-941, we concluded that the
theory stated in the notice of appeal was so distinct from the
theory argued in the taxpayer's brief that the taxpayer should
have specifically stated the latter theory in the notice of
appeal. However, in Goodyear Tire & Rubber Co. v. Limbach
(1991), 61 Ohio St.3d 381, 383, 575 N.E.2d 146, 147, we
concluded that the taxpayer could assert an alternative
argument since it specified the commissioner's action that it
questioned, cited the statute under which it objected, and
asserted the treatment it believed the commissioner should have
applied to the income.
In this case, the claim of double counting relates to the
value of the property mentioned in paragraph one of the
notice. The commissioner's auditor admitted that double
counting property would be contrary to statute. We conclude
that Buckeye has raised an alternative argument similar to
Goodyear, rather than a distinct, separate objection as in
Manfredi. In resolving questions regarding the effectiveness
of a notice of appeal, we are not disposed to deny review by a
hypertechnical reading of the notice. Abex Corp. v. Kosydar
(1973), 35 Ohio St.2d 13, 17, 64 O.O.2d 8, 10, 298 N.E.2d 584,
587. Accordingly, we find that Buckeye has raised the issue of
double counting. Furthermore, Buckeye has presented evidence
indicating that the commissioner did double count property
additions. The BTA should not have ignored it. We direct the
BTA to analyze the evidence and decide whether Buckeye has
established a double counting of property and the amount
attributable thereto.
Finally, Buckeye argues that the commissioner included
exempt property in the value.1 Buckeye failed to quantify the
amounts of exempt property allegedly included in the excess
purchase price attributable to its property, and we allow that
portion of the BTA decision to stand.
Accordingly, we affirm the portion of the BTA's decision
that finds the allocated purchase price to be the value of the
personal property and remand this matter to the BTA for it to
determine whether the commissioner double counted personal
property and the consequence thereof.
Decision affirmed in part,
reversed in part
and cause remanded.
Moyer, C.J., Sweeney, Holmes, Douglas, H. Brown and
Resnick, JJ., concur.
Wright, J., concurs in judgment only.
FOOTNOTES
1 Buckeye also asserted a due process violation but did
not brief that argument.

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