Copland v. Department of Taxation

Brown, Fatrchted, and Gordon, JJ.

(dissenting). We do not differ in any respect from the statement of the law under the heading “Scope of Review of Agency Finding” in the opinion of the court written by Mr. Justice Currie. Our *562 difference lies solely in the application to the evidence in the record before us.

In our view the record presents a conflict in evidence as to the value of each taxpayer’s interest in the partnership, or ultimately the new corporation, after the reorganization. On the one hand the value found by the board of tax appeals is supported by the informed judgment of the so-called Thomson group and the taxpayers themselves, demonstrated by their acts and statements in 1947 and 1948. On the other hand, the generalized, and no doubt statistically valid, rules on which Mr. Kimball based his opinion would support a different finding. The latter, however, are not, in our view, conclusive. Putting it in the terms used in the majority opinion, these rules and Mr. Kimball’s opinion derived therefrom do not render reliance upon the contemporaneous judgments of the parties unreasonable.

There is a measure of sympathy directed toward taxpayers because they held a minority interest. Perhaps they were reluctant, as suggested by the testimony of Mr. Thomson, to have the gain in value of their interest in the old corporation recognized for tax purposes in 1947. Such sympathy, however, should be wholly immaterial in determining from the evidence the value of their interest and resulting-gain.

H. B. Thomson, apparently the leader of the group of six Thomsons, all related, who purchased a three-quarter interest in the old corporation in 1947, had been in the Coca-Cola business all his life. From 1923 to 1935 he had been general manager of Western Coca-Cola Bottling Company, the grantor of the franchise involved. He had operated and been interested in other Coca-Cola distributing companies. His group had just sold a Coca-Cola bottling company in Illinois. The Madison company served a larger population and in Thomson’s opinion had eventually a greater possibility than the territory which they had sold. He and his associates *563 paid $1,050,000 for the three-quarter interest. It is true that this was a controlling interest although the largest individual holding was only about 31 percent and Mrs. Copland, one of the taxpayers here, was a sister of at least one member of the Thomson group.

Mr. and Mrs. Copland, the taxpayers, reported their gain on their United States income-tax returns for 1947, each indicating the value of the interest received as $175,000, the value found in this proceeding by the state board of tax appeals. Any overstatement of the value was indeed costly. Mr. Copland paid a federal income tax of $42,168.41, his other income being $5,544.33, and Mrs. Copland a tax of $41,497.17, her other income being $1,644.33. If the factor of control weakens the inference from the price paid for three quarters of the corporation that the value of the remaining quarter was $350,000, the fact that the taxpayers reported that value on their federal returns strongly supports it.

Besides these unequivocal contemporaneous acts relied upon by the board of tax appeals, there were statements made in the course of the corporate proceedings and participated in by taxpayers attesting the total value of the property involved. In addition a Mr. Festersen, a certified public accountant from Omaha, who specializes in Coca-Cola bottling-company work on a national basis, had prepared a statement for the new corporation as of December 1, 1947. His certificate that the balance sheet, which included valuation of the Coca-Cola franchise at $1,031,055.77, fairly reflected the financial condition of the corporation was contained in a letter to the board of directors which also stated: “On or about August 20, 1947, 75 percent of the stock of the Madison Coca-Cola Bottling Company was sold for a cash price of $1,050,000; thus establishing a value for the entire corporation of $1,400,000.”

The taxpayers did not testify before the board that they had been mistaken in reporting the value of their interests *564 in the 1947 federal returns, nor did they suggest that they had unwillingly reported such values because of pressure from the Thomson group.

Mr. Copland, who had been the managing officer of the old corporation since 1929, testified as follows:

“Q. Didn’t you think at that time [when the new corporation was organized] that the net worth of the partnership was worth that amount? $1,400,000? A. I presume so.”

Mr. Thomson testified with reference to his purchase of the interest in the Madison company:

“When we sold that [Springfield] we took that money and bought Madison and we considered that more or less of an exchange, Madison having a larger population and eventually greater possibility than the territory we sold. Q. You considered Madison would have future possible value? A. On account of the greater population we considered it had been a good proposition. I had been in the Coca-Cola business all my life. I had seen it grow all through the years. Unfortunately we bought it at the peak and it has not developed since as we had anticipated. I will admit' it was a bad purchase. I am mighty sorry I hadn’t bought listed securities on the New York stock exchange.”

Our review of the evidence satisfies us that the board’s findings of value and gain were sufficiently supported and should have been sustained.