Dougherty v. Commissioner

*1232 LOVE: This is a proceeding for the redetermination of a deficiency in estate tax in the amount of $1,158.06.

At the hearing the Commissioner, on request, was granted leave to file an amended answer, alleging a valuation of the interest of the estate of Ann L. Keenan in C. W. Keenan, Inc., at date of her death, of $87,000, in lieu of the valuation of $67,540 used by the Commissioner in his original determination of deficiency.

In his petition the petitioner complained of action on the part of the Commissioner, as follows:

(1) The raising of the valuation of the interest of the estate in C. W. Keenan, Inc., from $43,375 to $67,540, which last amount was raised by amendment to $87,000.

(2) The reduction of allowance for funeral expenses from $7,462 to $1,212.

At the hearing the Commissioner conceded error with reference to item (2); hence the same is eliminated from consideration.

FINDINGS OF FACT.

The petitioner is the administrator of the estate of Ann L. Keenan, who, prior to her death, resided in Kings County, New York, and who died November 29, 1922. *2016 Her estate consisted in part of the ownership of 125 shares out of a total of 250 shares of stock in the corporation "C. W. Keenan, Inc."

The business conducted by C. W. Keenan, Inc., is a retail paint store, dealing in various makes and brands of paint and painters' supplies. The business was founded by C. W. Keenan many years ago. In 1907 C. W. Keenan died, and his estate then passed to his two sisters, Mrs. Dougherty and Miss Ann L. Keenan, in equal shares. Mrs. Dougherty had two sons, Frank A. Dougherty and Joseph B. Dougherty. These two sons of Mrs. Dougherty took charge of the business and ran it for about two years as a partnership, and then in 1909 they formed a corporation of $25,000 capital stock, in 250 shares, 125 shares being issued to each of the two sisters.

When the Dougherty boys took charge of the business they found it in a very badly run-down condition, the building being antiquated, with no modern devices for display purposes, and no modern conveniences *1233 to meet demands of employees or patrons. They assumed the task of building up the business, accepted very meager salaries for several years ( $40 per week), carried all net profits to the*2017 surplus account, and from year to year improved the appearance as well as conveniences of the store, and, by close attention to business, by 1918 had succeeded in building up a prosperous business.

No dividends were paid by the corporation during the five years 1918 to 1922, inclusive.

The following tabulations reflect the scope and trend of the business of C. W. Keenan, Inc., for the five years 1918 to 1922, inclusive:

*2018 In 1920, the corporation expended $7,623.05 in installing a new elevator and heating plant, and charged the same to expense.

The value of the estate's interest in C. W. Keenan, Inc., in 1922 was $87,000.

The deficiency will be redetermined on 15 days' notice, under Rule 50.

TRAMMELL dissents.