Hitchcock v. Commissioner

*275OPINION.

The testimony presented in this proceeding is in the form of depositions taken at Pittsburgh, Pa. At the taking of such depositions the Commissioner objected to testimony given by officers of the Glass Company concerning the value of the patents to the Glass Company and their opinions as to the value of the leasing contract to the petitioner. Like objection was made by the Commissioner to the testimony concerning the amounts of royalty payments received by the petitioner for years subsequent to 1913. All of this evidence, although not to be considered as determinative of the March 1, 1913, value of the leasing contract is, under the rule of Dwight & Lloyd Sintering Co., 1 B. T. A. 179, admissible as corroborative of the values claimed by the petitioner and the offer made by the Glass Company in 1912;

The record of this appeal is replete with evidence which convinces us that the petitioner’s patents cover a mechanical apparatus and process which was revolutionary in the plate glass industry; that they are basic in character; and that immediately upon their completion they had a value far in excess of any amount that the petitioner has, or ever will realize, from their use. The, true value of the patents, however, is not here in issue. The petitioner sold the right to use the patents during their entire life under the terms of written leasing agreements and, therefore, the capital value to him is repre*276sented by the value of the leasing contract and not by the patents themselves. It is fully established by the testimony that in December, 1912, the lessee placed a value upon that contract of not less than $100,000 and that the petitioner placed a value thereon in excess of that amount. The best evidence of value of an article at a given time and for which there is no established market is the amount which a prospective buyer may be willing to pay and an amount which a willing seller may choose to accept. The testimony establishes that such amount was not less than $100,000 in December, 1912. This value did not decrease between December, 1912, and March 1, 1913. We are, therefore, constrained to hold that the Commissioner’s computation of March 1, 1913, value, based upon the minimum annual payments provided for by the leasing contract, has been overcome by competent evidence, and we therefore find that, for the purpose of the exhaustion deduction provided for by the Revenue Acts of 1918 and 1921, the value of the petitioner’s leasing-contract on March 1, 1913, was the sum of $100,000, and that for the years here under consideration the petitioner should be allowed a deduction for exhaustion of such value on the basis of the number of years and months between March 1, 1913, and the date of the expiration of the latest patent, March 10, 1931.

Order of redetermination will he entered on 15 days' notice, under Rule 50.