Perfex Corp. v. Commissioner

PERFEX CORPORATION (FORMERLY RACINE RADIATOR COMPANY), PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Perfex Corp. v. Commissioner Docket No. 44581. United States Board of Tax Appeals 27 B.T.A. 120; 1932 BTA LEXIS 1123; November 23, 1932, Promulgated *1123 Certain individuals and corporations agreed among themselves to cause the petitioner corporation to be organized and to have transferred to it the assets of another company, which was in receivership. The assets were sold at a judicial sale to one who purported to act on behalf of the corporation to be formed and the assets were transferred by the receiver directly to the petitioner. The petitioner ratified this action. Held, that the petitioner has not overcome the presumption in favor of the correctness of the respondent's determination that the sale was direct to the petitioner and that the basis for depreciation in petitioner's hands is the cost of such assets at such judicial sale. Held, further, that even if petitioner were correct in its contention that the property was sold by the receiver to the individuals and corporations and was by them transferred to petitioner in exchange for stock, and that the basis for depreciation is to be determined by the value of the assets at the date they were transferred to the petitioner, the respondent's determination could not be disturbed, since there is insufficient proof to overcome the presumption in favor of the correctness*1124 of of the basis determined by him, which was based upon the selling price of the property at the judicial sale. Frederic Sammond, Esq., and Thomas A. McCormack, Esq., for the petitioner. W. Frank Gibbs, Esq., for the respondent. MCMAHON *121 This is a proceeding for the redetermination of an asserted deficiency in income tax for the year 1925 in the amount of $3,010.65. It is alleged that the respondent erred (1) in allowing as a deduction for depreciation upon fixed assets only the amount $13,465.60 instead of the amount of $26,637.27 claimed by petitioner on its return, and (2) in failing to allow as a deduction from gross income in the year 1925 the net loss of the petitioner in 1924 in the amount of $2,728.61. FINDINGS OF FACT. The petitioner is a Wisconsin corporation, with its principal office at Milwaukee. Its name was changed from "Racine Radiator Company" to "Perfex Corporation" on October 10, 1927. In 1923 and prior thereto there existed in Racine, Wisconsin, a corporation known as Perfex Radiator Company, which was engaged in the manufacture of automobile radiators. About 1920, its affairs were placed in the hands*1125 of a trustee for creditors, and in 1923, it was thrown into receivership in the United States District Court for the Eastern District of Wisconsin. Willis E. Keats was appointed receiver by that court on February 8, 1923. He continued to operate the business, but at a loss. Keats requested the court to appoint appraisers to appraise the properties of the Perfex Radiator Company and thereupon the court appointed as appraisers William H. Gaukle, Francis O. Allen and Edward Kelley, three men who had had experience as appraisers and who had theretofore worked together on appraisals. An appraisal was made by these appraisers and was filed with the court. The summary of such appraisal is as follows: Item Amount Punching machinery $58,430 Production room 12,490 Tool room 10,572 Transmission 2,100 Small tools and shop fixtures 5,715 Dies, templets, etc 21,115 Office furniture and fixtures 3,539 Material in warehouse 3,055 Miscellaneous $1,788 Stock on hand 36,500 Junk [200] Factory real estate 96,000 Cottage 4,000 Patents and drawings 100,000 Total 355,504 *122 The figure $355,504 represents the appraised value of the property as of*1126 February 9, 1923. The cottage listed in the appraisal at $4,000 was not included in the property subsequently sold at the receiver's sale on April 21, 1923. Early in April 1923, Keats obtained an order from the court for the sale of such property at public auction. Keats discounted the appraisal value, he and his attorney informed the court that the property was worth $175,000 and the court set that figure as the minimum selling price. The property was advertised and on the day of the attempted sale the minimum price was announced, but no bids were received. Thereupon the court issued an order post-poning the sale until April 21, 1923, but no minimum selling price was fixed. About April 7, 1923, Daniel T. MacLeod, an engineer who had been seeking an opportunity for investment, was informed of the business of the Perfex Radiator Corporation by E. M. Alexander, an attorney at Milwaukee. Thereafter about April 19, 1923, MacLeod met F. M. Young, who was an employee of the Perfex Radiator Corporation prior to the receivership and who knew the business, and they discussed buying the plant. The next day MacLeod and Young met Clark S. Judd and David J. Evans, representatives respectively*1127 of the American Brass Company and the National Lead Company, which were creditors of the Perfex Radiator Company. This group entered into a general discussion of the possibility of carrying on the business. They all agreed orally to meet in Racine the morning of the sale and reach final agreements or make arrangements for bidding for the property. Thereafter a conference was had with representatives of the Manufacturers National Bank of Racine, Wisconsin, and, on the morning of April 21, 1923, the American Brass Company and National Lead Company as parties of the first part, and Daniel T. MacLeod and Young, as parties of the second part, entered into an agreement which provides in part as follows: Whereas, the parties of the first part are creditors in large amounts of the Perfex Radiator Company, a corporation of Racine, Wisconsin, which is now in the hands of a receiver appointed by the United States District Court for the Eastern District of Wisconsin, and its assets about to be sold under order of said Court and the parties of the first part desire to make certain that a sum of money, reasonable in amount, shall be bid for the purchase of the assets of the Perfex Radiator*1128 Company at the time they are offered for sale and to that end are disposed to lend financial assistance to the parties of the second part as prospective purchasers at the aforementioned sale, Now therefore, in consideration of one dollar ($1.00) in hand paid by the parties of the second part to the parties of the first part, the receipt of which is hereby acknowledged and confessed and in consideration of the execution of these presents: It is hereby mutually agreed that the parties to this instrument shall deposit with the Manufacturers National Bank of Racine, Wisconsin, on or *123 before twelve o'clock noon on the 21st day of April, 1923, for the uses and purposes hereinafter set forth, the following sums of money: - American Brass Company $56,666.67 National Lead Company 28,333.33 D. T. MacLeod 30,000.00 F. M. Young 10,000.00 which said parties hereby severally promise and agree to pay as hereinbefore set forth. It is mutually agreed that the Manufacturers National Bank of Racine, Wisconsin, shall hold the said one hundred twenty-five thousand dollars ($125,000.00) in escrow and in event that D. T. MacLeod shall bid or cause to be bid for*1129 the assets of the Perfex Radiator Company a sum not less than one hundred twenty-five thousand dollars ($125,000.00), said Manufacturers National Bank of Racine, Wisconsin, shall upon application of the said D. T. MacLeod pay over to Willis E. Keats, receiver of Perfex Radiator Company, the sum of twenty-five thousand dollars ($25,000.00) or such smaller sum as may be required by said receiver on account of the bid made by said D. T. MacLeod for the purchase of said assets, and upon confirmation of the sale for the amount of such bid said bank shall pay over to the receiver upon application of said D. T. MacLeod the balance of the funds deposited with said bank under this agreement, which said sum so to be deposited with the receiver is to be refunded to the said Manufacturers National Bank of Racine, Wisconsin, if the sale at the amount of such bid be not confirmed by the court. It is further agreed that if the highest bid submitted to the Receiver by or through D. T. MacLeod shall not be the highest bid received by the receiver for the purchase of said property, or if the court shall refuse to confirm the sale of the property for the amount bid therefor by or through said D. T. *1130 MacLeod, then and in that event the one hundred twenty-five thousand dollars ($125,000.00) so deposited with the Manufacturers National Bank of Racine, Wisconsin, under and pursuant to the terms of this agreement, shall within five days (5) after the decision of the court in relation to the confirmation of the sale be by said Manufacturers National Bank of Racine, Wisconsin, returned to the several parties hereto in the amount that each shall have respectively deposited with the said Manufacturers National Bank of Racine, Wisconsin, under the terms of this agreement. It is further mutually agreed that in event the bid of the said D. T. MacLeod for said property be accepted by the Receiver and confirmed by the court, then and in that event, said Parties of the Second Part shall immediately cause a corporation to be organized under the laws of the State of Wisconsin, to be known as Perfex Radiator Corporation, or such other name as may be agreed upon between the Parties of the Second Part, and shall cause the property purchased from the receiver to be transferred to such corporation. Such corporation so to be organized shall have a Capital Stock of Two Thousand Shares (2,000) of*1131 Common Stock of no par value per share, and Three Hundred Fifty Shares (350) of seven per cent (7%) Preferred Stock of the par value of one hundred dollars ($100.00) per share; that immediately upon the completion of the organization of said corporation, said Parties of the Second Part shall cause said Three hundred Fifty (350) Shares of Preferred Stock to be issued to the Parties of the First Part, or to person or persons by them designated, and shall also cause a mortgage, to be executed by said corporation covering the real estate and buildings purchased from the said Receiver, in the principal sum of fifty thousand dollars ($50,000.00) to mature on or before five years (5) from *124 the date thereof with interest at the rate of six per cent (6%) payable semi-annually, said mortgage to be payable to the said Parties of the First Part as their interests may appear; the mortgagor shall be privileged by the terms of said mortgage to make payments of one thousand dollars ($1000.00) or any multiple thereof upon any interest paying date. It is mutually agreed that if the sale of the said assets of the Perfex Radiator Company for the amount of the bid to be hereafter made by*1132 said D. T. MacLeod shall be confirmed by the Court, then and in that event, title to the property so sold shall be transferred by the said Receiver directly to the corporation to be organized as hereinbefore set forth, but if the Parties of the Second Part shall fail to arrange to have title so transferred direct to said corporation as hereinbefore provided, then and in that event the Parties of the Second Part shall cause title to said property to be transferred to the Manufacturers National Bank of Racine, Wisconsin, who shall upon application of the Parties of the Second Part at any time within thirty days (30) from the date hereof transfer the said property to a corporation to be organized in accordance with the plan hereinbefore set forth and in the event said Parties of the Second Part shall fail within thirty days (30) to make application for transfer of the property to such corporation as hereinbefore set forth, then and in that event said Manufacturers National Bank of Racine Wisconsin, shall cause the property to be transferred to the Parties of the First Part, two thirds to American Brass Company and one third to National Lead Company upon payment by first parties of the*1133 sum of $35,200.00 which said sum shall be forthwith paid over by said Manufacturers National Bank of Racine, Wisconsin, to the parties of the second part, three fourths to D. T. MacLeod and one fourth to F. M. Young. * * * The money was deposited with the escrow agent in accordance with the above agreement and at the receiver's sale on April 21, 1923, the property was sold to the highest bidder, E. M. Alexander, who did the bidding at the sale upon the request and under the personal direction of MacLeod. There were three bidders at the sale. One of them made only one bid of $46,000, which was not acceptable to the receiver. The bidding of Alexander and the other competitor started at between $85,000 and $100,000. On April 24, 1923, this sale was confirmed by the court; and Keats, the receiver, was authorized to transfer to E. M. Alexander, or to the party or parties to be designated by him, all the property of the Perfex Radiator Company, including the accounts receivable, provided the grantee paid the sum of $119,500 and assumed all outstanding contracts for the manufacture and sale of products, together with the receiver's liabilities for merchandise purchased, amounting*1134 to $13,467.76. On April 21, 1923, after the sale, Judd, Evans, MacLeod and Young went to Alexander's office and began drawing papers with the purpose of organizing the petitioner herein. They entered into articles of incorporation that evening. These articles were filed in the office of the Secretary of State of Wisconsin on April 23, 1923. They were signed by Daniel T. MacLeod, Fred M. Young, and Errett M. Alexander. These articles provide in part that the capital stock *125 of the corporation shall consist of 2,000 shares of common stock of no par value and 350 shares of preferred stock of $100 par value, preferred as to a cumulative dividend of 7 per cent payable in equal semiannual installments and also as to assets; that the preferred shares are callable upon 30 days notice; that no amendment to the articles of association relating to the preferred stock can be made unless adopted by a three-fourths vote of the holders of all of the outstanding stock, preferred and common, and that with this exception the voting power shall be exclusively in the common stock. On April 25, 1923, the Secretary of State of the State of Wisconsin issued a certificate stating that*1135 a certificate had been filed with his department to the effect that the articles of incorporation were recorded in the office of the register of deeds of Racine County, Wisconsin, on April 24, 1923, and that: THEREFORE, the State of Wisconsin does hereby grant unto the said corporation the powers and privileges conferred by Chapter 86 of the Wisconsin Statutes for the purposes above stated and in accordance with the said Articles of Association. The minutes of the meeting of the subscribers to the capital stock of the petitioner, held on April 26, 1923, read in part as follows: WHEREAS, this corporation was organized primarily for the purpose of acquiring from Willis E. Keats, Receiver appointed in the United States District Court for the Eastern District of Wisconsin, the property and assets of the Perfex Radiator Company and with that end in view Mr. Daniel T. MacLeod and Mr. Fred M. Young, two of the stockholders entered into a certain agreement with the American Brass Company, a corporation and National Lead Company, a corporation, under date of the 21st day of April, A.D. 1923, a quadruplicate original copy of which agreement is to be found in this record book entitled*1136 "Escrow Agreement between American Brass Company and National Lead Company, Parties of the First Part and Daniel T. MacLeod and Fred M. Young, Parties of the Second Part, and Whereas, under and pursuant to said agreement said Daniel T. MacLeod caused a bid to be submitted to Willis E. Keats, Receiver, for the purchase of said property and assets in the sum of one hundred nineteen thousand five hundred dollars ($119,500.00) together with the assumption of a liability of the Receiver of the American Brass Company in the amount of eight thousand Nine Hundred Ninety Two and 37/100 Dollars ($8,992.37); a liability of said Receiver to the National Lead Company in the amount of four thousand four hundred seventy five and 42/100 dollars ($4,475.42) and the assumption of certain unfilled orders for the sale of radiators, etc., the amount of such orders so to be filled being seventy eight thousand eight hundred sixteen and 77/100 dollars ($78,816.77) and said bid has been accepted by said Receiver with the approval of the court, and Whereas, it is the desire of this Corporation to acquire the said property, Now, therefore, the officers of this Corporation ore hereby authorized and directed*1137 to have the property, above referred to, transferred to this Corporation, this Corporation to assume the obligations and liabilities provided in the bid submitted as hereinbefore set forth and to cause payment of the *126 purchase price to be made to said Receiver in the amount of one hundred nineteen thousand five hundred dollars ($119,500.00). On Motion duly made, seconded and adopted by unanimous vote, the following resolution was adopted: Resolved, that the officers of the corporation, in consideration of a loan to this corporation in the sum of fifty thousand dollars ($50,000.00) made or to be made by the American Brass Company and National Lead Company or by or through them, be authorized to execute the promissory note or notes of the corporation in the aggregate amount of said fifty thousand dollars ($50,000.00), payable on or before five (5) years from this date with interest at the rate of six percent (6%) per annum, payable semi-annually with the privilege of making payments on said note of one thousand dollars ($1,000.00) or any multiple thereof, on any interest paying date and as security for the payment of said notes, the officers of said corporation be authorized*1138 to execute a mortgage covering the real estate and buildings owned by the corporation. On April 26, 1923, E. M. Alexander delivered to the receiver a written declaration wherein he designated the petitioner as the party to receive the property purchased at the sale in question. In such declaration it was stated: "I further declare that the bids so made by me was for and on behalf of the Racine Radiator Company." On April 26, 1923, in an agreement entered into between Keats, the receiver, and the petitioner it was stated in part: Whereas, the highest bid received at such sale was from E. M. Alexander, for and on behalf of the Racine Radiator Company, and was subject to the conditions above referred to * * *. * * * Whereas, the execution of this memorandum of agreement has been duly authorized by the Board of Directors of the Racine Radiator Company. On April 26, 1923, the petitioner and Keats entered into a written agreement whereby petitioner assumed, among other things, to pay the accounts payable of the Perfex Radiator Company in the amount of $13,467.42. The amount of $119,500 was paid to "Willis E. Keats, Receiver" by the Manufacturers National Bank, the escrow*1139 agent, by two checks, one dated April 21, 1923, for $18,750 and one dated April 26, 1923, for $100,750. On April 26, 1923, the receiver transferred all the property of the Perfex Radiator Company, except cash, to the petitioner. The amount of $5,500 remaining in the hands of the Manufacturers National Bank as escrow agent was paid to petitioner by check on April 26, 1923. The petitioner then issued its common stock of no par value as follows: Daniel T. MacLeod, 1,200 shares; F. M. Young, 799 shares; and E. M. Alexander, 1 share. In accordance with the escrow agreement set forth hereinabove, the preferred stock was issued to the American Brass Company and *127 National Lead Company and a mortgage was issued in accordance with the escrow agreement. The ledger, which was petitioner's book of original entry, does not show any consideration for the stock or mortgage other than the property. In setting up the books of the petitioner, the assets and properties were placed on its books at a total value in excess of the price paid at the receiver's sale. The values to be placed upon the books were determined by MacLeod, Young, and Alexander. Alexander is an attorney, *1140 MacLeod had had no experience in the radiator business, and Young at that time was employed by the receiver as general manager of the Perfex Radiator Company. The appraisal made in the receivership proceedings was used as a guide in setting the values, but the total of the values placed on the books was less than the total of the appraisal figures. The following are the amounts shown by the opening entries on the petitioner's ledger, together with the amount of each item which the respondent determined was appreciation: Appreciation Assets Value Per cent Amount Cash $5,500.00 Accounts receivable 29,244.51 Inventory 45,940.00 Prepaid insurance 471.39 Land 25,000.00 11.8 $18,237.20 Buildings 65,000.00 30.9 47,280.62 Machinery and equipment 80,000.00 [38] 58,221.48 Furniture and fixtures 2,500.00 1.2 1,812.26 Automobiles 1,000.00 .5 713.44 Small tools 5,000.00 2.3 3,681.83 Patterns and drawings 7,500.00 3.5 5,494.08 Dies and templets 15,000.00 7.1 10,930.86 Patents 10,000.00 4.7 7,316.34 Total 292,155.90 [100] 153,688.11 In determining the deficiency here involved the respondent computed depreciation upon*1141 the basis of the purchase price of the assets as paid by Alexander at the receiver's sale, plus the liability of $13,467.79 which was assumed by the petitioner. The respondent held that the petitioner acquired these assets directly from the receiver. In its return for the year 1925 the petitioner claimed depreciation in the amount of $26,637.27. Of this amount the respondent, in the deficiency letter, disallowed the amount of $13,171.67. The respondent's explanation in the deficiency letter is as follows: 2. Excessive depreciation disallowed in accordance with Articles 161 and 164, Regulations 69. This excess is due principally to the deduction of deprecation *128 on appreciation. The detailed computations were set forth in Exhibit B of Revenue Agent's report, a copy of which was furnished you. Depreciation deducted $26,637.27 Depreciation allowed 13,465.60 Excessive amount disallowed $13,171.67 Your contention that depreciation on capital assets should be computed on the basis of the fair market value of the assets at the date of transfer to your corporation has been denied. This office holds that the cost is the proper basis, as set forth*1142 in the Revenue Agent's report, a copy of which was furnished you, and in office letter dated September 11, 1928. The depreciation involved in the case covers the years 1925 and 1926 and is therefore governed by the Revenue Act of 1926. See Section 204(a), 204(a)(8), 204(c) and Section 203(b)(4) of the Revenue Act of 1926. (The weight of the evidence indicates a sale of the Receiver direct to the corporation and not a sale from the Receiver to the incorporators and thence to the corporation.) OPINION. MCMAHON: The principal question here presented relates to the proper basis to be used in computing the depreciation deductions to which the petitioner is entitled in the year 1925 upon the depreciable assets of the Perfex Radiator Company. The respondent has held that the proper basis is the price at which such assets were sold at the receiver's sale on April 21, 1923. The petitioner contends that when Alexander bid the properties in at the receiver's sale he was acting on behalf of MacLeod Young, the American Brass Company and the National Lead Company, that those parties in interest later transferred such assets to petitioner in exchange for stock and other securities, and*1143 that the proper basis for the computation of depreciation deductions is the value of such assets at the time petitioner actually acquired them, which value petitioner contends was in excess of the price at which they were sold at the receiver's sale. Petitioner arrives at this conclusion by reasoning that the cost of the assets to the petitioner was the value of the stock and securities issued therefor by the petitioner, which in turn is governed by the actual value of the assets. The respondent held that the assets in question were purchased by the petitioner directly from the receiver. From a consideration of all the evidence we conclude that the petitioner has not overcome the presumption in favor of the respondent's determination in this respect. On the contrary, there is persuasive evidence which tends to support the respondent's determination. The property was bid in by Alexander, who, in a written declaration to the receiver designated the petitioner as the party to receive the property, and stated that the bid made by him was for and on behalf of the petitioner. In an agreement entered into between the receiver and the petitioner it was stated that the highest bid received*1144 at the sale was from Alexander, for and on behalf of the petitioner. In the minutes of *129 the meeting of the subscribers to the capital stock of petitioner held on April 26, 1923, it was stated that "this corporation was organized primarily for the purpose of acquiring from Willis E. Keats, receiver appointed in the United States District Court for the Eastern District of Wisconsin, the property and assets of the Perfex Radiator Company." A reading of the escrow agreement discloses that the formation of a corporation was contemplated by the parties and it was therein provided that title to the assets should be transferred directly to the corporation, but that, in the event Young and MacLeod should fail to arrange to have title transferred direct to the corporation, then title should go to the Manufacturers National Bank of Racine, Wisconsin, the escrow agent, and should then be transferred to either the corporation or the American Brass Company and the National Lead Company, in which event MacLeod and Young were to be paid $35,200, or $4,800 less than the amount they had advanced. Nowhere in the escrow agreement was there any provision for the vesting of title to the assets*1145 in Young or MacLeod. Furthermore, title to the property in question did pass directly from the receiver to this petitioner. The fact that the remainder of $5,500 of the escrow funds unused in the purchase of the assets was transferred to the petitioner indicates that such funds were placed in escrow for the use of the corporation and were, in fact, advances to it. The fact that the petitioner was not in existence on April 21, 1923, at the time Alexander bid upon the property, is not inconsistent with this view, since the petitioner, in an agreement with the receiver dated April 26, 1923, ratified the action of Alexander in acting on its behalf at this sale. The rule is well established that a contract made in behalf of a corporation before it is formed becomes the contract of the corporation so that it is both entitled to the benefit thereof and is liable thereon if it expressly or impliedly ratifies or adopts the same after it comes into existence, provided the contract is within its charter or corporate powers. In re Quality Shoe Shop, Inc.,212 Fed. 321; *1146 Hinkley v. Sagemiller, 210 N.W.(Wis.) 839, 841; Myers, Inc. v. Ogden Shoe Co., 181 N.W.(Wis.) 307; Pratt v. Oshkosh Match Co.,89 Wis. 406; 72 N.W. 84; cases cited in note 48, I Fletcher Cyc., Corporations, p. 211; and in note 63, 14 C.J. 257. See Carel Robinson,19 B.T.A. 751. See also Whitney v. Wyman,101 U.S. 392, wherein the Supreme Court stated in part: But it is said the corporation at the date of these letters was forbidden to do any business, not having then filed its articles of association, as required by the statute. To this objection there are several answers. The corporation subsequently ratified the contract by recognizing and treating it as valid. *130 This made it in all respects what it would have been if the requisite corporate power had existed when it was entered into. * * * Cf. Petree v. United States, 34 Fed.(2d) 563; affd., 41 Fed.(2d) 517; certiorari denied, 282 U.S. 877. Under the evidence it does not appear that the respondent erred in holding that the petitioner purchased the*1147 assets in question from the receiver as of April 21, 1923. It follows that the determination of the respondent, that the cost of such assets at such receiver's sale is the basis for the determination of depreciation deductions thereon, must be approved. See section 204(a) and (c) of the Revenue Act of 1926, which is set forth in part in the margin. 1 Furthermore, even if petitioner were correct in its contention that it purchased the assets from the American Brass Company, National Lead Company, Young and MacLeod and that the cost of the assets to the petitioner is to be determined by the value of the assets themselves at the time*1148 acquired, the respondent's basis for computation of depreciation deductions would still prevail. By the provisions of section 907(a) of the Revenue Act of 1926, as amended by section 601 of the Revenue Act of 1928, the Board is bound by the rules of evidence prevailing in the courts of equity in the District of Columbia. In Ruppert v. McArdle,42 App.D.C. 392, the court was called upon to determine the value of certain property at the date of the termination of a life tenancy. An appraisal had been made of the property subsequent to the termination of such tenancy and thereafter the executor had sold such property under court order. The court held that the appraisement was merely prima facie evidence of the value of the property, and that the subsequent judicial sale, which was a fair sale, was better evidence of the value of the property at the date in question. Here, appraisers appointed by the court valued the assets in question as of February 9, 1923, and the valuation placed thereon by them was greatly in excess of the price at which such assets were subsequently sold on April 21, 1923, at the receiver's sale. Obviously the appraiser's report fixing*1149 the value of the property in question herein at $351,504 was before the court, and notwithstanding the appraised value the receiver informed the court that such property was worth $175,000, and the court set the latter figure as the minimum selling price. A receiver's sale was attempted, but no bids were received, *131 and thereupon the court postponed the sale and fixed no minimum price for the property. Thereafter the receiver's sale was consummated on April 21, 1923, and, it being a fair judicial sale, we conclude that the value established by that sale should be taken as the value of the property on that date and also on April 26, 1923, the date it was actually transferred to petitioner by the receiver. In the instant proceeding, one of the appraiser's testified at the hearing that the appraisal made represented the best judgment of the appraisers as to the fair market value of the property on February 9, 1923. In the absence of such showing this would be assumed, and this proof adds little, if anything. In Ruppert v. McArdle, supra, there is no indication that any of the appraisers did testify before the court, but we deem this difference between*1150 the two cases insufficient to justify a different result. Under these circumstances, we can not disturb the value of the assets as determined by the respondent as of the date they were acquired by the petitioner, which is the price at which they were sold at the judicial sale on April 21, 1923. See also Hazelton v. Le Duc,10 App.D.C. 379; and Andrews v. Commissioner, 38 Fed.(2d) 55; affirming Estate of Effie Andrews.13 B.T.A. 651; and cf. Belridge Oil Co.,26 B.T.A. 810. There is no proof in the record sufficient to overcome the presumption in favor of the correctness of the respondent's determination as to value based on the judicial sale of April 21, 1923. The contention of the petitioner that it should be allowed, as a deduction from gross income of the year 1925, the amount of a net loss in 1924 also fails, since at the hearing it was stipulated between the parties that if the Board should approve the depreciation basis as determined by the respondent, then the petitioner sustained no net loss in 1924. Reviewed by the Board. Judgment will be entered for the respondent. GOODRICH concurs*1151 in the result. Footnotes 1. SEC. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that [exceptions immaterial] - * * * (c) The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the same as is provided in subdivision (a) or (b) for the purpose of determining the gain or loss upon the sale or other disposition of such property, except that - [exceptions immaterial]. ↩