Opinion
No. 74-777
Decided July 9, 1975.
Taxation — Personal property — "True value" determined, how — Sale between willing buyer and willing seller.
For personal property tax purposes, the best method of determining value is the actual sale of such property on the open market and at arms length, between one who is willing to sell, but not compelled to do so, and one who is willing to buy, but not compelled to do so. ( In re Estate of Sears, 172 Ohio St. 443, approved and followed.)
APPEAL from the Board of Tax Appeals.
Appellant, The Grabler Manufacturing Company (herein referred to as Grabler), was a wholly owned subsidiary of Commercial Credit Company, a Maryland holding company which acquired Grabler in 1942. Grabler manufactured pipe fittings, first in Cleveland, and, later, also in Tiffin, Ohio.
Although Grabler was originally a profitable operation, it began losing money about 1962, which led to the construction of the plant in Tiffin in the hope that a modern, automated plant would stem the losses. However, the losses continued and Commercial Credit Company decided to attempt a sale of Grabler in late 1967.
Control Data Corporation took control of Commercial Credit Company during negotiations for the sale of Grabler. Its policy reemphasized that of Commercial Credit and made no change in the outcome, so we continue to refer to Commercial Credit Company as the parent-holding company.
On March 31, 1969, due to the efforts of management personnel of Commercial Credit Management Company (another wholly owned subsidiary), Grabler sold its plants and real property (which are not in issue here), as well as equipment and machinery to Hayes-Albion Corporation. At the same time, Commercial Credit Corporation (still another wholly owned subsidiary) sold equipment and machinery to Hayes-Albion, to which it held title due to a purchase and lease-back agreement between it and Grabler, entered into after the purchase of new equipment and machinery by Grabler for its Tiffin plant.
On May 16, 1969, Grabler and Commercial Credit Corporation sold other machinery and equipment to Acme Equipment Company.
When Grabler filed its 1969 Ohio personal property tax return, it listed the depreciated book value of its personal property (all disposed of in the March 31st and May 16th sales). However, it also filed a claim for deduction from depreciated book value, claiming that the "true value in money" of the property was equal to the amounts for which these items were sold to Hayes-Albion and Acme.
Grabler paid the tax based upon its true value claim. Then, before any final action by the Tax Commissioner, Grabler filed for a refund because of so-called mechanical errors in reducing the true values on the schedules filed.
Grabler waived its argument of error as to Schedule 4 before the Board of Tax Appeals. If Grabler prevails in its argument as to "true value," an amount equal to the increased tax which it paid, by reason of its having made a mathematical error on Schedule 2 of its return, should be returned to it.
Instead of allowing the $6,780 refund, the Tax Commissioner, basing his assessment solely on the depreciated book value of the property, issued final assessment certificates which increased Grabler's tax.
Upon appeal, the Board of Tax Appeals affirmed, and the cause is now before this court pursuant to an appeal as of right.
Messrs. Glander, Brant, Ledman Newman, Mr. C. Emory Glander and Mr. James H. Ledman, for appellant.
Mr. William J. Brown, attorney general, and Mr. John C. Duffy, Jr., for appellee.
The issue before the court, as it was before the Tax Commissioner and the Board of Tax Appeals, is the proper determination of the "true value in money" of the personal property sold by Grabler to Hayes-Albion and Acme.
R.C. 5711.18, in pertinent part, provides:
"* * * In the case of personal property used in business, the book value thereof less depreciation at such time shall be listed, and such depreciated book value shall be taken as the true value of such property, unless the assessor finds that such depreciated book value is greater or less than the then true value of such property in money. * * *"
The Tax Commissioner (assessor) found that the book value, minus depreciation, was the true value of the property. However, appellant argues that the sale price should be used, and that failure to use the sale price as value is unreasonable and unlawful.
In State, ex rel. Park Investment Co., v. Bd. of Tax Appeals (1964), 175 Ohio St. 410, 412, this court determined that:
"* * * The best method of determining value, when such information is available, is an actual sale of such property between one who is willing to sell but not compelled to do so and one who is willing to buy but not compelled to do so. Paragraph two of the syllabus in In re Estate of Sears, 172 Ohio St. 443, 178 N.E.2d 240. This without question, will usually determine the monetary value of the property. * * *"
The Board of Tax Appeals attempted to distinguish that statement, since Park Investment is a real property case. However, Sears is a personal property case, and the logic extends to personal property.
From the record, it is clear that Commercial Credit Company wanted very much to sell Grabler. Commercial Credit Management Company carried out vigorous negotiations, covering the better part of 15 months in selecting 20 to 25 possible purchasers from several hundred potential purchasers. Several offers were made before the Hayes-Albion offer was accepted. The record shows that these parties dealt at arms-length. In addition, an adequate effort was made to market the equipment and machinery which was not purchased by Hayes-Albion before Acme's offer was accepted. These were transactions fulfilling the requirements of Park Investment, supra.
The Board of Tax Appeals, however, reaches the opposite result because:
"* * * Grabler was the owner of the equipment in question, yet no one from the corporaton participated in the negotiations. Moreover, Grabler had no choice but to sell its assets owing to the fact that Commercial Credit Corporation was looking for a buyer of the equipment which Grabler leased from it. * * *" (Emphasis added.)
Of course Grabler had no choice, it was a wholly owned subsidiary, and Commercial Credit Company had decided to sell it. But from a taxation standpoint, Grabler must be considered a willing seller when we consider its parent organization to be a willing seller. From the evidence, we do consider these sales to be between a willing buyer and seller.
The Tax Commssioner argues that the evidence of these sales was not available on tax listing day, so that it was not unreasonable for the assessor to use depreciated book value for the true value.
Since this court has determined that a sale between a willing buyer and seller is the best evidence of true value, the question becomes whether the sales in question were, in time and crcumstances surrounding them, the best evidence of true value in this case. We believe that they were. There is no evidence in the record to show a change in circumstances from December 31, 1968, until March 31 and May 16, 1969, to justify a departure from our rule, and sales within that period of time after tax listing day, December 31, 1968, seem to be within a reasonable time.
For the foregoing reasons, the decision of the Board of Tax Appeals is unreasonable and unlawful, and we reverse.
Decision reversed.
O'NEILL, C.J., HERBERT, CORRIGAN, STERN and W. BROWN, JJ., concur.
P. BROWN, J., dissents.