sold for less than it would cost, at present prices, to reproduce them. In many cases during the war, prices were paid far in excess of reproduction costs. Recent sales by willing sellers to willing buyers are the best bases of all, but the records of such sales are confined almost entirely to stock and similar exchanges. Reproduction cost may, however, be very useful evidence in establishing fair market value. The following expression of opinion as to the best method of determining fair market value is of interest: The valuation engineers of the Revenue Bureau, as I understand it, are to answer the question of valuation that is comprehended in the imaginary situation of a prospective buyer, competent to measure mine values and actuated by the hope of profit to be derived from mine operation, making an offer for a mine to the owner who is likewise competent to measure mine values and who is under no obligation to sell except such obligation as arises from his belief that the offer made is advantageous to him. . . . . In arriving at fair market value as of March 1, 1913, one is supposed to take into consideration only the facts that were then known or that could have been then known had one endeavored to learn them at that time. The question may therefore arise as to whether it is fair to arrive at a 1913 valuation by applying to the standard present-value method of mine valuation modifications which have not been proposed until 1919. In my opinion, however, there is sufficient justification for using those modifications that are consequences of taking into account changing grade of ore and changing rate of others; the command which one commodity has over others in traffic, in a restricted (and the popular) sense, the amount of money for which a thing can be sold; price." (Century Dictionary.) "Concrete purchasing power; the specific quantity of another object for which a given object can be exchanged, a price which can actually be obtained. The value of an article depends not upon its total utility but upon its marginal utility, diminishing as the supply increases. It will be proportionate to the cost of production; because when the value of an article is above its cost, producers will tend to increase the supply, while if its value is below its cost producers will tend to diminish the supply." (Webster's Dictionary.) "The source of commercial value according to different schools of economists is (1) the degree of want felt for a commodity as shown in the relation of supply and demand; (2) the amount of labor embodied in it, or (3) the cost of reproduction. Practically, commercial value is that for which a thing can be sold or exchanged at a given time and place." (New Standard Dictionary.) "By the price of a thing, therefore, we shall henceforth understand its value in money; by the value or exchange value of a thing, its general power of purchasing; the command which its possession gives over purchasable commodities in general." (J. S. Mill, Pol. Econ.) production. The justification is this: In 1913 and since that time there was no actual method followed for valuing mines for purpose of sale, for the reason that mines of the size. to which these newly proposed factors would apply are rarely, if ever, sold. In arriving at a market value as of 1913, therefore, we are dealing with a wholly hypothetical question. If there had been occasion to value. such mines for sale in 1913, it is unbelievable that factors so important as the change in grade of ore and the likely change in rate of production would have been ignored. In other words, if a market value had been required at that time, it would have been reached in accordance with the methods now proposed.12 The Treasury has issued a schedule for computation of profit and loss from sale of capital assets. The following extracts are from questions therein which indicate the scope of the evidence required to support March 1, 1913, values. 5. [Was the] value. . . . determined by an engineer or other expert, and if so, give his name and last known address and attach hereto or submit herewith copy of his report? 6. (b) Date of acquisition... (c) Manner of acquisition (purchase, trade, gift, etc.). $. (e) Amount paid in interest-bearing or other notes1..$. etc. Cash value per share at date of payment2. NOTES 'Describe notes as to rate of interest, security, due dates, date of issue, State how cash value per share was determined. In case stock was paid in a series of payments at different dates, attach hereto a schedule showing for each separate payment of stock the date of payment, number of shares, par value per share and cash value per share on date of payment. "Federal Taxation of Mines, by L. C. Graton. (g) Amount paid in bonds3.... (h) Amount paid in other consideration of a value oft Total paid... .$. .$...... .$. 8. On or about March 1, 1913, was any bona fide offer made for the purchase in whole or in part of property listed and described in response to question 1?...... If so, submit full evidence of such offer and discuss the bearing of it on the value of the property on March 1, 1913.. 9. Give particulars respecting bona fide sales of properties in your district or vicinity, within a year prior to and within a year subsequent to March 1, 1913, in so far as such sales have a bearing on the market value of property listed and described in question 1, as of March 1, 1913.. II. (a) On what stock exchanges was your capital stock listed on and about March 1, 1913? If not listed, so state.. (b) Was your capital stock traded in on a "curb" market on and about March 1, 1913? If so, where?.. (c) Was your capital stock listed in daily newspapers or brokers' lists or bulletins on and about March 1, 1913? If so, where?....... (d) What was the quoted value of the shares of your capital stock on and about March 1, 1913? Give the source of the quotations (e) If your stock was not quoted on a stock exchange or curb market, give the particulars of private and public sales of your stock on and about March 1, 1913, so far as you have knowledge of them. (f) If, in your opinion, the quoted value of the shares of your capital stock on March 1, 1913, does not fairly reflect the current normal market value of same, then attach hereto the daily quotations covering the period of three months preceding that date... 12. With respect to the property listed and described in question 1, did anyone interested therein as owner, operator, or member of a partnership or stockholder in a corporation owning or operating the same die on or soon after March 1, 1913?........ If so, give the name, the number of shares held, the approximate date of death, the residence at time of death, and the name and location of the court in which the estate was administered... 14. State, as far as are known to you, the names of the parties to any litigation in which the value of the property listed and described in question I, or any part of it, or of a partnership interest therein, or of stock in a corporation owning or operating the same. was involved; also the name of the court or courts in which the litigation was conducted.... 15. Has the value of the property listed in question I been involved in any partnership accounting known to you?.... If so, give particulars 16. (c) What was the quoted value of your bonds, notes, and/or other certificates of indebtedness on March 1, 1913? Give source of quotation... (d) If your bonds, notes and/or other certificates of indebtedness were not quoted on or about March 1, 1913, give particulars of public and private transactions in them on or about that date so far as you have knowledge of such transactions.. ADJUSTMENT OF APPRAISALS OF VARIOUS DATES.—Most appraisals made either by taxpayers or disinterested third parties are of some date other than March 1, 1913. If made within a short time before or after that date the books of account should afford sufficient data upon which adjustments could be based. When the date of the appraisals is more than a year before or after March 1, 1913, the application of book adjustments is not of itself evidence that the result would represent fair market value as of that date. Actual conditions at the date of the appraisals would have to be compared with conditions existing March 1, 1913. If it could be shown that building materials, labor and other elements of cost were substantially the same, and if normal depreciation were applied, there is no good reason why an appraisal of a date more than a year before or after should not form the foundation for an adjustment of book figures to conform to fair market value at March 1, 1913. The Treasury has in such cases required evidence of comparative values of similar property and other data bearing more closely on values at March 1, 1913. The purpose for which an appraisal was made should always be stated as it may be the controlling factor in its acceptance or rejection. When the actual surplus at March 1, 1913, does not ap |