Before BIGGS, Chief Judge, and MARIS and GOODRICH, Circuit Judges.
The issue before us is the value for gift tax purposes of jewelry given by the petitioner, Mrs. Rose Publicker, to her daughter in 1946 and 1947.
26 U.S.C.A. § 1000(a) states: "For the calendar year 1940 and each calendar year thereafter a tax, computed as provided in section 1001, shall be imposed upon the transfer during such calendar year by any individual, resident or nonresident, of property by gift. * * *" Section 1005 provides: "If the gift is made in property, the value thereof at the date of the gift shall be considered the amount of the gift." Treasury Regulations 108 further explains the meaning of "value" as used in the statute: "Sec. 86.19. Valuation of Property . (a) General . The statute provides that if the gift is made in property, the value thereof at the date of the gift shall be considered the amount of the gift. The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell. The value of a particular kind of property is not to be determined by a forced sale price. Such value is to be determined by ascertaining as a basis the fair market value at the time of the gift of each unit of the property. For example, in the case of shares of stock or bonds, such unit of property is a share or a bond. All relevant facts and elements of value as of the time of the gifts should be considered."
The following facts are not in dispute. On April 9, 1941, Mrs. Publicker purchased from Milner, of a Philadelphia wholesale and retail diamond firm, a diamond ring containing a marquise-cut diamond of 20.5 carats in an iridium platinum setting with two tapered, bullet-shaped diamonds. For this ring Mrs. Publicker paid $45,000 plus a ten per cent Federal excise tax of $4,500. On October 2, 1946, Mrs. Publicker gave the ring to her daughter, and in her gift tax return for that year she reported its value on the date of gift as $50,000.
On February 5, 1947, Mrs. Publicker purchased from Harry Winston, Inc., in New York a second diamond ring containing an emerald-cut diamond weighing 33.45 carats in a ring mounting. On the same day she bought from the same seller a pair of marquise-cut diamond ear clips of .56 carat. Mrs. Publicker paid $200,000 for the ring and the ear clips, plus a twenty per cent Federal excise tax*fn1 of $40,000. She gave these pieces of jewelry to her daughter on July 16, 1947, valuing them in her 1947 gift tax return at $115,000 for the ring and $6,000 for the ear clips.
Upon examination of Mrs. Publicker's gift tax returns the Commissioner sent to her his notices of deficiency in which he valued the 1946 gift at $100,000 and the 1947 gifts at $240,000. The deficiencies claimed were $13,875 and $43,162.50 respectively.*fn2
Mrs. Publicker contested the claimed deficiencies in proceedings brought by her before the Tax Court. Upon trial the Tax Court redetermined the deficiencies for 1946 and 1947 in the respective amounts of $2,733.75 and $41,272.50, finding the value of the 1946 gift to be $58,500 and the value of the 1947 gifts to be not less than $240,000. The memorandum findings of fact and opinion of the Tax Court are not reported officially but see CCH Dec. 18,993(M) at 11 TCM 519. Mrs. Publicker petitions for review.
The criteria to be employed in determining "value" necessarily must differ somewhat in respect to the kinds of property to be valued under the statute. A question of law is presented therefore as to the standard to be applied. See Powers v. C.I.R., 1941, 312 U.S. 259, 260, 61 S. Ct. 509, 85 L. Ed. 817. But the Tax Court's determination of value, the proper standard having been applied by it, is a finding of fact. This finding, based upon the resolution of conflicting evidence, may not be disturbed unless clearly erroneous. See 26 U.S.C.A. § 1141(a) and FRCP, Rule (52) (a), 28 U.S.C.A.
At the trial before the Tax Court the petitioner called three expert witnesses who testified to the fair market value of the large diamonds in the two rings and of the ear clips. The qualifications of these witnesses were not questioned. They were diamond merchants of many years experience whose principal business was dealing at wholesale in unmounted diamonds but who also had had some experience in selling diamonds at retail. The first witness, Milner, from whom, as we have said, Mrs. Publicker had purchased the ring in 1946, set a value of $46,650 on it, of which $46,125 represented the value of the large stone and $500 the value of the two bullet-shaped stones and the setting. On the 1947 gifts Milner set values of $109,000 for the ring and $5500 for the ear clips. In determining these amounts, Milner did not take into consideration the Federal excise tax.
The second witness, Sommer, stated that the value of the 1946 gift was $46,125 for the diamond, which, at the time of his appraisal, had been removed from its setting. On the 1947 gifts he set values of $73,590 for the ring and $5000 for the ear clips. These appraisals were exclusive of Federal excise tax and of the ten per cent mark-up which Sommer's firm ordinarily charged on resale of diamonds purchased.
The third witness, Sumnick, testified that he would pay $51,250 for the large diamond in the 1946 gift, $117,000 for the large diamond in the 1947 ring and $5000 for the ear clips. These amounts were exclusive of the Federal excise tax and of any mark-up on resale of the diamonds to a retailer. Sumnick testified that he would probably sell the diamonds at a profit of about ten per cent to one of the few retail houses handling diamonds of such size and that on resale at retail these houses would in turn add a mark-up of indeterminate amount, depending on the means and enthusiasm of the ultimate purchaser.
Also included in the taxpayer's evidence was a letter from Harry Winston, Inc., the seller of the 1947 gifts, in which it was stated that as of July 8, 1947, Mrs. Publicker might "with some effort * * * be able to procure $115,000 in the present market" for the 1947 ring. The ear clips were considered salable for $6000. No mention was made of the Federal excise tax. This letter had been attached by Mrs. Publicker to her 1947 gift tax return.
Cross examination of the taxpayer's witnesses developed the fact that even among the large wholesale and retail diamond merchants, sales of diamonds of the size of those here involved were extremely rare. Milner, however, admitted that between 1941 and 1946 there was an ...