7. Partnerships. Generally the valuation of co-partnership property involves the same problems as to book value, earning power, depreciation of assets and value of good will that are involved in appraising closely held stocks. The title vests in the surviving partner and all that the executor can claim is the equitable interest in the surplus after the payment of all debts. Williams v. Whedon, 109 N. Y. 333; 16 N. E. 365. A special partner is, in a sense, a creditor. An agreement between partners as to the value of the co-partnership interest and what a retiring partner shall have, whether the retirement be by death or otherwise, often has a material bearing upon the valuation. Matter of Borden, 95 Misc. 443; 159 Supp. 346. But an agreement that the surviving partner shall take all or a material portion of the assets, or may buy the decedent's share for a materially lower valuation than it is worth is an agreement to take effect at death and would seem to be taxable. Matter of Cory, 164 Supp. 956; aff. 221 N. Y. mem. App. 166 Supp. 126. See ante, p. 98. Where the testator bequeathed to his partners his interest in the partnership assets on condition that they pay ninety per cent. of its appraised value to his executors in fifteen equal annual instalments, the probate court made a finding that the inheritance tax should be fixed from time to time as the money or property of the estate should come into the hands of the executors and not at the present value of future payments to be made by the partners. Port Huron v. Wright, 150 Mich. 279; 114 N. W. 76. A recent case before the New York County Surrogate's court illustrates some of the difficulties in the valuation of co-partnership assets from the examination of the firm books by an accountant. The court thus criticises the methods adopted: "The decedent was a member of the firm of Milmine, Bodman & Company, which has been established in this city for more than thirty years. For the purpose of enabling the appraiser to ascertain the value of decedent's interest in the firm an affidavit was submitted by an accountant in which he states that the figures given by him in relation to the assets and liabilities of the firm are ' accurate statements from the books of the co-partnership.' He subsequently states that deduction ranging from 5 per cent. to 10 per cent. had been made by him as depreciation from the value of the assets. If the figures given by him are accurate statements from the books of the co-partnership,' then his conclusion as to the value of decedent's interest is incorrect, because he fails to make any deductions from the figures supposed to have been taken from the books of the firm. If he has made the deductions, then the figures given by him cannot be ' accurate statements from the books of the co-partnership.' In ascertaining the value of the merchandise on hand the accountant has taken the cost price of wheat, barley, oats and grain. This is incorrect, as it is the market price of the merchandise at the date of decedent's death which should be taken in ascertaining the value of decedent's interest in the firm. The accountant states that there is no good will, because the firm does not do business with the public. This statement seems to be inconsistent with accounts receivable of $297,320 and accounts payable of $191,247.93. There should be some explanation of these items. In ascertaining the value of the stock of the Rochester Cold Storage and Ice Company the accountant has deducted 5 per cent. from the cost price of the real estate owned by the company. This is incorrect, as the real estate should be appraised at its market value upon the date of decedent's death. The value of the merchandise owned by the Bodman-McConaughy Company is given at $295,909.29, but it is not stated whether that amount represented the market value of the merchandise at the date of decedent's death. To justify the appraiser in appraising at $68,151.58 the value of the note given by the Elk Creek Ranch Company to the decedent for $81,594.71 there should be a verified statement of the assets and liabilities of the company as of the date of decedent's death. The appraiser's report will be remitted to him. for further testimony in regard to the matters above referred to." Matter of Bodman, 100 Misc. 390. As to Partnership real estate the rule seems well established that the interest of the deceased co-partner, being in the surplus after the payment of debts, is personalty. McFarlane v. McFarlane, 82 Hun, 238; 31 Supp. 272. Fairchild v. Fairchild, 64 N. Y. 471. Van Brocklen v. Smeallie, 140 N. Y. 70. Matter of Straus, N. Y. L. J., Oct. 9, 1911. On the other hand it has been held that, unless the partnership agreement expressly or impliedly refers to it, the co-partnership real estate retains its character as realty with all the incidents of that species of property between partners themselves and also between a surviving partner and the real and personal representatives of a deceased partner, except that each share is impressed with the payment of debts and obligations of the partnership. Huber v. Case, 93 App. Div. 479; 87 Supp. 663. Partnership ownership is not a legal joint tenancy. Money loaned to a firm by one of the co-partners is capital invested and not a mere co-partnership interest, subject to accounting. It is to be valued like any other asset on the death of the creditor. Matter of Probst, 40 Misc. 431; 78 Supp. 983. Where a partner in a firm invested the profits with the firm and transferred this account to his wife to protect his wife from his creditors, on the death of the wife a transfer tax should be assessed against the fund as her property. Matter of Anthony, 40 Misc. 497; 82 Supp. 981. A non-resident decedent sold his interest in a New York co-partnership shortly before his death and took as part payment notes of the firm indorsed by the continuing partners. These notes matured after death and were paid by the firm to the widow in her individual capacity who made affidavit that the deceased owned no property within the state, held not taxable as there was no proof the notes belonged to decedent at the date of his death. Matter of Wallace, 149 Supp. 354. Profits due but not withdrawn held a part of the partnership assets and to be taken into account in the valuation of the interest of the deceased. Matter of DuBois, 163 Supp. 668. Interest on capital invested by retired partners should not be included in estimating net profits. Matter of Weatherbee, N. Y. L. J., Nov. 5, 1913. When Dr. Johnson was selling the Thrale brewery he made the famous statement that it was not the material assets that he was putting up at auction but "The potentiality of growing rich beyond the dreams of avarice,' and though the Thrale brewery no longer has any good will it was obviously a valuable commodity a hundred years ago. Good will consists of various elements: 1. The probability that old customers will resort to the old place. 2. Or if they do not "resort " that they will continue to be customers. 3. The advantage of continuing on established business at the "old stand." 4. The advantage of continuing a familiar name or style. 5. Reputation and prior advertising. 6. Pattern, styles, trademarks. Austen v. Boys, 27 L. J. Ch. 714. People v. Roberts, 159 N. Y. 70; 53 N. E. 685. Kramer v. Old, 119 N. C. 1, 25 S. E. 813. Matter of Silkman, 121 App. Div. 202; 105 Supp. 872. Where a business was carried on by an administratrix in the name of the decedent the good will was held to be an asset in her hands. Matter of Mullon, 74 Hun, 358; 26 Supp. 683. The succession to the good will of a decedent's business in which he had an interest is therefore a taxable transfer. Matter of Jones, 28 Misc. 356; 59 Supp. 983; 69 aff. Div. 237; 74 Matter of Vivianti, 138 App. Div. 281; 122 Supp. 954; same case, b. RULES FOR COMPUTATION. Good will is elusive and in the nature of things cannot long endure as a thing apart from the enterprise and effort of the successors. While no hard and fast rules could be applied to the valuation of anything so ephemeral, several elements necessarily are to be considered. |