Helvering v. Maytag

At the time of Dena Maytag’s death, the Maytag family owned approximately 1.38 million of the 1.62 million shares of Maytag Company common stock in existence. The remaining roughly 240,000 shares of common stock were publicly owned and traded. The day Dena died, the common stock’s price in the public market was around $4.75 per share, and Dena’s estate (plaintiff) contained approximately 130,000 shares. Dena’s estate used a business-valuation method to calculate the stock’s value at $2.50 per share on its estate-tax return. The same year, Dena’s son, Elmer Maytag (plaintiff), transferred 400,000 shares of Maytag Company common stock into trusts for his children. On the date of this gift transfer, the common stock’s average market price was $4.56. On his gift-tax return, Elmer listed the stock’s value at the same $2.50 per share that Dena’s estate had used. The commissioner of Internal Revenue (commissioner) (defendant) determined that the stock’s market value was the correct method for determining the share values on both the estate-tax and gift-tax returns and assessed taxes based on this higher valuation. Dena’s estate and Elmer petitioned the Board of Tax Appeals (board) for a new determination, arguing that if either party had tried to sell the stock, the large number of shares would have flooded the market and caused the market price to decrease significantly. Thus, by itself, market price was not an accurate way to calculate the stock’s value. In response, the commissioner pointed out that if the size of a block of stock was a relevant valuation factor, taxpayers with large blocks of stock would be taxed at a lower stock-value amount than taxpayers with smaller blocks. The commissioner argued that (1) taxes were supposed to be uniform, (2) having two different tax values for the same item was not uniform taxation, and (3) using market price alone for valuation would keep the taxation uniform for all taxpayers. The board found that it could consider the size of the stock blocks. Taking the block size into account, the board determined that Dena’s block of stock was worth $3.10 per share and that Elmer’s block of stock was worth $3.80 per share. The two cases were appealed to the Eighth Circuit Court of Appeals.