they could have been disposed of for a substantial sum at the time deductions from the testator's gross estate were to be made. We think that the averments of the complaint show such a state of facts that the existence of the power conferred on the trustees to invade the corpus of the trust estate cannot properly be given the effect of depriving the bequests to the charitable institutions of any substantial value. For estate tax purposes the approximate amount of that value was ascertainable, and was allowable as a deduction from the testator's gross estate. It follows that the court's action in sustaining the demurrer to the complaint was erroneous. Because of that error, the judgment is reversed, and the cause is remanded for a new trial.

Reversed.

GERARDI v. UNITED STATES. Circuit Court of Appeals, First Circuit. February 2, 1928.

No. 2155.

1. Poisons 9-Where indictment for possession of and sale of narcotics alleged defendant was person required to register, allegation was material part of offense to be proved (Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 [26 USCA §§ 211, 691695, 704], and § 8 [26 USCA § 700]).

Where an indictment charged defendant in three counts with possession of morphine hydrochloride, an opium derivative, and in two counts with its sale, and in all of the counts alleged that he was required to register, but had not done so, and had not paid the special tax required, the allegation that defendant was a person required to register was a material part of the offense to be proved, under Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 (26 USCA §§ 211, 691-695, 704), and section 8 (26 USCA § 700; Comp. St. § 6287n). 2. Poisons 2-Only persons selling narcotics in or from an original stamped package are liable to tax payment (Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 [26 USCA §§ 211, 691-695, 704]).

Under Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 (26 USCA §§ 211, 691-695, 704), it is only those persons who sell from or in an original stamped package who are liable to the payment of the tax pro

vided.

3. Poisons 9-Proof of narcotic sales alone held not proof defendant was required to register, so as to place burden on him to show registration (Harrison Anti-Narcotic Act, § 1, as amended by the Revenue Act 1926 [26 USCA §§ 211, 691-695, 704]; § 8 [26 USCA § 700]).

In prosecution for violation of Harrison Anti-Narcotic Act, § 1, as amended by Revenue

Act 1926 (26 USCA §§ 211, 691-695, 704), and section 8 (26 USCA § 700; Comp. St. § 6287n), quired to register, but had not done so, proof of wherein it was alleged that defendant was resales of morphine hydrochloride, without showing that they were from an original stamped package, held not proof defendant was required to register, so as to place the burden on him to show registration.

4. Poisons 9-Possession of narcotics under statutory provision creates no presumption of statutory violation, where necessity for accused's registering is not shown (Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 [26 USCA §§ 211, 691-695, 704]; § 8 [26 USCA § 700]).

The possession by an accused under the provisions of Harrison Anti-Narcotic Act, § 8 (26 USCA § 700; Comp. St. § 6287n) creates no presumption of a violation of that section, or of section 1 of the act, as amended by Revenue Act 1926 (26 USCA §§ 211, 691-695, 704), in the absence of a showing that defendant was a person required to register.

5. Poisons 9-There is no presumption of violation of narcotic seller's registration provisions, in absence of showing seller was required to register (Harrison Anti-Narcotic Act, § 1, as amended by Revenue Act 1926 [26 USCA §§ 211, 691-695, 704]; § 8 [26 USCA § 700]).

There is no presumption of a violation of the Harrison Anti-Narcotic Act because of a seller's nonregistration under section 1 of the act, as amended by Revenue Act 1926 (26 USCA § 211, 691-695, 704), and section 8 thereof (26 USCA § 700; Comp. St. § 6287n), in the absence of a showing that the person accused of violating the law was required to register thereunder.

Anderson, Circuit Judge, dissenting.

In Error to the District Court of the United States for the District of Massachusetts; James M. Morton, Judge.

Daniel Gerardi was convicted of possession of an opium derivative and of its sale, and he brings error. Judgment vacated, verdict set aside, and case returned to District Court, with instructions to grant defendant new trial.

William H. Lewis, of Boston, Mass. (Matthew L. McGrath, of Boston, Mass., on the brief), for plaintiff in error.

John V. Spalding, Asst. U. S. Atty., of Boston, Mass. (Frederick H. Tarr, U. S. Atty., of Gloucester, Mass., on the brief), for the United States.

of morphine hydrochloride, an opium derivative, and in two counts with its sale. In all the counts it is alleged that he was required to register, but had not registered, with the collector of internal revenue, and had not paid the special tax required by law. He was found guilty upon all the counts, and sentenced upon each to serve a term of three years at hard labor in the United States penitentiary at Atlanta, the sentences to run concurrently.

One of the errors assigned, and the only one that we find it necessary to consider, is that the court denied the request of the defendant to instruct the jury to bring in a verdict of not guilty upon all the counts, because the government had not sustained the burden of proof.

The Harrison Anti-Narcotic Act under which he was convicted was approved December 17, 1914 (38 Stat. 785, c. 1), and amended February 24, 1919 (40 Stat. 1057, 1130, 1131). Section 1 of the act was amended by the Revenue Act of 1926 (44 Stat. c. 27, § 703 [26 USCA §§ 211, 691-695, 704]). The act is entitled "An act to provide for the registration of, with collectors of internal revenue, and to impose a special tax upon all persons who produce, import, manufacture, compound, deal in, dispense, sell, distribute, or give away opium or coca leaves, their salts, derivatives, or preparations, and for other purposes."

Its constitutionality has been sustained on the ground that it is a revenue act, enacted under the power conferred upon Congress to levy taxes, and that its purpose is not to prohibit the sale of the substances with which it deals. United States v. Doremus, 249 U. S. 86, 39 S. Ct. 214, 63 L. Ed. 493; Webb et al. v. United States, 249 U. S. 96, 39 S. Ct. 217, 63 L. Ed. 497; Alston v. United States, 274 U. S. 289, 47 S. Ct. 634, 71 L. Ed. 1052. In discussing the provisions of the act before it in the last-named case, the court said:

"These provisions are clearly within the power of Congress to lay taxes and have no necessary connection with any requirement of the act which may be subject to reasonable disputation. They do not absolutely prohibit buying or selling; have produced substantial revenue; contain nothing to indicate that by colorable use of taxation Congress is attempting to invade the reserved powers of the States. The impositions are not penalties." Section 1 of the act as re-enacted is, in part, as follows:

"Section 1. That on or before July 1 of each year every person who imports manufactures, produces, compounds, sells, deals in,

dispenses, or gives away opium or coca leaves, or any compound, manufacture, salt, derivative, or preparation thereof, shall register with the collector of internal revenue of the district his name or style, place of business and place or places where such business is to be carried on, and pay the special taxes hereinafter provided."

The section then classifies those who are to register and pay the tax, and fixes the amount to be paid by each class. It defines a wholesale dealer as one who sells any of said drugs in the original stamped packages, and a retail dealer as one who sells or dispenses from original stamped packages. It provides that an internal revenue tax at the rate of one cent per ounce, and the same rate on any fraction of an ounce, shall be paid by the importer, manufacturer, producer, or compounder of the narcotic drugs therein enumerated, said tax to be represented by appropriate stamps to be provided by the Commissioner of Internal Revenue and which shall be so affixed to the bottle or other container as to securely seal the stopper, covering, or wrapper. It also provides that: "It shall be unlawful for any person required to register under the provisions of the act to import, manufacture, produce, compound, sell, deal in, dispense, distribute, administer, or give away any of the aforesaid drugs without having registered and paid the special tax as imposed by this section." It further provides that: "It shall be unlawful for any person to purchase, sell, dispense, or distribute any of the aforesaid drugs except in the original stamped package or from the original stamped package; and the absence of appropriate tax-paid stamps from any of the aforesaid drugs shall be prima facie evidence of the violation of this section by the person in whose possession same may be found; and the possession of any original stamped package containing any of the aforesaid drugs by any person who has not registered and paid special taxes as required by this section shall be prima facie evidence of liability to such special tax."

Congress thus made its intention clear to confine the sale of narcotic drugs to those which had been stamped according to the provisions of the act, and by those who had registered and paid the special tax.

It will be noted that only the possession of a stamped package creates a presumption of liability to register and pay the special tax.

The section further makes it unlawful for any person, whether registered or not, to sell or purchase said drugs in or from an unstamped package.

Two offenses are therefore defined by the act: (1) The sale of stamped packages by one required to register and pay the special tax but who has failed to do so; and (2) the sale of unstamped packages by any one, whether required to register or not.

Section 8 of the act (26 USCA § 700; Comp. St. § 6287n) is, in part, as follows:

"It shall be unlawful for any person not registered under the provisions of this act, and who has not paid the special tax provided for by this act, to have in his possession or under his control any of the aforesaid drugs; and such possession or control shall be presumptive evidence of a violation of this section, and also of a violation of the provisions of section 1 of this act."

[1] In United States v. Jin Fuey Moy, 241 U. S. 394, 36 S. Ct. 658, 60 L. Ed. 1061, the Supreme Court held that the words "any person not registered" refer to the class dealt with by the statute those required to register. Each count in the indictment alleges that the defendant was a person required to register and pay a special tax and that he had not done so. The allegation that he was required to register was a material part of the offense. Butler v. United States (C. C. A.) 20 F.(2d) 570; O'Neill v. United States (C. C. A.) 19 F.(2d) 322; Weaver v. United States (C. C. A.) 15 F. (2d) 38. See, also, Taylor v. United States (C. C. A.) 19 F. (2d) 813. [2-4] The government contends that the evidence that the defendant sold morphine hydrochloride was proof that he was a person required to register, and that having shown this the burden was upon the defendant to prove that he had registered and paid the special tax, citing a large number of cases in which this has been held. He would not be liable, however, to the payment of any special tax unless he sold in the original stamped package, in which case he would fall under the definition of a wholesale dealer given in the act, or if he sold from a stamped package he would fall under the definition of a retail dealer. It is only those persons who sell in or from an original stamped package who are liable to the payment of the tax. there was no evidence in this case that the sales made by the defendant were in or from the original stamped packages, proof of the sales alone would not constitute proof that the defendant was required to register. Nor would possession by him under the provisions of section 8 of the act create a presumption of a violation of that section or of section 1 of the act unless it were shown that he was a person required to register. United States v. Jin Fuey Moy, supra.

As

[5] The allegation in each count in the indictment that the defendant was a person required to register would not apply to the possession of or sale in or from unstamped packages, and to prove the defendant guilty it was necessary that there should have been evidence that the sales were in or from original stamped packages. The motion for a directed verdict should have been granted.

The judgment of the District Court is vacated, the verdict set aside, and the case returned to that court, with instructions to grant the defendant a new trial.

ANDERSON, Circuit Judge, dissents.

HEINER, Collector of Internal Revenue, v. CROSBY.

SAME v. ANDERTON.

Circuit Court of Appeals, Third Circuit. January 24, 1928.

Nos. 3494, 3516.

I. Internal revenue 25-Fair market price or value of corporate stock for income tax purposes is fact question, depending on circumstances (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, § 1200, subd. [a], being Comp. St. § 6336b, subd. [a]).

Fair market price or value of corporate to be determined under all the circumstances, in stock at a particular time is a question of fact, assessing income tax on increase in value thereof, under Revenue Act 1917, § 1200, subd. (a), being Comp. St. § 6336b, subd. (a), and Revenue Act 1916, § 2, subd. (c), being Comp. St. § 6336b, subd. (c).

2. Internal revenue

25-"Market price" of

corporate stock for income tax purposes implies market, supply and demand, sellers and buyers (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, 1200, subd. [a], being Comp. St. § 6336b, subd. [a]).

"Market price" of corporate stock within Revenue Act 1916, § 2, subd. (c), being Comp. St. § 6336b, subd. (c), and Revenue Act 1917, § 1200, subd. (a), being Comp. St. § 6336b, subd. (a), implies existence of a market, of sup

ply and demand, of sellers and buyers.

and Phrases, First and Second Series, Market [Ed. Note. For other definitions, see Words Price.]

3. Evidence 323(2), 601 (4)-Sales are evidence of market price, but do not conclusively establish fair market price or value of corporate stock for income tax purposes (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, § 1200, subd. [a], being Comp. St. § 6336b, subd. [a]).

Sales are always evidence of market price, but do not in themselves, without regard to cir

cumstances under which made, conclusively establish fair market price or value, required by Revenue Act 1916, § 2, subd. (c), being Comp. St. § 6336b, subd. (c), and Revenue Act 1917, § 1200 subd. (a), being Comp. St. § 6336b, subd. (a), in ascertaining taxable gain from sale of such stock.

4. Evidence

must be

323 (2)-Evidence heard to determine fair value of property sold under peculiar circumstances for income tax purposes (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, § 1200, subd. [a], being Comp. St. § 6336b, subd. [a]).

Sales made under peculiar and unusual circumstances, such as sales of small lots, forced sales, and sales in restricted market, may neither signify fair market price or value, nor serve as basis for determining amount of taxable gain from sale thereof, under Revenue Act 1916, § 2, subd. (c), being Comp. St. § 6336b, subd. (c), or Revenue Act 1917, § 1200, subd. (a), being Comp. St. § 6336b, subd. (a), but in such case resort must be had to evidence.

5. Evidence 323(2), 525-Good faith offers and opinions of experienced men are admissible to show fair value of stock, sold in restricted market, for income tax purposes (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, § 1200, subd. [a], being Comp. St. § 6336b, subd. [a]).

Offers made in good faith and opinions of intelligent men experienced in business are admissible to show fair value of property, such as corporate stock, sold in such a restricted market as not to evidence fair market price or value required to ascertain taxable gain from sale thereof under Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. (c), and Revenue Act 1917, § 1200, subd. (a), being Comp. St. § 6336b, subd. (a).

6. Evidence 113(4)-Evidence held to show sales of corporate stock in such restricted market as to justify resort to evidence of intrinsic value for income tax purposes (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [c]; Revenue Act 1917, § 1200, subd. [a], being Comp. St. 8 6336b, subd. [a]).

Evidence held to show that sales of oil company's stock were made in such a restricted market as to justify resort to evidence of intrinsic value to ascertain taxable gain from sale thereof, under Revenue Act 1916, § 2, subd. (c), being Comp. St. § 6336b, subd. (c), and Revenue Act 1917, § 1200, subd. (a), being Comp. St. § 6336b, subd. (a).

8. Evidence

601(4)-Evidence held to sustain District Judge's finding that fair market value of corporate stock when acquired by persons subsequently selling it was $2 less per share than sale price (Revenue Act 1916, § 2, subd. [c], being Comp. St. § 6336b, subd. [0]; Revenue Act 1917, § 1200, subd. [a] being Comp. St. § 6336b, subd. [a]).

Evidence held to sustain District Judge's finding that fair market value of Pure Oil Company's stock on July 21, 1913, and August 20, 1915, when acquired by persons selling it on July 26, 1917, for $24.50 per share, was $22.50 per share, making taxable gain of $2 per share under Revenue Act 1916, § 2, subd. (c), being 1917, § 1200, subd. (a), being Comp. St. § Comp. St. § 6336b, subd. (c) and Revenue Act 6336b, subd. (a).

In Error to the District Court of the United States for the Western District of Pennsylvania; Frederic P. Schoonmaker, Judge.

Action by Minnie F. Byles Crosby and by Thomas A. Anderton, executor of the last will and testament of Thomas Anderton, deceased, against D. B. Heiner, Collector of United States Internal Revenue. Judgments for plaintiffs (12 F.[2d] 604), and defendant brings error. Affirmed.

John D. Meyer, U. S. Atty., and W. J. Aiken, Asst. U. S. Atty., both of Pittsburgh, Pa. (William T. Sabine, Jr., and A. W. Gregg, both of Washington, D. C., of counsel), for plaintiff in error.

James Walton and Frank B. Ingersoll, both of Pittsburgh, Pa., for defendants in

error.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

DAVIS, Circuit Judge. These cases concern the taxes paid as income on the increase in value of the stock of the Pure Oil Company under the provisions of section 1200 (a) of the Revenue Act of 1917 (40 Stat. 329 [Comp. St. § 6336b, subd. (a)], and section 2, subdivision (c) of the Revenue Act of 1916 (39 Stat. 758 [Comp. St. § 6336b, subd. (c)]). They were argued together, involve the same question of the fair market price or value of the stock, and will be disposed of in a single opinion.

On July 21, 1913, Mrs. Crosby received from the estate of her deceased husband 13,157 shares of stock. She sold them on July 26, 1917, for $24.50 per share. She placed a value of $22.50 per share on the stock at the time she received it, and so in her return for the year 1917 she reported a gain of $2 per share. The Commissioner of Internal Revenue, on the other hand, valued the stock at $14.37% per share when acquired, and

so determined that she sold it at an increase of $10.121⁄2 per share. He assessed the tax accordingly, and demanded payment within 10 days, on threat of penalty for nonpayment. She paid the tax and brought suit for its recovery. A jury was waived and the case tried to the court without a jury. It found that the fair market price or value of the stock at the time it was received was $22.50 per share.

In the Anderton Case, Thomas A. Anderton, executor of the estate of Thomas Anderton, deceased, acquired 10,807 shares of the common stock of the Pure Oil Company on August 20, 1915. He sold the stock on July 26, 1917, for $24.50 per share. He reported in his tax return for 1917 an increase in the value of the stock of $2 per share from August 20, 1915, to July 26, 1917. The Commissioner determined the fair market price or value of the stock when received to be $17 per share, an increase in value of $7.50 per share, and assessed the tax accordingly. This was paid under protest, and suit was brought to recover the additional tax paid on the Commissioner's determination. The learned District Judge before whom the ease was tried without a jury found, as in the Crosby case, that the fair market price or value of the stock on August 20, 1915, was $22.50 per share, and so entered judgment for the plaintiff.

The collector has brought both cases here for review on writ of error. The sole question for determination, as stated above, is the fair market price or value of the stock in the Crosby case, on July 21, 1913, and, in the Anderton case, on August 20, 1915. Defendant says that the court erred in resorting to evidence of the intrinsic value of the stock, when its fair market price or value was evidenced by sales, and that the evidence in support of intrinsic value is insufficient to support the findings of fact and the judgments.

The determination of the fair market price by the Commissioner was based on the price paid for the stock on the Pittsburgh Stock Exchange on the dates in question. On July 21, 1913, the date Mrs. Crosby received her stock, 60 shares were sold on the Pittsburgh Stock Exchange at $14% per share. On August 20, 1915, the date Mr. Anderton acquired his stock, 1,185 shares were sold and the price ranged from $16% to $17 per share.

[1-5] The fair market price or value of stock at a particular time is a question of fact, to be determined from all the circumstances. Market price implies the existence of a mar24 F. (2d)-13

ket, of supply and demand, of sellers and buyers. Sales are always evidence of a market price, but the statute requires that, in "ascertaining the gain derived from the sale," there must be not simply a "market price," but a "fair market price." Sales made at a particular time and place may be significant, but the price paid is not necessarily decisive of fair market price or value. The fact of sales, in itself and without regard to the circumstances under which the sales were made, does not conclusively establish either statutory fair market price or value. Sales made under peculiar and unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may neither signify a fair market price or value, nor serve as the basis on which to determine the amount of gain derived from the sale. In such cases resort must be had to evidence to determine "fair value." Offers made in good faith and opinions of intelligent men experienced in the business are admissible to show fair value. Louisville & Nashville R. R. Co. v. Western Union Telegraph Co. (C. C. A.) 249 F. 385; North American Telegraph Co. v. Northern Pacific Railway Co. (C. C. A.) 254 F. 417; Walter v. Duffy (C. C. A.) 287 F. 41; Boom Co. v. Patterson, 98 U. S. 403, 25 L. Ed. 206; United States v. Chandler-Dunbar Co., 229 U. S. 53, 77, 33 S. Ct. 667, 57 L. Ed. 1063.

[6,7] Were the circumstances under which the stocks in question were sold peculiar, showing a restricted market, in which the sellers and buyers were limited, so that the sales did not evidence a "fair market price or value"?

The evidence shows, as the learned District Judge found, that the independent oil operators of Western Pennsylvania had for a long time suffered from monopolistic control, which interfered with and restricted every means of disposing of oil stock. The Pure Oil Company was organized in 1895, with the express purpose of protecting and maintaining what are known as "the independent interests in the petroleum industry." The organizers entered into a trust agreement whereby more than 50 per cent. of the common stock originally and subsequently issued was to be vested in a board of 15 trustees, who were to have control of the company, regardless of the legal or equitable ownership of the stock. This trust agreement could not be changed, except with the consent of three-fifths of the trustees and of the equitable owners of three-fifths of the shares held in trust.

On March 1, 1913, the Pure Oil Company