OPINION.
MoRRis:
The petitioner contends that when he purchased the Parkway he purchased the real estate, fixtures and good will, as a going business, and that the purchase price of $10,000 represented $16,000 which he paid for the land and $24,000 which he paid for the good will of the business. He further contends that when he closed the Parkway and dismantled the building, he transferred the business of that theatre, together with the good will, to the Grant and that the good will having been so transferred, it became part of the assets of the Grant. Therefore, as the petitioner contends, when he sold the Grant to Eli Resnick in July, 1923, he disposed of his good will which had been acquired in the purchase of the Parkway and consequently the respondent should not have included the Parkway property in the computation of his net worth at the cost price of $40,000 but should have included it at $16,000, excluding the value of the good will which had been transferred to and had become a part of the Grant, which was sold in July, 1923.
The record does not show by what method the respondent computed petitioner's net worth, nor has any evidence been offered with respect to the total values used by respondent as of December 31, 1923; therefore, we are not called upon to determine the correctness of the computation or the values used as of that date.
The parties having made no segregation of the purchase price of $40,000, nor having made any reference at all with respect to good will in the articles of agreement effecting this sale, we must first determine whether the Parkway was the possessor of a good will of the value claimed by the petitioner and if so whether said good will passed to the petitioner as a part of the purchase price of $40,000, and further, whether good will, as such, can be transferred as contended under the circumstances of this case.
If the Parkway was the possessor of a valuable good will at the time the petitioner purchased it, that fact was certainly not borne out by the testimony offered. ' Hirsh, the party from whom the petitioner purchased the Parkway, testified that when he purchased it, it was not doing a good business, and that it was not a worthwhile moving-picture show, but that he hoped to purchase it and make an up-to-date house of it and then build up a good business, but that before he had had an opportunity to realize his ambition or had justified his expectations he sold the Parkway to the petitioner.
It is perfectly clear from the testimony that the uppermost thought in the mind of the petitioner, at the time of the purchase of the Parkway, was to eliminate the probable competition that would be offered by Hirsh. The articles of agreement entered into between these parties not only did not segregate the purchase price of $40,000 into component parts, but failed to make any reference whatsoever to the fact that good will was intended to be a part of the transaction. It certainly does not appear from all the circumstances surrounding the purchase of the Parkway that good will was an influencing factor in the transaction.
No attempt was made by the petitioner to prove the value of the alleged good will at the date of acquisition of the Parkway, except indirectly. The petitioner offered the testimony of several real estate appraisers as to the value of the real estate at the date of acquisition, on which the Parkway Theatre was located, but not conceding that those values are satisfactorily established, we can not assume that the difference between the appraised value and the purchase price of $40,000 represents the value of good will.
Petitioner's counsel states in his brief:
The taxpayer is not contending in his appeal that merely the good will of the Fortieth Street Theatre was transferred to the Girard Avenue Theatre in May, 1921. Were this the case, it is admitted that this appeal should fail, for it is unquestionably the law that good will can not be transferred from one business to another unless the business to which the good will formerly attached also is transferred. It is equally true, however, that a business plus the good will that attaches to it may be transferred from one place to another, and may be combined with another business and its own good will.
In Widdall v. Garsed, 17 Atlantic 418, it was said:
The " transfer of the business " is an uncertain, equivocal expression, and may mean property, or it may mean good will.
We find nothing in the evidence submitted which would warrant the conclusion that the business and/or good will or any other property of the value of $24,000 was transferred from the Parkway Theatre. Of course the petitioner testified that when the Parkway was closed the receipts of the Grant were increased, but that we deem was due to the elimination of the competition in the immediate neighborhood and not to any valuable asset that had been transferred from the Parkway to the Grant.
Finding as we do that no good will passed to the petitioner upon the acquisition of the Parkway, it is not necessary for us to discuss the question of whether or not good will of the Parkway could under the law be transferred to and become a part of the assets of the Grant. We are of the opinion, however, that had good will existed at the time the petitioner acquired the Parkway it could not possibly have been transferred to the Grant under the circumstances of this case because as this Board said in the Appeal of Pevely Dairy Co., 1 B. T. A. 385-
Gooa will is not something which can be delivered like merchandise, but as recognized in all the definitions, it is the probability or expectation of retaining the old customers and that probability or expectation is all a purchaser can acquire.
The deficiency of $7,055.9^ as set forth in deficiency letter of August 26, 1925, is approved and judgment will be entered on 15 day's notice, under Bule 50.
Considered by Teammell and Littleton.