Full opinion text
BLACKMUN, Circuit Judge. Robert A. Goodall died October 22, 1953. The Commissioner of Internal Revenue, by his several 90-day letters, proposed deficiencies and additions to tax as follows: Estate of Robert A. Goodall, deceased (Our No. 18,631; Tax Court No. 72,-361) Estate of Robert A. Goodall, deceased (Our No. 18,632; Tax Court No. 95,387) Estate of Robert A. Goodall, deceased (Our No. 18,634; Tax Court No. 3142-63) Mr. and Mrs. Goodall (Our No. 18,633; Tax Court No. 95,388) Mrs. Goodall (Our No. 18,635; Tax Court No. 3143-63) Good-All Electric Mfg. Co. (Our No. 18,636; Tax Court No. 95,458) Federal estate tax. Income tax for the calendar year 1953; addition under § 291(a) of the 1939 Code. Income tax for the calendar year 1954; addition under § 6651(a) of the 1954 Code. Joint income tax for the calendar years 1950/53, inclusive; § 293(a) addition for each of the 4 years; § 294(d) (1) (B) addition for 1951; § 294(d) (2) addition for 1950/52, inclusive. Income tax for the calendar years 1954/59, inclusive; § 294(d)(1)(A) addition for 1954. Corporation income tax for the fiscal years ended May 31, 1950/54, inclusive; § 102 surtax for all 5 years. The deficiencies so proposed exceeded, in the aggregate, $6,300,000, and the additions totalled more than $545,000. By amended answer filed in the estate tax case, the Commissioner proposed a further deficiency of $281,388.03. Thus, more than $7,125,000 in tax deficiencies and additions, plus interest, were asserted. Except for about $195,000 of the corporation’s tax, almost all of this large amount was disputed. The Tax Court consolidated the several cases for hearing. Its detailed findings and opinion (Judge Mulroney) filed June 4, 1965 (not reviewed by the full court), T.C. Memo 1965-154, 24 T.C.M. 807, and its subsequent computational decisions under its Rule 50, filed July 26, 1966, redetermined deficiencies in the substantially reduced total net amount of $2,214,677.63, and additions aggregating $146,489.65. The respective taxpayers petition for review of certain aspects of these redeterminations. Our jurisdiction is established. The facts, as found by the Tax Court, are based on stipulations, oral testimony, a deposition, and many exhibits, some jointly stipulated or jointly introduced. The factual material is, of course, intricate and complex. We mention initially only a few background facts. Others are referred to as we consider the respective issues. The decedent, Robert A. Goodall, and his wife, Clarice M. Goodall, were equal business partners under an agreement executed by them on December 10, 1916, shortly after their marriage. This partnership continued from that date until Mr. Goodall’s death on October 22, 1953. Prior to May 28, 1949, the partnership operated an electronics business in Ogallala, Nebraska. It manufactured and sold capacitors, rectifiers, soldering machines, watch cleaning machines, and fishing reels. The capacitors were for proximity fuses for the United States Navy; the partnership had been approved by the Department of the Navy as an authorized supplier. In 1940 the Goodalls organized a Nebraska corporation under the name of Ogallala Industries, Inc. It was inactive, however, and its charter lapsed in 1944. The Goodalls revived the corporation in 1947. In April 1949 its name was changed to Good-All Electric Mfg. Co. This is the taxpayer in our No. 18,636. It is hereinafter referred to as the corporation. On May 28, 1949, the partnership and the corporation executed a Manufacturing and Rental Agreement under which the corporation on June 1 took over the manufacturing business theretofore conducted by the partnership. The issues before us are: I. The existence of Tax Court jurisdiction in the face of the taxpayers’ claim that the Commissioner failed to make the statutorily required determinations of deficiencies. This issue arises in all six cases. II. The sufficiency of the evidence to support the Tax Court’s finding that the partnership’s interests in certain oil leases had a value of $2,400,000 at the decedent’s death. This issue arises in the estate tax case. III. The informational sufficiency of that finding. IV. The sufficiency of the evidence to support the Tax Court’s finding that the partnership, at the decedent’s death, possessed a $940,000 asset consisting of “Intangibles — goodwill”. This also arises in the estate tax case. V. The sufficiency of the evidence to support the Tax Court’s finding that the corporation, in each of its fiscal years 1950/54, inclusive, permitted its earnings and profits to accumulate beyond the reasonable needs of its business, within the meaning of § 102(c) of the 1939 Code. VI. The sufficiency of the evidence to support the Tax Court’s finding that in those years the corporation was availed of for the purpose of preventing the imposition of surtax upon its shareholders, within the meaning of § 102(a). VII. The propriety of the Tax Court’s not taking certain taxes and withdrawals into account in its compilation of the § 102 surtax. VIII. The expensing of the partnership’s intangible drilling and development costs. This issue arises in the Goodalls’ income tax case, in the estate’s two income tax cases, and in Mrs. Goodall’s income tax case for 1954. IX. The deductibility of certain legal fees and expenses incurred by the partnership. This arises in the Goodalls’ income tax case for 1952. X. The treatment of 1953 partnership income in the computation of the estate’s basis in its partnership interest. This arises in Mrs. Goodall’s income tax case. XI. The measure of the 5% addition to tax under § 293(a) of the 1939 Code. This arises in the Goodalls’ income tax case for 1951 and 1953. We consider these issues in the order listed. Before we do so, however, we think it well to list certain matters which are not at issue on these petitions for review: 1. Not at issue is the legal efficacy of the 1916 partnership agreement between Mr. and Mrs. Goodall. This is therefore to be accepted as a genuine and fully effective business arrangement between the spouses. 2. Not at issue in the estate tax case is the elimination of an increase of $123,-208.35, effected by the Commissioner, in the value of the decedent’s partnership interest to reflect the difference in amounts withdrawn respectively by Mr. and Mrs. Goodall from the corporation and treated by them as partnership income. The Tax Court sustained the Commissioner in this increase. However, with the efficacy of the partnership agreement accepted, the Commissioner now concedes the increase to have been improper. Accordingly, on remand, the estate tax must be appropriately adjusted for this item. 3. Not at issue is a deduction of $109,-683.70 asserted by Mrs. Goodall in her 1956 return as interest paid that year to the District Director at Omaha with respect to income tax deficiencies for 1950/53. The Director, on receipt of the payment, placed it in his suspense account. The Commissioner disallowed the interest deduction and the Tax Court sustained him on the authority of Jacob J. Shubert, 41 T.C. 243 (1963) (taxpayer’s petition for review by the Second Circuit dismissed pursuant to stipulation). The Commissioner now concedes that “the interest payment was received and acknowledged as such” by him and that the deduction was proper. Accordingly, on remand, Mrs. Goodall’s 1956 tax must be appropriately adjusted for this item. 4. Not at issue are the corporation’s deductions in fiscal 1950/54 of amounts accruing to the partnership under the manufacturing and rental agreement. The Commissioner disallowed the major portion of these on the ground that they were not ordinary and necessary business expenses under § 23(a) (1) (A) and thus were equivalent to dividends. The Tax Court, however, held that the amounts were deductible in their entirety. The Commissioner has not petitioned for review of this ruling which is adverse to him. 5. Not at issue is the character of the substantial withdrawals made by the partners from the corporation. The Commissioner determined that these withdrawals were not loans, as the partners claimed, but were taxable dividends. The Tax Court concluded that they were loans and thus were not includable in partnership gross income. Here, too, the Commissioner has not petitioned for review of this ruling which is adverse to him. I. The jurisdictional issue. Did the Commissioner fail to make the deficiency determinations required for Tax Court jurisdiction? The argument here advanced by the respective taxpayers is that, in the administration of the federal income and estate taxes, self-assessment is basic; that the Commissioner, when a return is filed, is required, under §§57 and 840 of the 1939 Code, to determine the correct tax; that only if he determines that the correct tax exceeds the returned amount is he authorized to issue a notice of deficiency; that the process of determination requires that he resolve all issues, citing Terminal Wine Co., 1 B.T. A. 697, 701 (1925); that notice of the deficiency so determined is a prerequisite for Tax Court jurisdiction under § 272 (a) (1) [and § 871(a) (1)] of the 1939 Code and §§ 6212(a) and 6213(a) of the 1954 Code; that, in order to constitute a determination, the Commissioner’s action must be “thoughtful and considered” and bona fide and not “a mere formal demand for an arbitrary amount as to which there were substantial doubt”; that only when there has been appropriate administrative action of this kind do the courts become involved; that in the estate tax case the Commissioner expressly acknowledged that he had not determined the deduction [in any amount in excess of $234,444.81] for income tax claims against the decedent [inasmuch as they were then being contested, beyond that figure, by the estate]; that there was no reason why he could not make a decision with respect to those claims; that he had taken inconsistent positions within and among the several cases; that this is so with respect to valuation, basis, an option choice, and the interpretation of certain transactions; that it is not a situation where several taxpayers were taking different positions on the same issues; that, indeed, the sole party in interest in all the cases (except the corporation) is Mrs. Goodall; that she and the corporation have not taken any inconsistent position; that the Commissioner’s inconsistency is unconditional and not in the alternative; and that this has compelled the taxpayers to go to the Tax Court in order to avoid assessment. The Tax Court refused to hold that the Commissioner was acting capriciously or arbitrarily. It observed that it was clear that the determinations, although inconsistent, were made in the alternative and that “once a holding is reached on an issue it will be applied consistently where more than one taxpayer is involved”. We decide this jurisdictional issue against the taxpayer and do so for a number of reasons: 1. The provisions in § 272(a) (1) of the 1939 Code and § 6212(a) of the 1954 Code as to the determination of a deficiency do not specify that the determination be one which is fully consistent with every other determination made contemporaneously against a related taxpayer. Where there is no charge or indication of bad faith on the part of the Commissioner we are not disposed to read into the statute any such additional requirement for across-the-board legal theory consistency. 2. We see nothing inherently evil in the Commissioner’s making inconsistent determinations as between taxpayers where, as here, there is acceptable legal theory for each approach and where the determination falls short of the frivolous or the unfair. 3. We perceive no element of genuine prejudice to the taxpayers despite their comment that, had the Commissioner acted otherwise, “these cases would have been resolved many years ago without the necessity of involving the courts”. On the other hand, to compel the Commissioner to choose between good faith alternatives at the risk of later confrontation with the barrier of the statute of limitations, if his choice has been litigated and has not prevailed, could entail grave prejudice for the revenues and could result in a windfall to a taxpayer by way of escape from a just obligation otherwise due and collectible. 4. These are, after all, tax cases. Substantial sums are involved. The Commissioner is charged with the protection of the revenues. While these factors might be viewed as pragmatic, it would be unseemly, we feel, to force the Commissioner, in the performance of his administrative duties, to make an awesome choice of this kind at his peril. Taxes are not a game. Of course, the Commissioner, and the government itself, in this court is no more and no less than just another litigant. But we are aware of every person’s tax responsibilities and we are not inclined to let the realization of revenues stand or fall on so technical a base as impeccable consistency. Consistency is desirable but its virtue has limits. Good faith inconsistency buttressed by acceptable argument, when considered in the framework of the Commissioner’s responsibilities, cannot be regarded as an offense which provides a bar to bona fide tax litigation. 5. Inconsistency in determinations, when they are not made in bad faith, does not equate with an absence of the statutorily required determination, as the taxpayers suggest. Each taxpayer, even though there are several related ones, by the determination and notice made for him, knows the position the Commissioner is taking with respect to his tax situation. So long as the ultimate resolution of the issues is consistent for all, we see no legal wrong. 6. We are not contrarily persuaded by the taxpayers’ argument that Mrs. Goodall is the sole party in interest, other than the corporation, because she is the surviving spouse, is the survivor of the husband-wife partnership, is the sole executor of her husband’s will, and is the sole beneficiary of his estate, and that, therefore, the inconsistencies here exist with respect to the same taxpayer. The decedent, the estate, Mrs. Goodall, and the partnership are all distinct in tax law, either as separate tax paying entities or, in the case of the partnership, as an information reporting entity. This separateness has tax significance and, after all, the method of filing returns, the doing of business in the partnership form, and the disposition of Mr. Goodall’s estate, are products of considered choice by the taxpayers or one or more of them. 7. The Ninth Circuit has touched upon this jurisdictional issue in two cases. Revell, Inc. v. Riddell, 273 F.2d 649, 658-660 (9 Cir. 1959), cert. denied 364 U.S. 835, 81 S.Ct. 52, 5 L.Ed.2d 60; Malat v. Commissioner of Internal Revenue, 302 F.2d 700, 704 (9 Cir. 1962), cert. denied 371 U.S. 934, 83 S.Ct. 308, 9 L.Ed.2d 271. It is true that, as the taxpayers point out, Revell was an attempt by plaintiffs to enjoin the collection of income and excess profits taxes. The case thus has overtones of the policy expressed in § 7421(a) of the 1954 Code against suits to restrain tax assessment or collection. And the court there specifically observed, 273 F.2d p. 659, that it was not confronted by any question of the jurisdiction of the Tax Court. Nevertheless, because the requests for equitable relief centered in what was regarded as an absence of determinations, p. 657, “because of the conflicting tax deficiency determinations which were made in each case”, the opinion does afford valuable precedent. The Ninth Circuit stressed that there was nothing in the notices which impugned the good faith of the Commissioner; that on the face of each notice it appeared that the determination “was thoughtful and considered”; that the burden on the several taxpayers of contesting the conflicting determinations was about the same as was imposed on any taxpayer dissatisfied with a notice of deficiency; that the bar of the statute of limitations lurks in the background; and that, p. 660, “We find no legal or logical reason which compels the Commissioner to run such risk [of correct choice of theory] in the proper performance of his duty to protect the revenue”. Malat is equally positive and, significantly, concerned petitions to review decisions of the Tax Court. It thus met the jurisdictional question directly. There the claim was made that jurisdiction did not exist because “by reason of the conflicting holdings by the Commissioner * * * either no determinations were made or the Commissioner acted arbitrarily and capriciously”. The court cited Revell, referred to the statute of limitations, and held that the determinations were valid and that the taxpayers “properly invoked the jurisdiction of the Tax Court”. P. 704 of 302 F.2d. 8. We agree with the result reached by the Ninth Circuit. 9. The situation is far different than that condemned in James Couzens, 11 B.T.A. 1040, 1159 (1928), cited by the taxpayers. There the Board of Tax Appeals pointed out that the Commissioner testified that when he made the jeopardy assessments he “was not clear in his own mind that any tax was due”. 10. We have encountered inconsistency of determinations before and have not been concerned or impressed with it. See Meyer v. Commissioner of Internal Revenue, 383 F.2d 883, 885, 892 (8 Cir. 1967), affirming Leon R. Meyer, 46 T.C. 65 (1966). There are enough other intances in reported cases to indicate that alternative or contrary determinations in separate notices of deficiencies are not uncommon and have not been condemned by the courts. See Commissioner of Internal Revenue v. Southwest Exploration Co., 350 U.S. 308, 309, footnote 1, 76 S.Ct. 395, 100 L.Ed. 347 (1956); Commissioner of Internal Revenue v. Consolidated Premium Iron Ores, Ltd., 265 F.2d 320 (6 Cir. 1959); Nat Harrison Associates, 42 T.C. 601, 617 (1964) (Commissioner’s petition for review by the Fifth Circuit dismissed pursuant to stipulation); Sanford Reffett, 39 T.C. 869, 875 (1963) (taxpayers’ petition for review by the Fourth Circuit dismissed pursuant to stipulation); L. A. Thompson Scenic Ry., 21 B.T.A. 718 (1930). 11. There is no avowed attempt here to collect more than one tax on the same income. We, as did the Tax Court, feel that it is clear that the determinations were in the alternative and that consistent legal principles were ultimately to be applied. 12. We do not regard the estate tax case as one with no actual determination of deficiency. The 90-day letter precisely proposed and, in so many words, “determined” a deficiency of $280,905.06 in estate tax. This was in part attributable to the Commissioner’s limiting the deduction for income taxes of the decedent paid after death, and interest thereon to the date of death, to the amount not then being contested by the estate. The deficiency was thus computed without deduction for any additional pre-death income tax and interest which might later be agreed upon or judicially ascertained. Of course, such additional liability would constitute an appropriate estate tax deduction under § 812(b) (3) of the 1939 Code and would most certainly be claimed by the estate. This, however, does not make the Commissioner’s determination something less than a full-fledged one which satisfies the statute. The situation is not unlike that concerning the 80% credit for state death taxes paid; this credit did not enter into the determination of deficiency but it was clear that it would be allowed, in reduction of the deficiency, upon the submission of proper proof of payment within the period provided by law. Although the years were passing, we place upon the Commissioner no positive duty here to fix the pre-death income tax liabilities with finality prior to his making an acceptable and statute-satisfying determination of estate tax deficiency. His action was not unreasonable. We are satisfied that the jurisdiction of the Tax Court was properly invoked. II. The first estate tax issue. Does the record support the Tax Court’s finding that the partnership’s interests in oil leases in the Little Beaver Field in northeastern Colorado had a date-of-death value of $2,400,000 rather than the returned value of $1,353,830? The decedent’s, and hence the estate’s, major asset was his half interest in the partnership. The partnership, among other things, was engaged in oil ventures. And among its oil assets were working percentage interests in four leases in the Little Beaver Field. The estate tax return, which was timely filed and which valued the estate’s assets as of the date of death, set forth the decedent’s share in the partnership at $2,620,000 and the partnership’s interests in the four leases at $1,353,830. This was in accord with the Nebraska Inheritance Tax Appraiser’s Report submitted with and as a part of the return. The Commissioner’s audit and his eventual 90-day letter made a number of adjustments in the valuation of the partnership assets and liabilities. These resulted in a determination that the decedent’s interest in the partnership was $3,638,850.69. This was an increase of $1,018,850.69 over the reported figure. The major component in the increase was the addition of $940,000 for “Intangibles —goodwill”, an asset which did not appear in the return’s computations. This item is the subject of the second estate tax issue considered below. The other items, therefore, were relatively minor. As the estate points out, no adjustment was made through the audit period or by the 90-day letter in the valuation of the Little Beaver lease interests. It was in February 1964, “more than ten years after Mr. Goodall’s death and more than seven [six?] years after the deficiency notice was issued”, to use the language of the estate’s brief, that the Commissioner, by amended answer in the estate tax case, asserted the additional deficiency of more than $280,000 due entirely to a very substantial increase over the returned value of the decedent’s share of the partnership’s interests in the four leases. Section 6214(a) of the 1954 Code, applicable here (see § 7851(a) (6) (A) of that Code), permits the Commissioner to make an additional claim before or at the hearing in the Tax Court. But such action taken at that time by answer or amended answer places the burden of proof of the issue on the Commissioner. Tax Court Rule 32; Kimbell-Diamond Milling Co., 10 T.C. 7, 13 (1948); Estate of Harry Schneider, 29 T.C. 940, 956 (1958). See Tehan v. Commissioner of Internal Revenue, 295 F.2d 895, 896-897 (7 Cir. 1961). The Tax Court in its memorandum reviewed the testimony of the four witnesses produced by the Commissioner and their respective discussions and estimates (as of July 15, 1953, and January 1, 1954) of maximum oil reserves (from 13,635,000 to 14,220,000 barrels) in the entire Little Beaver Field; of the partnership’s percentage, computed on a decline curve, of the entire field’s production (17.37115%); of the vah e per barrel of oil indicated by area sales in the summer of 1953 ($1.8793); and of predeath production from the Goodall leases (416,320 barrels). The court noted that this approach results in a figure of 2,003.047 barrels of net oil reserves attributable to the Goodall leases as of the date of the decedent’s death and in a value for the partnership of $3,764,326. The court also noted, however, that, on a separate valuation analysis made by one of the Commissioner's witnesses (Cameron), the oil in the ground would have a value of $1.25 per barrel and that this figure, applied to the net reserve of 2,003.047 barrels and exclusive of possible secondary recovery, results in a total value of $2,503,809 for the partnership interests. The court then observed that the estate relied upon the testimony of its witness Low who used a different analytical approach. He estimated the reserve for each of the four leases individually and arrived at a total of 1,331,280 recoverable barrels. He then estimated the partnership’s future net operating profits at $2,707,840. On the assumption that “a buyer is entitled to approximately a dollar profit per dollar invested” he arrived at, and had no quarrel with, the returned figure of $1,353,830, which obviously is almost exactly half of the estimated future net profit. The Tax Court then recited that it had “examined in detail the various computations made by the parties and * * * paid special attention to the underlying estimates and assumptions”. It stated, “We are satisfied that the basic approaches adopted by the parties in placing a value on the relevant oil reserves are valid”. It went on to say, however, that it was convinced that the Commissioner’s proposed figure was excessive “since we believe some of the underlying estimates are too high”, inasmuch as they were “maximum figures of probable oil production from the entire field”, and because the per barrel figure of $1.8798 “is not without its infirmities”. It then said, “We do not believe it would be necessary to make a further detailed analysis of the evidence. Taking into consideration all of the evidence and making all the adjustments we deem appropriate, we find that the fair market value as of October 22, 1953 of the interests held by the partnership of R. A. and C. M. Goodall in the Little Beaver Field was $2,400,000.” This conclusion is an increase of more than a million dollars over the returned figure of $1,353,830. We note, initially and for what it may be worth: a. The Tax Court’s figure of $2,400,-000 is not too far from the midpoint ($2,-559,078) between the $3,764,326 proposed by the Commissioner’s witnesses and the $1,353,830 proposed by the estate’s witness. One might superficially argue or cynically comment, therefore, that the Tax Court compromisingly decided the issue down the middle. b. The difference in the Commissioner’s and the estate’s respective results is attributable primarily to the disparities in the estimates of oil reserves and in the per barrel values. c. Two of the Commissioner’s geologist witnesses had appeared on behalf of Mr. Goodall in 1953 before the Colorado Public Utilities Commission and had presented some of their same material in connection with an application for a pipe line to the Little Beaver. Generally, value is a fact to be found and usually is not to be established on the basis of fixed rules or formulas. Hamm v. Commissioner of Internal Revenue, 325 F.2d 934, 937-938 (8 Cir. 1963), cert. denied 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046; Arc Realty Co. v. Commissioner of Internal Revenue, 295 F.2d 98, 103 (8 Cir. 1961). See Churder v. United States, 387 F.2d 825. (8 Cir. 1968). The clearly erroneous standard and its accompanying rules apply, as has been noted by the Supreme Court and several times by this court, to findings of fact made by the Tax Court. Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 291, 80 S.Ct. 1190, 4 L.Ed. 2d 1218 (1960); Loco Realty Co. v. Commissioner of Internal Revenue, 306 F.2d 207, 209 (8 Cir. 1962); Idol v. Commissioner of Internal Revenue, 319 F.2d 647, 651 (8 Cir. 1963); Banks v. Commissioner of Internal Revenue, 322 F.2d 530, 537 (8 Cir. 1963); Wells-Lee v. Commissioner of Internal Revenue, 360 F.2d 665, 668 (8 Cir. 1966). Judge Learned Hand observed that the powers of review of a court of appeals “are very straitly limited upon all issues of fact * * * and that limitation is particularly narrow when the issue is one of value”. Sisto Financial Corp. v. Commissioner of Internal Revenue, 149 F.2d 268, 269 (2 Cir. 1945). We have joined in this observation. Hamm v. Commissioner of Internal Revenue, supra, p. 938 of 325 F.2d; Arc Realty Co. v. Commissioner of Internal Revenue, supra, p. 103 of 295 F.2d. On the other hand, the Tax Court’s finding of fact is not binding upon a court of appeals if there is no substantial evidence to sustain it, or if it is against the clear weight of the evidence, or if it is induced by an erroneous view of the law. Campbell County State Bank Inc., of Herreid, S. D. v. Commissioner of Internal Revenue, 311 F.2d 374, 377 (8 Cir. 1963). In the light of these principles we conclude that the record does contain evidence sufficiently supportive of the finding that the partnership interest in the four leases had a value of $2,400,000: 1. By the time of the decedent’s death 24 wells had been drilled in the Goodall leases in the Little Beaver Field. None was drilled thereafter. The partnership was then receiving about 22% of the field’s total production. By the end of 1953, 60 wells, out of an ultimate total of 71, had been drilled in the entire field and there were only 240 undrilled acres in an area of approximately 16 square miles. An activity level of a sort had thus been reached. 2. We see nothing improper, under the circumstances here, in the use of estimates for the entire field, as the Commissioner’s witnesses chose to do, and we find no legal imperative for restricting testimony to a consideration of only the individual leases. These are but differing approaches and different tools for the solution of the evaluation problem. And we do not regard the use of decline curves here as farcical, as the estate charges. 3. Various factors and approaches have proved to be acceptable in the evaluation of interests in oil leases for federal tax purposes. See Treas.Regs. 118, § 39.23(m)-7 and-9 (1953); Treas.Regs. § 1.611-2 (1967). Among these are comparable sales, analytical appraisals by experts, royalties paid, and state and local property tax valuations. The Commissioner here used analytical appraisals with sales references. The estate presented an opposing analytical appraisal. The Tax Court found each approach a valid one. The respective witnesses were experts in their field and technically well informed. Their testimony covered a wide range and, among other things, touched upon proportion of wells drilled; ultimate totals; decline curves; recoverable barrels; unitization; secondary recovery (although remote in 1953); underlying sand formations; and oil per acre foot. The record is full and adequate and is not without helpful evidence for the resolution of an issue which is usually difficult and which, when resolved, is at best only an approximation. 4. We would unduly lengthen this already too long opinion by a detailed summary of the respective analytical appraisals. It suffices to say that we, as did the Tax Court, feel that each side’s approach was valid and presented acceptable material. The choice between them, then, is obviously one for the factfinder. 5. The Tax Court’s ultimate finding of a $2,400,000 value is within the range of the estimation figures submitted by the several witnesses. When each and all of these figures are estimates and are based on so elusive a factor as human judgment, we cannot say that a figure within the range is invalid merely because no one of the witnesses mentioned that precise figure. We sustain no. element of shock or disbelief by the court’s finding and by its tempering what it felt to be figures excessively high and excessively low. And we are far, indeed, from that “definite and firm conviction that a mistake has been committed”, which the Supreme Court has employed as an indicator of the clearly erroneous finding. United States v. United States Gpysum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). 6. We regard as particularly pertinent, furthermore, the estimate by witness Cameron on his separate valuation analysis that the total value of the partnership interests was $2,503,809. This represents only a 4.33% differential from the Tax Court’s holding. Surely this is an insignificant variance among figures of this size when every bit of testimony rests on only estimational foundations. The Cameron testimony alone supports the Tax Court’s finding. We therefore conclude that the record contains adequate support for the $2,-400,000 valuation and that the Commissioner sustained his burden of proof with respect to this issue. III. The second estate tax issue. Is this valuation finding informationally sufficient ? The estate makes a secondary attack on the evaluation finding itself. It argues that the Tax Court drew a general conclusion increasing the value of the leasehold interests by more than a million dollars over the returned figure but explained the increase only by rejecting the Commissioner’s estimates as excessive and making “all the adjustments we deem appropriate”; that such a decision “simply cannot stand”; and that the finding is so general as to be legally insufficient because there is nothing which indicates the path by which the Tax Court reached its conclusion. Cited as supporting authority are expressions in the condemnation commission case of United States v. Merz, 376 U.S. 192, 198, 84 S.Ct. 639, 11 L.Ed.2d 629 (1964) and in the Interstate Commerce Commission case of Burlington Truck Lines v. United States, 371 U.S. 156, 167, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962), and our own condemnation commission case of United States v. Bell, 363 F.2d 94 (8 Cir. 1966), and Campbell County State Bank v. Commissioner of Internal Revenue, supra. Section 7459(b) of the 1954 Code, applicable here (see § 7851(a) (6) (C) (iv) of that Code), places upon the Tax Court the duty to make written findings of fact. Indeed, it is to “find the facts specially”. Section 7482(a) of the 1954 Code and Rule 52(a), Fed.R.Civ.P.; Hamm v. Commissioner of Internal Revenue, supra, p. 938 of 325 F.2d. This very argument was raised and rejected by this court in the Hamm case. There we observed, pp. 937 and 939 of 325 F.2d, that the taxpayers argued “that the Tax Court failed to find the facts specially” and “that there is no way of ascertaining how the Tax Court arrived at its value determination; that although the court listed in general terms several factors it said it had taken into consideration, it cannot be determined what weight it gave to any of these * * * and that the court did not find the facts specially but pronounced a conclusion and nothing more”. We noted in Hamm that the voluminous record did contain adequate supporting material and that “It is true that the record contains nothing pinned to this exact dollar and cents figure. However, it is well settled that ‘Valuation * * * is necessarily an approximation * * *. It is not necessary that the value arrived at by the trial court be a figure as to which there is specific testimony, if it is within the range of figures that may properly be deduced from the evidence’ [citations omitted]. * * * We feel that the taxpayers’ argument here comes down to a demand for a formula. Formulas, however, are only tools. With the kind of evidence present here, we need not, and do not, go so far as to require that a detailed computation leading to the determined value be present in the Tax Court’s findings.” Pp. 939-940 of 325 F.2d We need not decide whether the Supreme Court’s pronouncements with respect to a condemnation commission’s report and with respect to findings of the Interstate Commerce Commission, respectively set forth in Merz and Burlington, supra, do or do not have application to findings of the Tax Court. Although the court might have made our task on this review much less burdensome had it expressed its valuation finding in greater detail and had it illuminated every corner of its path to that finding, and thus given us more to work with, we are not inclined to hold, particularly in view of what has been said in the preceding division of this opinion, that the findings do not satisfy the Merz and Burlington standards, if applicable, or the requirements of Rule 52(a). We can understand the estate’s desire for complete detail and specificity, for a large sum is involved and critical analysis and comment are easier if the path of reasoning is indelibly defined. Nevertheless, there is enough here. IV. The third estate tax issue. Does the record support the Tax Court’s finding that the partnership, at the decedent’s death, possessed a $940,000 asset consisting of “Intangibles — goodwill” ? The facts pertinent to this issue, listed chronologically, are: 1. Prior to June 1949 the partnership owned and operated the manufacturing business. 2. On May 28, 1949, the corporation and the partnership executed the “Manufacturing and Rental Agreement”. Under this the corporation agreed to employ no one other than the two Goodalls; to reimburse the corporation for all other personnel; to pay the expenses of upkeep and maintenance of buildings and equipment; and to pay the partnership 5% of the corporation’s gross sales “for the use of the trade name, plant and equipment formerly used by the partnership in lieu of any royalties for the privilege of manufacturing such products and for the benefit of the industrial ‘knowhow’ of the engineers and employees of the partnership.” No title to any of the business properties was transferred to the corporation. The agreement was for one year from June 1, 1949, but was renewable annually. It was terminable by the partnership, with or without cause, on 24 hours’ written notice. 3. Stock in the corporation appears not to have been both formally and effectively issued until May 31, 1953. At that time 150,000 shares of its capital stock were outstanding in the names of each of the Goodalls in their capacities as partners. 4. During the five fiscal years from the inception of the agreement on June 1, 1949, through May 31, 1954, the payments by the corporation to the partnership under the 5% of gross sales provision of the agreement were: Fiscal Year Ended May 31 Payments 1950 $ 59,827.41 1951 134,314.01 1952 308,607.30 1953 283,153.65 1954 481,280.05 The average for these five years was $258,436.48. 5. Upon Mr. Goodall’s death in October 1953 the partnership necessarily proceeded to liquidate. A partial liquidation was effected on or about May 31, 1954. The estate at that time received 275,000 shares of the corporation’s stock and Mrs. Goodall received the remaining 25,-000 shares plus other assets. The final liquidation agreement of January 3, 1955, indicated a total value, for liquidation purposes, of $3,090,000 for the 300,000 shares, and values of the shares so distributed to the estate and to Mrs. Goodall at $2,832,500 and $257,500, respectively. 6. Sometime prior to June 1954, five employees made an offer to purchase the corporation’s stock for approximately $3,000,000. This offer was accepted. Mrs. Goodall’s shares were first redeemed by the corporation for $257,500 and on or about June 2, 1954, the estate transferred its 275,000 shares to the five employees. In order to finance their purchase the employees borrowed $55,000 from a bank and the balance of their purchase price from the corporation. This was made possible by Mrs. Goodall’s paying the corporation the full amount of the then balance of the Goodall withdrawals. The employees’ indebtedness to the corporation was evidenced by notes secured by the 275,000 shares. 7. Two days later on June 4, 1954, the corporation and the partnership executed a “Lease Agreement”. This, following the predecessor “Manufacturing and Rental Agreement” which it obviously replaced, provided for the leasing of the business real estate, machinery and equipment and further provided that the corporation was to pay all expenses of repairs and maintenance, building additions, property taxes, and insurance. It also obligated the corporation to pay the partnership “an amount equal to 3% of the gross sales of all products manufactured on or in said real estate or manufactured by said machinery and equipment”. This 3% provision contrasted with the earlier agreement’s 5% rate. The new agreement was to continue from year to year indefinitely but was cancelable on six months’ notice. The corporation could not assign the lease without the prior written consent of the partnership. 8. Also on June 4, 1954, the corporation and the partnership executed a separate option agreement. By this the partnership gave the corporation the option to purchase, upon the death of Mrs. Goodall, the leased real estate, machinery and equipment at prices equal to their fair market values on June 1, 1954, less accumulated depreciation. These values were to be determined [presumably by the parties] at a time convenient to the parties. 9. The amount paid under the new agreement for fiscal 1955 was $255,000. This was slightly more than the average payments ($253,436.48) for the preceding five years under the prior agreement but was less than the payment for each of the three immediately preceding years. 10. In the estate tax return the partnership’s stock in the corporation was valued at $3,090,000, the machinery and equipment at $41,167, and the real estate used in the business at $136,200. At the trial it was stipulated that the machinery and equipment had a date of death value of $29,800, rather than $41,-167 or the much larger figure of $352,-388.50 set forth in the 90-day letter. 11. The Commissioner in the 90-day letter made no adjustment in the $3,090,-000 valuation of the corporation’s stock. Although the estate in its petition for review alleged “that the value of said stock was substantially less than that amount”, the Tax Court sustained the figure. This value is not challenged by the estate here. 12. The Commissioner, however, in his 90-day letter and, earlier, in his 30-day letter (as subsequently explained by still another letter and accompanying schedules), increased the value of the estate’s interest in the partnership (along with other adjustments) by the addition of a $940,000 item entitled “Intangibles— goodwill”. No such item had been included in the estate tax return as filed. The schedules disclose that this $940,000 figure was arrived at by capitalizing (at 20% for a hazardous business) the partnership’s excess return, under the Rental Agreement, over what was computed as “fair and allowable rent” on the buildings, machinery and equipment (8% on realty; 12% % on equipment) during the fiscal years 1950/54. A like computation made for fiscal 1955 under the new agreement resulted in a capitalized figure of $1,000,000. 13. The estate in its petition for review alleged that the “partnership had no good will at the time of decedent’s death”. The Tax Court in its opinion recited that the estate “has introduced no evidence to show that this adjustment was incorrect”; that the adjustment was one made with respect to a separate partnership asset; that there was no convincing evidence that the good will item “was somehow involved with the valuation of the” corporation’s stock; and that the estate had not met its burden of proving that the Commissioner’s determination as to the item was in error. The estate’s argument on this issue, as we understand the argument, strikes us as more tactical than substantive. It asserts that at the trial “both parties proceeded on the understanding that this item was a part of the electrical manufacturing business value”; that they introduced their evidence on that basis; that the value of the intangibles was included in the value given to the corporation’s stock held by the partnership; that “the Internal Revenue Service has specifically advised petitioner that this adjustment related to the intangible values associated with the manufacturing operation” ; and that the Tax Court concedes that the values “were included in the value of the corporation’s stock”. After the filing of the/Ta^ Court’s opinion the estate moved to reconsider and to reopen the proceedings and based that motion on the same grounds. It was stated specifically that the $940,000 adjustment duplicated values already included in the value of the stock of the corporation. This motion was denied. The estate asserts that if the Commissioner contends that the good will item is related to some business or asset other than the manufacturing business he should be required to say so and the estate should be given a chance to meet that issue. It argues that this is an appropriate occasion for this court to exercise its jurisdiction to reverse “as justice may require”, as provided by § 1141(c) (1) of the 1939 Code [§ 7482(c) of the 1954 Code; see § 7851(a) (6) (C) (iv) of the 1954 Code]. Hormel v. Helvering, 312 U.S. 552, 61 S.Ct. 719, 85 L.Ed. 1037 (1941), and other cases are cited in support of this proposal. We feel that the estate is mistaken when it relates the addition for good will to the manufacturing operation and thus to the corporation. It seems to us that, instead, the good will is related to the lease and its controlling character and thus to the partnership. We feel, further, that the addition is most adequately supported by the Commissioner’s arithmetical computation. And it has not been overcome by any evidence presented by the estate. We therefore agree with the Tax Court that the estate has not sustained its burden on this issue. Neither are we impressed with the argument that the estate in some way was misled by the Commissioner. All the facts were known. The Goodalls were parties to the first agreement and Mrs. Goodall and the estate were parties to the second. The percentage obligation in each lease and the tangible assets covered by it were meticulously described. When the estate, pursuant to its request, was supplied in September 1957, by the Estate and Gift Tax Section of the Service at Omaha, with the details entering into the compilation of the $940,000 figure, the estate became fully aware of the basis for the inclusion of that item and its separateness from the corporation’s stock the value of which was not adjusted. The stock and the good will item were listed individually as assets of the partnership. Although good will, since the early days of A.R.M. 34, 2 C.B. 31 (1920), has often been an elusive and frequently misunderstood factor, the good will item here does not strike us as an unusual or esoteric one but, instead, as rather typical of a closely held and controlled arrangement such as the corporation-partnership dealings here. The good will in controversy did not go along with the stock of the corporation when it was sold to the five employees. It is true that what good will may have existed in the corporation’s operation went along. But what we are concerned with here are the lease rentals which flowed to the partnership under the agreements. It is there where the good will, which is now in contest, emerges over and above, and separate from, the value placed upon the corporation’s stock corresponding essentially with its sale price to the five employees. Certainly, the partnership’s right to receive a percentage of the corporation’s gross sales was something apart and distinct from the stock. And when the value of that right exceeds a fair rental of the tangible assets leased, it is an asset which exists and is includable in the gross estate. It is of particular significance, we think, to note that the rental paid during only the first fiscal year under the new lease was already one and a half times the value of the tangible properties rented. This is a 150% return in one year and clearly indicates the existence of good will owned by the partnership as an independent asset. We might further observe that, in our uninformed estimation, the Service’s computation of the $940,000 value seems to be one which was really advantageous to the estate. It was given the benefit of a hazardous business capitalization percentage and it was given the further benefit of a 12% % return on tangible personalty-valued at the 90-day letter’s figure of $352,388.50. But this latter figure at trial was reduced by stipulation all the way down to $29,800. The former factor, in view of several years’ experience, could perhaps be regarded as somewhat generous ; the latter factor is rendered grossly excessive by the stipulation. The compilation on the whole, therefore, strikes us as most reasonable. This issue must also be decided against the estate. V. The first corporation issue. Does the record support the Tax Court’s finding that, in each of its fiscal years 1950/54, inclusive, the corporation permitted its earnings and profits to accumulate beyond the reasonable needs of its business, within the meaning of § 102(c) of the 1939 Code? We have recited above that the corporation assumed its present name in 1949; that it entered into the Manufacturing and Rental Agreement with the partnership in May of that year; and that under that agreement it took over the manufacturing business theretofore conducted by the partnership. During each of the five fiscal years in question the corporation’s capacitor sales amounted to more than 90% of its total sales. The corporation itself did not have a contract with the Navy but it supplied capacitors to firms which possessed such contracts. It had five customers. The principal one was Eastman Kodak. Its gross sales of capacitors, its returned gross sales, and its returned taxable income were: Fiscal Year Ended May 31 1950 1951 1952 1953 1954 Gross Sales of Capacitors $1,080,734.54 2,474,708.18 5,761,401.22 5,280,247.13 8,841,906.74 Total Gross Sales $1,185,689.54 2,686,280.23 6,200,690.79 5,663,073.05 9,629,976.14 Returned Taxable Income ! 323,366.13 754,934.46 2,118,545.45 1,458,268.97 3,405,106.25 The balance sheets set forth in the returns filed by the corporation showed the following amounts of cash and earned surplus and undivided profits: Fiscal Year Ended May 31 1950 1951 1952 1953 1954 Cash $ 515,940.38 685,997.36 2,269,514.88 1,619,636.41 3,198,585.98 Earned Surplus and Undivided Profits $ 323,366.13 955,421.46 1,138,748.37 1,581,729.06 2,528,642.29 No dividends were declared by the corporation during the five fiscal years, During these years, however, the Goodalls repeatedly withdrew corporate funds. They also made some repayments. Most of these withdrawals were utilized in partnership oil activities. The year-end balances of the withdrawals, as shown in the returns for 1950/53 and described therein as amounts due from officers, were: Fiscal Year Ended May 31 1950 1951 1952 1953 Balance $203,043.48 273,152.58 309,696.15 880,273.20 At May 31, 1954, the balance was approximately $1,660,000; $1,318,088.74 of this amount had been withdrawn for use in the oil ventures. During this five year period the corporation was engaged in meeting technical problems in the reduction of the size and cost of capacitors and in designing a satisfactory enclosure for them. In May 1961 the Commissioner notified the corporation, pursuant to § 534(b) of the 1954 Code, that he proposed to issue for fiscal 1950/54 the statutory notice of deficiency in tax imposed by § 531 [§ 102 (a) of the 1939 Code], The corporation, as permitted by § 534(c), thereupon, by letter dated June 19, 1961, submitted its statement of the grounds on which it was relying to establish that its earnings and profits had not been permitted to accumulate beyond the reasonable needs of its business and thereby purported, under § 534(a) (2), to place the burden of this issue on the Commissioner. The grounds so stated were: 1. The need “to provide for the very large and undetermined liabilities to the United States Government for renegotiation of war contracts and for income and excess profits taxes and for the operational needs of the business”. 2. The need “for the contemplated expansion of the business into other fields, the acquisition of other companies and businesses, and for the planned construction of factories in other countries”. 3. The need “to provide against losses and costs of changing to different fields of manufacturing, to offset losses incident to termination of military contracts, and to supply the funds to obtain the necessary plant and equipment for the manufacture of civilian items, and to finance the development of a market therefor”. With its engagement in the manufacture of capacitors for Navy use, the corporation was subject to renegotiation under the Renegotiation Act of 1951 (see 50 U.S.C. App. § 1191). In March 1952 the Renegotiation Board notified the corporation that fiscal 1950 was being considered. In the following July it notified the corporation that it was commencing renegotiation proceedings for that year. No liability, however, was determined for fiscal 1950. In November 1954 the Board made a tentative determination of liability for fiscal 1951. Renegotiation as to that year was concluded in April 1955. Also, in that month, a notice of tentative determination was given for fiscal 1952; a final determination for 1952 was made by the Board in February 1956 and concluded in the ensuing fall. Preliminary notices of liability for fiscal 1953/54 were given in March and May 1959, respectively, were finally determined that August, and were concluded in November 1959. The total of the tentative determinations for the five years was $1,500,900. The corporation’s ultimately required repayments, net after credits under § 3806(b) of the 1939 Code, were: Fiscal Year Ended May 31 1951 1952 1953 1954 Reduction m Net Income $ 275,000 1,200,000 550,000 1,100,000 $3,125,000 Net Repayment After Credit under § 3806(b) of the 1939 Code $ 56,632.36 360,000.00 150,012.66 411,912.33 $978,557.35 One readily sympathizes with the business problems of a corporation such as this one during the hectic years of the Korean War. Its business was concentrated in capacitor production. Even that aspect of its activity was largely confined to one customer. Orders were subject to cancellation and some were cancelled. There were pressing and seemingly constant problems as to size, storage, construction, production, and costs of capacitors. Mr. Goodall’s death was a most jarring event. There were competitive problems, too, and demand showed signs of volatility. Maintaining the corporation’s share of the market depended upon ability to keep up with new developments, to deliver promptly, and to comply with changes required by the Navy. The company, as any competent manufacturer then engaged in government work would be, was aware of its renegotiation obligations and of the possible and seemingly inevitable result of renegotiation. It filed its contractor’s reports with the Renegotiation Board. A conference with board representatives was held at Ogallala in the summer of 1952. And Mr. Goodall, in the first half of 1953, traveled to Europe and to Mexico to investigate the possibility of locating plants there for civilian use manufacture. A Mexican corporation had even been organized and a bank account opened in that country. The Tax Court, however, decided the unreasonable accumulation issue against the taxpayer corporation. The court expressed doubt whether the facts set forth by the corporation in its responsive statement under § 534(c) were “sufficient to support the listed grounds” but went on to hold that even if it assumed that the burden of proof was on the Commissioner, he had successfully met that burden. The Tax Court emphasized the absence of declaration of any dividends during the entire five year period; the increase in earned surplus and undivided profits from zero to more than two an a half million dollars; the Goodalls’ complete control; their continuous withdrawal of corporate funds for their own or partnership purposes; the growth of these withdrawals to more than $1,600,000 by May 31, 1954; and the use of most of the withdrawals for the oil operations and thus “for purely personal expenditures or for other ventures of the Goodalls”. The court observed, “Such continual use of the corporate funds strongly indicates, in our opinion, that its earnings and profits to this extent were not needed in the operation of the corporation’s business and that such amounts were accumulated beyond its reasonable needs within the meaning of the statute”. The court then examined the grounds stated by the corporation in justification of the accumulation. It concluded that none of them had merit. It was not convinced by the purported expansion plans because the trips Mr. Goodall made in 1953 were no more than exploratory; there was no showing that earnings accumulated in prior years were insufficient for this purpose; there was no showing that such expansion plans were contemplated formally; and any such plans evaporated when the decedent died in October 1953, seven months prior to the end of fiscal 1954. The court dismissed the factor of potential renegotiation liability because it was not until July 1952 (which was in fiscal 1953) that the corporation was first informed that fiscal 1950 was to be renegotiated; it was not until November 1954 (after the five fiscal years here involved) that the corporation was notified of a tentative determination for fiscal 1951; and management was not sufficiently concerned about these liabilities to establish a reserve for them. The court was not persuaded by the factor of income and excess profits tax liability because the Commissioner did not begin his audit of the fiscal years in question until September 1953, during the last of the fiscal years here involved, and the agent’s report was not completed until some years later. Neither was the court convinced by the factor of need for operations because the corporation’s cash account throughout the entire period was substantial and, when viewed against the background of constant withdrawals, indicated that the accumulation was not to meet operational needs. It also touched upon the favorable working capital position, the nature of the current assets, and the sales pattern. Lastly, the court was not impressed with the claimed hazardous nature of the business. It noted that no reserves for this contingency had been set up; that there was no real indication that management was concerned about the hazard; that sales rose substantially during the period; that the sales pattern was generally upward; and that sales exceeded $9,000,000, not only in fiscal 1954 but also in the two succeeding fiscal years after the corporation had been sold. The corporation first attacks the decision of the Tax Court by arguing (1) that there can be no § 102 surtax unless earnings and profits were accumulated beyond the reasonable needs of the business because, it says, this is the issue narrowly framed by the 90-day letter; (2) that, because of the filing of the § 534(c) statement, the Commissioner has the burden of proof; (3) that the court must find facts as to the corporation’s earnings and profits and as to its reasonable business needs; and (4) that it failed to make a finding as to either of these essential facts. Although we are inclined to share the Tax Court’s concern about the legal sufficiency of the § 534(c) statement (under the statute’s specification of “facts sufficient to show the basis thereof”), we are willing to assume, for purposes of this review, but without deciding, the first three of these four propositions advanced by the corporation. See American Metal Prod. Corp. v. Commissioner of Internal Revenue, 287 F.2d 860, 861 (8 Cir. 1961). Having done this, we are not persuaded that the Tax Court failed to make findings as to earnings and profits and reasonable business needs. On the contrary, it did find specifically what the corporation’s records showed as to earned surplus and undivided profits at the end of each of the five fiscal years. It did find the amounts in the cash account on the same dates. It did find corporate inactivity as to that cash. And it did find that, to the extent of the withdrawals, earnings and profits “were not needed in the operation of the corporation’s business and * * * such amounts were accumulated beyond its reasonable needs”. The heart of this preliminary argument by the corporation, however, seems to be that actual tax and renegotiation liabilities clearly enter, under § 102(d), into the determination of what is “section 102 net income” and therefore must first be provided for before a corporation can be sai