Detroit Trust Company

When John F. Dodge died in January 1920, his will provided for the establishment of a trust managed by the Detroit Trust Company in Detroit, Michigan. In 1919, just the year before, John Dodge, his brother Horace Dodge, James Couzens, and the other minority shareholders in the Ford Motor Company (FMC) were approached about selling their FMC stock. Before the Dodge brothers would sell their shares, they wanted to know what the Federal income taxes would be on the proceeds. The Commissioner of the Bureau of Internal Revenue (BIR) did a study of FMC and concluded that the value that should be assigned to a share of FMC stock as of March 1, 1913 was $9,489.34. The Dodges agreed to sell their stock for $12,500 per share and paid taxes on a capital gain of $3,010.66 per share. In March 1925, the BIR conducted a review of James Couzens' 1919 income tax return, twelve days before the statute of limitations was due to expire. A new study of the 1913 valuation by the BIR claimed a valuation of $9,489.34 was too high and claimed a much lower valuation of $2,600 per share. The BIR notified other former FMC minority shareholders that because of the lowering of the 1913 valuation of the stock, capital gains were increased to $8,900 per share and additional taxes were due. Each of the Dodge brothers' estates received notification of an additional tax due of $5,004,399.20. Nine of the then former minority shareholders protested and petitioned the U. S. Board of Tax Appeals for an abatement of the additional tax. They won the case after three and a half years of legal hearings and appeals. The Additional Tax Case is considered to be a landmark legal decision that has influenced the development of American capitalism ever since.

From the description of John F. Dodge Estate Trust Lawsuit collection, 1902-1928 (bulk 1925-1928) (The Henry Ford). WorldCat record id: 62246246

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