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There are generally three kinds of valuation methods used to
determine the fair market value of real property: (1) The
comparable sales method, (2) the income method, and (3) the cost
method. See Marine v. Commissioner, 92 T.C. 958, 983 (1989),
affd. without published opinion 921 F.2d 280 (9th Cir. 1991).
Variously using these methods, the appraisers in the instant case
estimated the property values as follows:
Montecito Village North
Appraisal Method Holden Marx
Income approach $8,375,000 $9,925,000
(Discounted cash-flow)
Sales comparison 7,900,000 10,369,000
Cost1 –- --
Montecito Village South
Appraisal Method Holden Marx
Income approach $5,000,000 $5,874,000
(Discounted cash-flow)
Sales comparison 4,900,000 5,972,000
Cost 4,600,000 –-
1Mr. Holden performed a cost approach analysis for Montecito Village
North, but only for the date of death, not the alternate valuation date. The
date of death value was determined by Mr. Holden to be $10,225,000.
Although the parties used more than one method to value MVN and
MVS, each expert relied most heavily on a version of the income
method called the discounted cash-flow method. The sales
comparison and the cost approach methods played insignificant
roles in their analyses and appear to have little effect on Mr.
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