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corroborated by means of contemporaneous sales of four comparable
properties. The land was valued at $215,000 and the 57-percent
completed building at $465,690 ($817,000 times 57 percent) for a
total of $680,690. A 10-percent marketability discount ($68,690)
was used to reflect the incomplete status of the residence to
arrive at an appraised value of $612,000. Respondent’s notice
determination utilized the appraiser’s $1,032,000 completed value
to determine that the gross estate should be increased by
$420,000 ($1,032,000 less the $612,000 reported).
At trial, the estate offered an expert who concluded that
the value of the residence, if it had been completed on November
4, 1994, would have been $900,000. The trial expert explained
that the cost method was usually a good measure of value, but
that it was not a reliable measure of value with respect to the
actual cost of restoring the Manchester Drive property because
the costs were excessive. The expert reached that conclusion
because the actual construction costs were not “recoverable in
the marketplace”, due to “the abnormal post fire construction
environment and the high quality of workmanship”. He also
concluded that the income method was inappropriate, so that a
sales comparison approach was the only relevant way to measure
value. Five comparable contemporaneous sales of property were
used to reach the $900,000 value if completed.
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