Martin H. Droz - Page 7

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          amount of $19,795.2  Attached to petitioner's 1991 return was a             
          report (Hetz report) that contains what purports to be the signa-           
          ture of Russell W. Hetz (Mr. Hetz).3  The Hetz report indicated             
          that, based on the cost approach, "We recommend a Rounded Es-               
          timate [sic] Fair Market Value" for "the MARK IV United States              
          Navy Helmet, Circa 1959" of $76,700.4                                       


          2  Petitioner calculated the amount of the deduction reported in            
          his 1991 return on the basis of the claimed fair market value of            
          the Mark IV helmet at issue, reduced to take account of the                 
          limitation prescribed in sec. 170(b)(1)(A) that the deduction not           
          exceed 50 percent of his contribution base for 1991.                        
          3  Mr. Hetz' purported resume states, inter alia, that he is "a             
          Fee Appraiser, specializing in the market valuation of industrial           
          machinery and transportation equipment."                                    
          4  The Hetz report noted, inter alia, that the various factors to           
          be considered in determining that value included the "Sale of [a]           
          similar Helmet."  That report further stated, with no explana-              
          tion:  "WE have elected to use the Cost Approach."  It described            
          the cost approach as an estimate of "value based on the current             
          cost in dollars of a new replacement Property Unit of similar               
          design, capacity, materials and utility."  The Hetz report                  
          concluded that the total design and material cost of "the MARK IV           
          Pressure Helmet" as of the time the Hetz report was prepared was            
          $338,000.  It then allocated that cost to the Mark IV helmet that           
          was the subject of the Hetz report as follows:                              
             In order to spread the development costs for High Technol-               
             ogy Projects such as this MARK IV Helmet, the first 2 units              
             produced are tested to their limits, usually to destruc-                 
             tion.  We say the subject Helmet was the first one built                 
             after the tests and we shall spread the Design and Material              
             Cost over the First Three Units.                                         
                                                                                     
          3  $338,000  =  $112,933 [sic] Allocated Cost for the Subject Helmet.       
          The Hetz report adjusted that $112,933 allocated cost for depreciation using a
          100-year useful life for the helmet that was the subject of that report and 
          arrived at a recommended "Rounded Estimate [sic] Fair Market Value" of $76,700
          for that helmet.                                                            




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