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$228,000.16 At trial and on brief, petitioner argued that the
value of the property was $170,000. The fair market value of
property is a question of fact. The value determination in the
notice of deficiency is presumed correct, and petitioner bears
the burden of proving otherwise. Rule 142(a); Welch v.
Helvering, supra.
The subject property, a retail shoe store, is located in an
older, inner-city neighborhood, west of the downtown area of
Louisville. The area is depressed, and property values have
steadily declined in the area since the 1960's. The site is
zoned for commercial use. The property was purchased by Cyril
for $207,721, and the deed was recorded in July 1983. The
property was subject to a lease, which commenced on April 26,
1983, and was for an initial term of 20 years. At the end of the
initial lease period, the tenant had the right to extend the term
for two additional consecutive periods of 5 years each. The
terms of the lease provided for minimum annual payments of
$22,514, plus 5 percent of the gross sales less the minimum rent.
The tenant was responsible for all expenses directly related to
the property, including taxes, insurance, and interior and
exterior maintenance.
Petitioner introduced a report and testimony of its expert
16Respondent's valuation in the notice of deficiency of
$228,000 was based upon the income stream provided for in the
lease capitalized at a rate of 10 percent.
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