Barbara Ann Tudyman - Page 21

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          retrofitting the foundation to get the postearthquake loss in                 
          value of petitioner's home.                                                   
               Respondent argues that Halpin improperly used a cost-of-                 
          repair method.  We disagree.  Halpin valued petitioner's home by              
          comparing its fair market value before and after the earthquake.              
               An appraiser may consider repair cost estimates in deciding              
          postcasualty fair market value.  Pfalzgraf v. Commissioner, 67                
          T.C. 784, 788 (1977); Abrams v. Commissioner, T.C. Memo.                      
          1981-231.  In Abrams, an appraiser used repair estimates to                   
          confirm his estimate of postearthquake fair market value, which               
          he based on the market method.  In Pfalzgraf, we held that, in                
          estimating the amount of a casualty loss, an appraiser may                    
          consider the cost of repairing property to restore it to its                  
          precasualty status.  67 T.C. at 788.  We rejected the taxpayers’              
          method of estimating their loss based on the difference between               
          the prefire fair market value and the postfire fair market value              
          because the taxpayers’ method included losses or expenses not                 
          caused by the fire.  Id. at 789-791.                                          
               Respondent contends that Abrams and Pfalzgraf do not stand               
          for the proposition that repair estimates may be used to                      
          calculate a casualty loss.  We disagree.  The taxpayer's expert               
          in Abrams concluded that a prospective buyer would discount the               
          value of the damaged building by the cost of needed repairs.  He              
          subtracted the estimated cost of repairs from the precasualty                 
          fair market value.  Similarly, Halpin estimated the loss in value             

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