Lakewood Associates, Robert G. Moore, Tax Matters Partner - Page 14

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                  Petitioner presented the expert testimony of a real estate                          
            appraiser, Bruce Hatfield, to the effect that the value of the                            
            property decreased in 1989 from about $11 million to $1 million                           
            as a result of the 1989 Manual and MOA.  Mr. Hatfield's valuation                         
            is based on his conclusion that the highest and best use of the                           
            Elbow Lake property is residential development and that the                               
            property could be rezoned from agricultural to residential.  The                          
            fair market value of property is a question of fact for which the                         
            burden of proof is on petitioner.  Symington v. Commissioner, 87                          
            T.C. 892, 896 (1986).  The fair market value of property is based                         
            on the highest and best use for the property on the date of                               
            valuation regardless of whether the property is actually being                            
            used for that purpose or the land owner intended to put the                               
            property to that use.  Frazee v. Commissioner, 98 T.C. 554, 563                           
            (1992); Stanley Works v. Commissioner, 87 T.C. 389, 400 (1986).                           
            Rather, "The realistic, objective potential uses" of the property                         
            control.  Stanley Works v. Commissioner, supra at 400.  The                               
            highest and best use is a reasonable and probable use of the                              
            property in the near future.  Frazee v. Commissioner, supra.                              
            Restrictions on a land owner's right to use the property are                              
            relevant in determining whether the identified highest and best                           
            use of the property is reasonable.  Stanley Works v.                                      
            Commissioner, supra at 402.  Accordingly, petitioner must prove                           
            that it was reasonable and probable that the Elbow Lake property                          

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