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on Mary Catherine’s books. Bobrow advised petitioner that Mary
Catherine could either sell the Ridge or write it down to fair
market as of the end of the taxable year under the LCM method.
As a result, petitioner was under the impression that these
methods were equally valid ways, for income tax purposes, of
realizing the loss on the Ridge.
In July 1990, petitioner commissioned his own appraisal
of the Ridge from Phillip A. Goodsell and Donald R. Brown,
appraisers. Goodsell and Brown arrived at a value, as of
December 31, 1989, of $2,525,000 for unapproved, unimproved
land.4 Prior to December 31, Mary Catherine had been carrying
the Ridge at an adjusted basis of $6,266,352. The parties have
stipulated that the fair market value of the Ridge on December
31, 1989, was $2,525,000. Using the LCM method, Mary Catherine
wrote down the Ridge on its financial statements to its market
value and claimed a loss on its 1989 income tax return in the
amount of $3,741,352, the difference between the adjusted basis
of the Ridge and its fair market value on December 31, 1989.
Prior to 1989, Mary Catherine had not written down any of
its land holdings for Federal income tax purposes. In 1989, when
4 The record contains no evidence that would explain the
$1,870,000 disparity between Goodsell and Brown’s valuation as
of Dec. 31, 1990, and their valuation as of Apr. 11, 1990.
Petitioners contend in their reply brief that the value increased
between December and April because a portion of the land received
subdivision approval between the two appraisal dates, but there
is nothing in the record to support a finding to that effect.
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