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Crocker contends that the best method to value both the
theater component and the retail/office component of the property
is the replacement cost method because there are no true
comparable sales:
There are no comparable sales of a historic movie
palace such as the Fox Theater with its appendage, the
Retail/Office Space. There are comparable sales of the
parts, but not the whole, and in our case, for
appraisal value purposes, the whole is bigger than the
sum of its parts.
Because each appraiser determined that the property should be
preserved, and "the whole is inseparable", Crocker argues the
property must be valued by use of the replacement cost method.
Respondent's position is that comparable properties--the San
Jose Fox and the Stanford Theater--were sold during the relevant
time period, and, therefore, these transactions should be given
primary emphasis in the determination of fair market value.
Respondent disputes the reliability of the replacement cost
method in this instance for a number reasons, and further argues
that the comparable sales transactions demonstrate that the fair
market value of the Redwood City Fox is "not equal to * * * [its]
replacement cost, but rather, it is far less."
This Court has held that replacement cost may be considered
in valuing property. Cupler v. Commissioner, 64 T.C. 946, 955
(1975). However, replacement cost is an appropriate measure of
value only where the taxpayer establishes a probative correlation
between such cost and the fair market value of the property.
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