- 89 -
Estate of Palmer v. Commissioner, 839 F.2d 420, 424 (8th Cir.
1988), revg. and remanding 86 T.C. 66 (1986).43
Generally, a correlation between replacement cost and fair
market value has been proved where the property is unusual in
nature and other methods of valuation, such as comparable sales
or income capitalization, are not applicable because of the
property's uniqueness and nonincome-producing nature. See, e.g.,
Estate of Palmer v. Commissioner, 839 F.2d at 424. While we have
found that the income capitalization method is not appropriate to
value the theater portion of the Redwood City Fox, the comparable
sales method is appropriate because two properties which we find
to be substantially similar to the Redwood City Fox were sold
close in time to the valuation date of December 31, 1986.
The San Jose Fox is a 24,363-square foot "movie palace" that
opened in 1927. The Redevelopment Agency of the City of San Jose
purchased the San Jose Fox in September 1985 with the intent to
renovate the theater and revitalize the downtown area of San
Jose. Similarly, the Stanford Theater is a 22,313-square foot
movie theater that was built in 1925, and, while not a live
performance theater, is similar in size and attractiveness to
both the San Jose Fox and the Redwood City Fox. It was purchased
43 In published guidelines, respondent has taken a similar
approach to the use of reproduction cost in valuing property for
purposes of the sec. 170 deduction. Such guidelines direct that
"fair market value depends upon value in the market and not on
intrinsic worth", and that reproduction cost is to be considered,
but only to the extent it is probative of value. Rev. Proc. 66-
49, secs. 2.04, 2.07, 1966-2 C.B. 1257, 1257-1258.
Page: Previous 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 NextLast modified: May 25, 2011