- 15 - There are 3 basic methods used to value real property and other assets: (1) The market-data, or sales comparison, approach; (2) the replacement-cost approach; and (3) the capitalization-of-earnings approach. See Marine v. Commissioner, supra at 983. The market-data approach entails a comparison of the subject property to similar properties sold in the same time frame and geographic area. Differences which make a comparable property superior or inferior to the subject property are accounted for by adjusting the sale price of the comparable property downward or upward, respectively. See Estate of Spruill v. Commissioner, 88 T.C. 1197, 1229 n.24 (1987); Estate of Korman v. Commissioner, T.C. Memo. 1987-120. The validity of this valuation method depends to a great degree upon the comparables selected and the reasonableness of the adjustments made thereto. See Wolfsen Land & Cattle Co. v. Commissioner, 72 T.C. 1, 19-20 (1979). The replacement-cost approach begins with an estimation of the value of the underlying land and then adds the cost of constructing equivalent improvements thereupon as if the improvements were new. From this figure is subtracted the amount that the existing improvements have diminished in value due to physical depreciation or obsolescence. Marine v. Commissioner, supra at 983. The capitalization-of-earnings approach to valuation is premised on the theory that the value of property correlates withPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011