Edward E. and Constance M. Thorpe - Page 17

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               At trial, petitioners presented their expert witness, Mr.              
          Peter Larson III.  Petitioners offered the expert report of Mr.             
          Larson for the purpose of proving the amount of rent charged to             
          ETCO by Mr. and Mrs. Thorpe was not excessive.  In his report,              
          Mr. Larson described the condition of the real estate market in             
          the Washington, D.C., metropolitan and surrounding area in the              
          early 1990's as having experienced a dramatic decline, which                
          caused average rents to be reduced from annual square foot rates            
          from "upper $20's to low $30's to numbers that did not support              
          [many commercial projects]."  Mr. Larson also indicated in his              
          report that because of the dramatic decline in the real estate              
          market, many large institutions sought to restructure leases.               
          Mr. Larson reasoned that because Mr. and Mrs. Thorpe premised the           
          amount of rent they charged ETCO on the amount of their debt                
          obligation in the office condominium, there would be no reason to           
          consider restructuring their lease agreement with ETCO.                     
               Mr. and Mrs. Thorpe received rent from ETCO of $30,000 per             
          year ($2,500 per month).  Respondent determined that the fair               
          market rent was $14,028 per year.5  Neither petitioners nor their           
          expert presented any evidence which would contest respondent's              
          determination of fair market value based on reasonable                      

               5Mr. and Mrs. Thorpe received rent from ETCO of $30,000 per            
          year, and respondent determined that the dividend from rental               
          payments was $15,972 for each of the years in issue.  Thus, the             
          fair rent per year would be $14,028 ($30,000 less dividend of               
          $15,972 equals $14,028).                                                    

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