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According to the terms of the McArthy-Imperial agreement,
Imperial agreed to waive "tap-on" fees up to $200,000. Clearly,
Imperial expected something of value in exchange for its waiver
of fees. Mr. Fribis testified that Imperial has waived tap-on
fees for other customers in the past in exchange for easements
over property Imperial needed to construct a sewer line. In this
case, Imperial received $200,000 in lieu of future tap-on fees.
This Court has noted that the determination of the fair
market value of property on a given date is a question to be
resolved on the basis of the entire record. See McShain v.
Commissioner, 71 T.C. 998, 1004 (1979). In this case, we find
that the record clearly supports the use of the cost method of
valuation.
We have considered the cost method of valuation in light of
all relevant evidence: (1) The cost of construction; (2)
petitioner's expectations at the time of valuation; and (3) the
positioning of the sewer line through Pine View. The knowledge,
actions, and expectations of petitioner illustrate that the cost
of construction is in these circumstances indicative of the fair
market value of the sewer line. Therefore, we find that the
price at which the sewer line would change hands between a
willing buyer and a willing seller, neither being under any
compulsion to buy or sell, is the cost of construction.
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