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Structures, which stated that the cost of digging a canal of the
approximate dimensions of the Canal would be $107,134.50.
As of October 5, 1988, the tax-assessed value of the Canal
was $1,000. According to a ratio study completed by the State of
South Carolina, in Clarendon County during 1990 the average ratio
of tax-assessed value to sales price for nonresidential,
nonagricultural property was 79.4 percent.
On April 15, 1991, petitioners filed a Form 4868, Extension
of Time to File U.S. Individual Income tax Return, seeking an
automatic 4-month extension of time to file their 1990 Federal
income tax return. The Form 4868, signed by petitioners’ tax
return preparer, required the taxpayer to estimate the amount of
tax owed and stated that “If we later find that your estimate was
not reasonable, the extension will be null and void.” On the
Form 4868, petitioners estimated a total tax liability of $0 for
1990. On August 15, 1991, petitioners filed a Form 2688,
Application for Additional Extension of Time to File U.S.
Individual Income Tax Return, seeking an additional extension of
time to file their 1990 return until October 15, 1991.
Petitioners hired an appraiser to value the Canal. The
appraiser’s report, dated August 15, 1991, valued the Canal at
$111,750. The appraisal used the cost method of valuation, under
which the appraiser’s estimated cost of constructing the Canal,
$98,010, was included in the value of the property.
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