Estate of Charles a. Boratello, Deceased, C. Norman Borgatello and Josephine E. Donnelly, Co-Executors, and C. Norman Borgatello, Successor Trustee to the Charles A. Borgatello Living Trust - Page 14

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                  There are generally three kinds of valuation methods used to                         
            determine the fair market value of real property: (1) The                                  
            comparable sales method, (2) the income method, and (3) the cost                           
            method.  See Marine v. Commissioner, 92 T.C. 958, 983 (1989),                              
            affd. without published opinion 921 F.2d 280 (9th Cir. 1991).                              
            Variously using these methods, the appraisers in the instant case                          
            estimated the property values as follows:                                                  
            Montecito Village North                                                                    
            Appraisal Method                           Holden              Marx                        
            Income approach                     $8,375,000      $9,925,000                             
            (Discounted cash-flow)                                                                     
            Sales comparison                    7,900,000      10,369,000                              
            Cost1                                     –-                --                             
            Montecito Village South                                                                    
            Appraisal Method                            Holden             Marx                        
            Income approach                           $5,000,000        $5,874,000                     
            (Discounted cash-flow)                                                                     
            Sales comparison                          4,900,000         5,972,000                      
            Cost                                      4,600,000         –-                             
            1Mr. Holden performed a cost approach analysis for Montecito Village                       
            North, but only for the date of death, not the alternate valuation date.  The              
            date of death value was determined by Mr. Holden to be $10,225,000.                        
            Although the parties used more than one method to value MVN and                            
            MVS, each expert relied most heavily on a version of the income                            
            method called the discounted cash-flow method.  The sales                                  
            comparison and the cost approach methods played insignificant                              
            roles in their analyses and appear to have little effect on Mr.                            

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