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Producer Price Indexes: A Guide for Contracting Parties issued
by the U.S. Department of Labor, Bureau of Labor Statistics in
September 1991 for the purpose of establishing that the PPI can
be applied to contract rents to calculate accurately fair market
rents for future years in the absence of escalation clauses, as
the expert claimed to have done. We determined in Estate of
Thompson that:
Report 807 does not support the proposition that market
rents for the relevant period can be accurately calculated
from contract rents entered into several decades beforehand
via the application of the PPI for purposes of section
2032A(e)(7)(A) for those leases which do not themselves
contain rent escalation clauses. Rather, Report 807
provides guidance to contracting parties with respect to the
use of price adjustment clauses at the time the contract is
entered into. * * *
In Estate of Thompson the average gross cash rental for the
5 years preceding the decedent’s death was determined by the
expert on the basis of his "personal knowledge * * * what I
thought would be the indicated market rent for what I knew about
the whole business, and that’s it." Furthermore, the expert
testified that he validated his estimate of the cash rental rate
for the timberland by reference to the prevailing rate for
cropland during the relevant period, of which there was no
evidence.
In decedent’s estate here, the special use valuation of the
five estate tracts is based exclusively on actual cash rents from
the five leased tracts for the 5 years preceding decedent’s
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