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Lipscomb valued petitioner’s 100-percent interest in the
leased land under both a sales comparison approach12 and an
income capitalization approach,13 and then reconciled the two
results. Under his sales comparison approach, Lipscomb valued
the leased land at $958,473. In arriving at this value, Lipscomb
determined an indicated value of the leased land on the basis of
each of four comparable sales, then discounted each indicated
value by 45 percent on the theory that buyers would demand a
significant discount for property encumbered by a lease for 32
years. Under his income capitalization approach, Lipscomb valued
the leased land at $795,364. Treating the values determined
under the sales comparison approach and the income capitalization
approach as establishing upper and lower boundaries,
respectively, of a range of possible values, and weighing the
income capitalization approach most heavily, Lipscomb determined
that the value of a 100-percent interest in the leased land, as
of the date of the gifts, was $850,000. Lipscomb then determined
that a 50-percent undivided interest should be subject to a 27-
percent discount for a fractional ownership interest, as
determined by a range of adjustments suggested by his analysis of
12 Under a sales comparison approach, property is valued by
identifying sales of comparable properties and making appropriate
adjustments to the sales prices.
13 Under an income capitalization approach, income-producing
property is valued by estimating the present value of anticipated
future economic benefits; i.e., cash flows and reversions.
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