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in substantial agreement that the leased land should be valued as
of the time the subject gift was made as the sum of: (a) The
present value of the projected annual rental income from the
lease, plus (b) the present value of the reversion. The parties
disagree, however, about numerous assumptions made by the experts
at each step of the valuation methodology. We address these
disagreements below.
1. Present Value of Projected Lease Rents
The value of the lease income stream may be estimated by
determining the rental payments petitioner was receiving at the
time of the gifts, then projecting those rents into the future
based upon an anticipated growth rate, and finally discounting
the future rents payments to a 1991 present value using an
appropriate discount rate. See Saunders v. United States, supra;
see also Estate of Barge v. Commissioner, T.C. Memo. 1997-188
(using an income capitalization approach to value gift of 25-
percent undivided interest in timberland); cf. Estate of Proctor
v. Commissioner, T.C. Memo. 1994-208. We estimate the present
value of the projected income stream from the lease based upon
events, expectations, and market conditions as they existed at
the time of the gifts in August 1991.
a. Projected Annual Income From the Lease
It is undisputed that when petitioner made the gifts, the
remaining term of the lease was approximately 32 years. The
parties have also stipulated the actual rental amounts received
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