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basic rate as being 3.5 percent over the prime lending rate of 9
percent and approximately 1.5 times the 30-year bond rate. His
report indicates that this basic discount rate is consistent with
the somewhat lower yields on a land lease at a Birmingham
shopping center and with a national survey of 1991 real estate
yields for all real estate types. His report states that a
higher discount is appropriate for the leased land than for these
other real estate comparables because the lease income “is
dependent upon the stability or lack thereof in the timber
business.” His report indicates that an additional 1-percent
discount should be added to his 12.5-percent basic rate to
reflect the absence of any lease term requiring the lessee to
reseed or reforest the land upon termination of the lease.
Dilmore applied the 13.5-percent discount rate to the pretax
lease income stream.
Maloy selected a discount rate of 8 percent on the basis of
interviews with Federal Land Bank appraisers and forestry
economics professors. Unlike Lipscomb, but like Dilmore, Maloy
applied his selected discount rate to the pretax lease income
stream.
i. Pretax Versus After-Tax Present Value
Analysis
Respondent argues that Lipscomb’s use of an after-tax
analysis is inappropriate for determining fair market value.
Respondent argues that an after-tax analysis is “used only to
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