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representative of what Kmart’s 29-year bonds would trade at in
the open market, the addition of the premium would result in a
rate of 10.34 percent. Then, as Thompson had, White applied a
higher rate to the second portion of the lease, extending from
2023 to 2032. He chose a 13-percent rate to reflect the high
uncertainty surrounding the financial viability of the property
so far into the future, the difficulty of re-leasing a large,
aging facility for any brief remainder of its life and the high
likelihood of having to make significant capital improvements in
order to do so. While saying that he thought that, in all
likelihood, only the land would have any value and that
significant costs would be attached to necessary capital
improvement at the lease’s end, White accepted Thomson’s residual
value of $71,901 to be “as good a guess as anyone’s”. White
calculated a gross value of $5,408,784 for the Kmart property.
Although the 1997 sale reflects the value of the property at
that time, it is not close enough in time, and it depended on
information that was unknown and unforeseeable at the time of
decedent’s death. The termination of the Kmart lease, inclusion
of the parking lot property, and penalties for early loan payoff
were all factors that were not under consideration on September
7, 1993. We cannot consider unforeseeable future events that may
affect the value of property at a later date. See sec.
20.2031-1(b), Estate Tax Regs.; see also Estate of Newhouse v.
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