- 16 - Commissioner, 94 T.C. 193, 218 (1990); Estate of Gilford v. Commissioner, 88 T.C. 38, 52 (1987). The owners decided to refinance the property in 1994, even though a penalty was due and a strict prepayment restriction was added to the modified mortgage. This would indicate that there was no intention on the owners’ part to sell at any time soon after the modification was completed. For this reason, we do not consider the 1997 sale price. Both parties used acceptable methodologies for valuing the subject property. Although the methodologies were appropriate, we do not agree in all respects with the manner in which they were applied. With respect to the Kmart property valuations, we tend to favor petitioner’s applications. The use of the bond return by respondent’s expert is less reflective of the below- market return to be expected from the lease. Comparable real estate investment returns are more appropriate here. In addition, we disagree with Thomson’s manipulation of the rates to cause a higher discount rate for the rental loss. Thomson’s approach resulted in a higher value favoring respondent but was without explanation for differing discounts for simultaneous monetary events. Moreover, Thomson did not explain his reasons for concluding that the life of warehouse would exceed 60 years and therefore have a residual value at the end of the Kmart lease. We acceptPage: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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