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The fair market value of the MLR easement should be based on
the highest and best use of petitioner's property at the
valuation date, including potential development. See, e.g.,
Stanley Works v. Commissioner, 87 T.C. 389, 400 (1986); Hilborn
v. Commissioner, 85 T.C. 677, 688 (1985); sec. 1.170A-14(h)(3)(i)
and (ii), Income Tax Regs. The realistic and objective potential
uses for petitioner's property control. See Stanley Works v.
Commissioner, supra. Regardless of whether an owner actually
puts the property to its highest and best use, we consider "The
highest and most profitable use for which the property is
adaptable and needed or likely to be needed in the reasonably
near future". Olson v. United States, 292 U.S. 246, 255 (1934).
Petitioner has the burden of proving the fair market value of the
MLR easement. See Rule 142(a).
The highest and best use of petitioner's property before the
MLR easement was as rural recreational development (RRD)
property. RRD is a general property classification consisting of
properties with multiple uses, including recreational use. In
addition, RRD property can be divided into smaller recreational
parcels. RRD property does not have development as its exclusive
highest and best use, and the value of RRD property is not
predicated on its development potential. Property that is valued
based upon its development potential is generally classified as
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