Katherine Strasburg - Page 9




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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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