- 11 -
committee believes it should not be applied
mechanically. [S Rept. 96-1007, at 15-16 (1980), 1980-2
C.B. 599, 606.]
The regulations also provide that the before and after method is
used as a "general rule (but not necessarily in all cases)."
Sec. 1.170A-14(h)(3)(i), Income Tax Regs.
B. "Before and After" Analysis
The parties have stipulated that the fair market value of
petitioner's property before the grant of the easement was
$2,624,000. The parties disagree as to the fair market value of
petitioner's property after the grant of the MLR easement. This
disagreement accounts for the extreme variance in fair market
value assigned to the easement by the parties.
To establish the fair market value of the MLR easement, each
party offered the report and testimony of an expert witness.
Both expert witnesses testified that they used a "before and
after" method to value the MLR easement. The experts' opinions
involved an analysis of conservation easement sales, easement-
encumbered property sales, and paired sales.8 Expert witnesses'
8The analysis of conservation easement sales involved
comparing the purchase price of a conservation easement to the
fair market value of the property that is burdened by the same
conservation easement. The purchase price of the conservation
easement was divided by the fair market value of the burdened
property to derive a diminution percentage attributable to the
conservation easement involved in the comparison.
The analysis of easement-encumbered property sales involved
a comparison of the fair market value of easement-encumbered
(continued...)
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