- 6 -
consecutive 5-year options to renew the lease at a fair market
rental value. The postdeath lease set the initial rent at $7.50
per acre annually and $12,000 annually per each residence located
on the land. The postdeath lease on the Cotulla Ranch allowed
hunting on the leased properties with the express written consent
of the lessors. Hunting had been prohibited in all prior written
leases because decedent was adamant that the ranchlands would not
be used for hunting.
The estate reported the fair market value of the Sinton
Ranch at $2.6 million on its Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return, Schedule A, Real
Estate. The real estate appraisal report that was prepared by
Thomas F. Dorsey (Dorsey) and submitted with the estate’s Form
706 concluded that the unencumbered fair market value of
decedent’s interest in the Sinton Ranch on decedent’s date of
death was $4,150,000 and that the fair market value of the Sinton
Ranch encumbered by the postdeath lease was $3,350,000. In the
notice of deficiency, respondent determined that the fair market
value of the Sinton Ranch on the date of decedent’s death was
$4,150,000. Respondent reduced the value by $750,000 for a valid
election under section 2032A.
The estate reported the fair market value of the interest in
the Cotulla Ranch on Form 706, Schedule A, at $1,070,000. The
real estate appraisal report that was prepared by Dorsey and
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011