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visible property in a prime location and is used as a retail gas
station, convenience store, and cardlock operation. Mr. McIntosh
discloses no analysis to adjust for the superiority of the Nella
Oil lease. He simply attempts to justify petitioner’s lease
rates by pointing out that the rent per square foot paid by Nella
Oil is higher than the rent per square foot paid by petitioner.
Mr. McIntosh criticized Mr. Harris’s report, arguing that it
is not appropriate to apply a capitalization rate to the fair
market value of the property to derive the fair market rental
value of the property. Yet in a letter to petitioner dated
December 8, 1999, criticizing an Internal Revenue Service
engineer’s report in a prior dispute,6 Mr. McIntosh stated that
6Petitioner provided a copy of Mr. McIntosh’s letter to the
Internal Revenue Service. Respondent used this letter at trial
for impeachment purposes. Mr. McIntosh testified at trial that
he reviewed Mr. Vanderbundt’s report and found it to be a sound
basis for determining the fair rental value of the subject
properties. Mr. Vanderbundt relied entirely on a single
“comparable” lease for property in Lodi, California, which is 23
miles south of Sacramento, California, near Stockton, California.
Mr. McIntosh was asked at trial whether the Modesto and Stockton
areas are comparable to Sacramento:
A: Some of the areas around Modesto and Stockton, and
I’m familiar with those areas, because I do
appraising in that area, would be familiar
[similar] with many of the areas around the
Sacramento metropolitan area.
* * * * * * *
Q: Mr. McIntosh, would you ever attempt to use a
comparable from areas like Modesto or Stockton for a
property in Sacramento?
(continued...)
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