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“the recent lease negotiated with the Nella Oil Company in West
Sacramento * * * gives a Cap Rate of 13%, a 13% range is deemed
reasonable and meaningful for comparable purposes.” Mr. McIntosh
also testified at trial that the Nella Oil lease would result in
a capitalization rate of “someplace in the neighborhood of 12 to
13 percent.”
Mr. McIntosh faced a difficult problem in attempting to
justify petitioner’s rental rates because he had previously
valued the properties for estate-planning purposes at low
values.7 Mr. McIntosh’s fair market value determinations in his
estate-planning appraisal were even lower than respondent’s fair
market value determinations, as shown in the following chart:
6(...continued)
regarding the comparability of property in Modesto or Stockton
with Sacramento, depending on whether the analysis supports or
contradicts his client’s position, and his suggestion that it
would be proper for an appraiser to rely solely on a single
related-party comparable in determining the fair market value of
the subject property, call into question the independence of his
analysis.
7Presumably, petitioner and its shareholders wanted
conservative values for estate-planning purposes, so as to
minimize gift and estate taxes. Mr. McIntosh was already bound
by the conservative fair market value determinations he used in
his estate-planning appraisal. It is, of course, easier to
justify higher rental rates with higher property values.
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