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substantially understated, and to the complete lack of data and
analysis contained in the expert reports offered by petitioner.
Using Mr. McIntosh’s “estate-planning” appraisal values, as
respondent requests, and our 13-percent “capitalization” rate
would have resulted in very substantial excessive rents.10 We
believe this is attributable to Mr. McIntosh’s undervaluing of
the properties for estate-planning purposes rather than to
petitioner’s overstating of the rents.
While we would have preferred to base our decision on a
record containing expert testimony supported by complete data and
thorough, unbiased analysis, we must to do the best we can with
the evidence presented by the parties. We are comforted in the
correctness of our conclusion that petitioner paid fair market
rents for the remaining three properties by respondent’s
admission that Mr. Harris, respondent’s expert, had concluded
that the rents for these three properties were not excessive.11
10Applying a 13-percent “capitalization” rate to Mr.
McIntosh’s fair market values would have resulted in fair market
rent of $18,200 per year for Mosquito Road, $32,500 for Roseville
Road, and $33,800 for White Rock Road. Using these fair market
rental values, petitioner would have overstated the fair market
rents for these three properties for the 2 years in issue by
$151,100.
11Because respondent’s appraiser used a flat 10-percent
“capitalization” rate to determine fair market rental value,
respondent’s expert must have determined fair market values
exceeding $530,000 for Mosquito Road, $540,000 for Roseville
Road, and $550,500 for White Rock Road--many times the values
determined by Mr. McIntosh (who valued the properties at
(continued...)
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