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3. Cases That Allow a Reduction in Value To Reflect
the Cost of Making An Asset More Marketable
The estate cites two cases addressing the issue of valuing
land that is either subject to unfavorable zoning or
contaminated. In Estate of Spruill v. Commissioner, 88 T.C. 1197
(1987), this Court allowed valuation methods that required a
reduction in the value of the decedent’s property to reflect
unfavorable zoning associated with the property and the potential
litigation costs associated with obtaining zoning.8 In Estate of
Necastro v. Commissioner, T.C. Memo. 1994-352, this Court held
that contaminated property could be discounted to account for the
cost to clean the property. The estate characterizes these cases
as instances where “this Court regularly allows discount for
costs necessary to render an estate’s assets marketable.”
The estate’s characterization of the holdings in these cases
is misplaced. First, the valuation concerns associated with real
property are markedly different from those associated with
securities. For tangible property, the fair market value of
property should reflect the highest and best use to which such
property could be put on the date of valuation. See Symington v.
Commissioner, 87 T.C. 892, 896 (1986). In the case of real
property, the highest and best use of the land may need to take
8Although agreeing with the premise that these principles
should be taken into account in valuation, this Court ultimately
found that the expert in Estate of Spruill v. Commissioner, 88
T.C. 1197 (1987), failed to consider the reasonable probability
of obtaining zoning at the time of decedent’s death.
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