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C. Valuation Methodology and Highest and Best Use
The parties’ disagreement over DP’s value stems from two
issues. First, what was the highest and best use to which DP
could have been put on the valuation date? Second, what method
should be used to value DP? We note that the valuation method
petitioner urges us to apply and the method J. Richard Cox (Mr.
Cox), an attorney and C.P.A., used to determine the value of DP
that the estate reported on the estate tax return are different.
Given this difference we will analyze the appraisals attached to
the estate tax return in addition to the reports of the experts
who testified.
1. The Estate Tax Return
Mr. Cox’s report was attached to the estate tax return, but
he was deceased at the time of trial. The valuation method Mr.
Cox used aggregated the timber value and the land value. A land
appraisal by Mr. Middleton and a timber appraisal by Scott Pellum
(Mr. Pellum), a registered forester, were also attached to the
estate tax return.
a. Land Appraisal
To determine the highest and best use for DP, Mr. Middleton
considered four factors: (1) Physical possibility, (2) legal
permissibility, (3) financial feasibility, and (4) maximum
productivity (profitability). After considering these factors,
Mr. Middleton concluded that DP’s highest and best use was a
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Last modified: May 25, 2011