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concluded that the true fair market value of the land was
$1,837,750 ($1,470,200/.80). As a result, Mr. Middleton’s land
value played no role in the amount reported by the estate on the
Estate tax return.
Aggregating the adjusted timber value of $2,440,263, the
adjusted land value of $1,837,750, and the $100,000 value of the
improvements on the land, as determined by Mr. Middleton, Mr. Cox
concluded that the fair market value of DP was $4,378,013.
2. Respondent’s Valuation Method in the Notice of
Deficiency
In his notice of deficiency, respondent stated that the
value of DP was $5,490,992 on the valuation date. This was
determined by aggregating the timber value in Mr. Pellum’s report
and the land value in Mr. Middleton’s report. This method
essentially disregarded any discounts Mr. Cox had applied and
rejected Mr. Cox’s land valuation method.
Mr. O’Rear concluded in his report that the highest and best
use that DP could have been put to on the valuation date was a
mixed use of recreation and agriculture. However, at trial he
opined that DP should be valued as timberland since that was its
only profitable use on the valuation date. Accordingly, he
applied a summation approach to arrive at the value stated in the
notice of deficiency.
3. Mr. Hartnett’s Valuation Method
As stated above, the estate contends that the value of DP is
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