Estate of F. Wallace Langer, Deceased, Clarence D. Langer, Jr., Executor - Page 16

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          3,404 households could support only 208,325 square feet of retail           
          space.  Because more than 300,000 square feet of commercial space           
          was available on the date of death, Mr. Kelley concluded that               
          there was an oversupply of commercial property.                             
               By limiting his analysis to a 1.5-mile radius, Mr. Kelley              
          made an implicit assumption that people living outside the radius           
          will not shop within the radius.  His approach takes into account           
          only 9,218 people, which does not even include the entire                   
          population of Sherwood in 2000 (12,230).  Mr. Kelley did not                
          offer a reasonable explanation for why he so limited his                    
          analysis.  The businesses within the area included a Home Depot,            
          grocery stores, banks, restaurants, a movie theater, and an ice-            
          skating arena.  We find that it is unreasonable to assume that              
          only those people living within 1.5 miles will frequent such                
          businesses.                                                                 
               For the above-stated reasons, we reject Mr. Kelley’s use of            
          a discounted cashflow analysis.10                                           

               10  We recognize that discounted cashflow analysis can be an           
          appropriate valuation method.  For example, discounted cashflow             
          analysis has been accepted as a method of valuing a company’s               
          stock by determining the present value of its future stream of              
          income.  See, e.g., N. Trust Co. v. Commissioner, 87 T.C. 349,              
          378-380 (1986).  Also, in Estate of Rodgers v. Commissioner, T.C.           
          Memo. 1999-129, discounted cashflow analysis was accepted to                
          determine the fair market value of multiple pieces of real                  
          property.  The properties were so numerous that they could not be           
          liquidated within a reasonable time without depressing the sales            
          prices, and thus a discounted cashflow analysis was appropriate             
          to take into account a market absorption rate.  Id.  This case is           
                                                             (continued...)           




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