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cost used by petitioners’ principal witness at trial and the
determination of replacement cost used to estimate the donation
by MRDF which was attached to petitioners’ return for 1994 with a
letter from MRDF to the donees. Our discussion will start with
the role of replacement cost in the parties’ methodologies.
Petitioners’ expert at trial was Thomas Ferguson, a self-
described marine surveyor. He valued JUL by starting with an
estimate of replacement cost of $4.25 million. He then
determined that JUL had a useful life of 18 years from its
“reoutfitted [sic] date in 1982 and salvage value of $620,000”,
thus resulting in depreciation of $2,450,000 from the replacement
cost of $4,250,000 and a fair market value of $1.8 million as of
December 19, 1994. Mr. Ferguson’s original report was attached
to petitioners’ 1994 income tax return and reached the same
conclusions as the report submitted at trial.
As stated previously, a letter to the donees of Sealodge
from MRDF, dated January 4, 1995, was also attached to the 1994
return. Referenced in this letter and also attached to the 1994
return was a report prepared by Edward Geiger, a consulting
engineer. Mr. Geiger’s report determined the value of JUL and
related equipment as $1.97 million based upon “the estimate cost
to replace this vessel.”2
2Inexplicably, petitioners argue on brief that this
information should be ignored because Mr. Geiger’s report was not
(continued...)
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