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relevant facts.” Sec. 1.170A-1(c)(2), Income Tax Regs (emphasis
added); see also United States v. Miller, 317 U.S. 369, 373-74
(1943). In determining FMV, we look to the “highest-and-best
use” for the property in question. See McMurray v. Commissioner,
985 F.2d 36, 40 (1st Cir. 1993), affg. in part and revg. in part
T.C. Memo. 1992-27; Browning v. Commissioner, 109 T.C. 303, 323
(1997); Van Zelst v. Commissioner, T.C. Memo. 1995-396, affd. 100
F.3d 1259 (7th Cir. 1996); McLennan v. United States, 24 Cl. Ct.
102, 108 (1991), affd. 994 F.2d 839 (Fed. Cir. 1993). The
parties agree that the highest-and-best use of the Hamblen Road
property is mining it for sand and gravel.
There are three widely accepted methods of estimating FMV
for any property: comparable sales, income capitalization (or
discounted cashflow), and replacement cost. Our first step then
is to decide which of these methods works best here. We
immediately discard the replacement-cost method, which both
parties agree is inappropriate in valuing mineral reserves. That
leaves us to choose between the comparable-sales and discounted-
cashflow (DCF) methods. Comparable sales uses market data, and
looks for sales of property in the same market with similar
characteristics that were made at arm’s length. See Rev. Proc.
79-24, 1979-1 C.B. 565. DCF requires us to prepare a reasonable
estimate of future income over time and discount it to present
value. Figuring out a reasonable estimate of income for a sand-
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