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made at arm’s length. One sale that Moritz did use (his Sale #4)
was of a 41-acre property in the same area as the Hamblen Road
property, but this sale was made before either the buyer or the
seller knew there was sand and gravel beneath the property.
Moritz’s Sale #5, 50 acres and located even closer to Houston
than the Hamblen Road property, was likewise made at a price
negotiated before either party knew the property held valuable
deposits.
Given the ignorance of the buyers and sellers in these
sales, we will not treat them as comparables. One of the
requirements of FMV is that both the buyer and seller be informed
regarding all the factors relevant to the land’s value. Foster
v. United States, 2 Cl. Ct. 426, 446 (1983); see also sec.
1.170A-1(c)(2), Income Tax Regs. (both buyer and seller must have
“reasonable knowledge of relevant facts”). We find that Moritz’s
Sales #4 and #5 fail this requirement. That leaves only Sale #3,
a 60.48-acre parcel that was sold for $150,000. This property
was known by both buyer and seller to have sand and gravel
deposits, but the parcel was contaminated by oil and was burdened
with oil pipeline easements and leases that restricted its
development. Though the Hamblen Road property’s own mineral
rights were also severed (Texaco owned them in 1998), there was
no active or pending oil-and-gas drilling at the time of the
donation, leading us to find that Sale #3 was not comparable
either.
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