                          T.C. Memo. 2005-227



                      UNITED STATES TAX COURT



         ROGER AND SHARON WORTMANN, ET AL.,1 Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 21534-03, 21535-03,     Filed September 29, 2005.
                 21536-03, 21537-03.



     Gerald P. Laughlin, Kent O. Littlejohn, and Francis J.

Reida, for petitioners.


     David W. Sorensen, for respondent.




              MEMORANDUM FINDINGS OF FACT AND OPINION


     KROUPA, Judge:   Respondent determined deficiencies in

petitioners’ Federal income taxes for 1999 and 2000 in the

following amounts:

     1
      This case is consolidated for briefing, opinion, and trial
with Michael J. and Leslie A. Cain, docket No. 21535-03, Steven
L. and Nancy E. Archbold, docket No. 21536-03, and William J. and
Janice L. Hesse, docket No. 21537-03.
                                    -2-

     Petitioners            1999 Deficiency         2000 Deficiency

         Wortmann               $12,864                $12,536

         Cain                    13,712                 10,193

         Archbold                18,655                 11,347

         Hesse                   15,530                 14,431

We are asked to decide the fair market value of land near

Oakdale, Nebraska, improved with a chapel, monastery, and

dormitory (the retreat center) for purposes of determining the

amount of the allowable charitable contribution deduction under

section 170.2       Petitioners determined that the retreat center had

a value of $475,0003 at the time of contribution, and deducted

charitable contributions accordingly.         Respondent determined that

the retreat center had a value of $76,200 at the time of

contribution.       We hold that the fair market value of the retreat

center at the time of contribution was $76,200.




     2
      All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
     3
      Of the $551,272 total charitable contribution deductions
petitioners claimed on their respective tax returns, respondent
does not dispute $76,082, representing the value of the personal
property within the buildings of the retreat center. The parties
stipulated that $475,000 was at issue, which is also the value of
the retreat center property determined by petitioner’s expert.
We assume this to be an approximation of the $475,190 result of
subtracting the agreed valuation of the personal property from
the total charitable contribution deductions. Petitioners’
deductions of $76,082 attributable to the personal property
within the buildings are therefore not at issue. We focus solely
on the real estate value of the retreat center.
                                  -3-

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the accompanying exhibits are

incorporated by this reference.    Petitioners Roger and Sharon

Wortmann resided in Hartington, Nebraska, at the time they filed

their petition.   Petitioners Michael J. and Leslie A. Cain

resided in Bloomfield, Nebraska, at the time they filed their

petition.   Petitioners Steven L. and Nancy E. Archbold resided in

Bloomfield, Nebraska, at the time they filed their petition.

Petitioners William J. and Janice L. Hesse resided in Yankton,

South Dakota, at the time they filed their petition.

The Monastery

     In the late 1970s, Father Clifford Stevens, a Catholic

priest, was serving as the pastor for a church in Neligh,

Nebraska.   Father Stevens had dreamed of building a monastery and

looked in many places for the right piece of land on which to

build the monastery.

     In the early 1980s, Father Stevens found a 240-acre parcel

of land about 10 miles from Neligh, Nebraska, near Oakdale,

Nebraska, that he considered perfect for the monastery.    Father

Stevens received permission from the Archbishop of Omaha

(Archbishop) to build a monastery on the land and arranged for

incorporating a nonprofit organization, called the Monks of

Tintern, Inc. (Monks Nonprofit), to obtain the land.    The Monks

Nonprofit obtained the land and constructed a barn-shaped

monastery and a chapel.
                                 -4-

       While Father Stevens was in residence at the monastery, the

Monks Nonprofit was able to pay its bills.      The Monks Nonprofit

borrowed money from a bank to build the monastery building and

obtained a bequest to cover much of the construction debt.      The

Monks Nonprofit also accepted donations but did not solicit them.

To avoid burdening the Catholic Church, the Catholic Church

required that the monastery show its financial stability before

accepting monks in residence.    Although the Monks Nonprofit was

able to pay its bills, the Monks Nonprofit was unable to show

sufficient ability to operate financially independently to meet

the standard required by the Catholic Church.      As a result, the

monastery never had any monks in residence, although a few people

came to inquire about it.

       In 1991, Father Stevens experienced some health problems and

departed Nebraska for Nova Scotia, anticipating that he would

die.    He left the monastery in the hands of the Monks Nonprofit.

The Archbishop became the president of the Monks Nonprofit, which

meant that the Catholic Church had both legal and ecclesiastical

responsibility for the monastery.      The Archdiocese invited the

Patrists, a religious group from Singapore, to move onto the

property, and the Patrists accepted.      The Patrists constructed a

third building on the land, a two-story dormitory.      The Patrists

experienced conflicts within their group, and the Archdiocese

forced the Patrists to vacate the premises in about 1994.

       Faced with the possibility that no religious order was

willing and able to occupy the premises, the Archdiocese
                                -5-

considered selling the property to the Oak Creek Ranch, which was

a for-profit enterprise located next to the subject property.

Father Stevens, still in Nova Scotia, heard about this

possibility and was horrified that the land might be used for a

nonreligious purpose.   Father Stevens considered it sacrilege to

have the land sold for nonreligious purposes after people had

made numerous donations and contributed so much personal effort

to the monastery.   Father Stevens wrote to the Archbishop and

obtained permission to return to Nebraska in 1995 to take care of

the monastery.   Although he had expected to die, his health had

apparently improved to the extent he was able to return to

Nebraska, resume the presidency of the Monks Nonprofit, and

assume the duties related to the monastery.

     On his return, Father Stevens found the monastery in

financial disarray.   The Monks Nonprofit had continued to receive

some donations, but it began experiencing difficulty in keeping

current on its outstanding debt.   Although the Monks Nonprofit

was continuing to pay the debts in the ordinary course, it was

becoming increasingly difficult to keep current with the payments

owed.   Father Stevens realized that all of the monastery’s assets

had to be liquidated to pay the liabilities.   Father Stevens

agreed with the Archdiocese in the summer of 1996 that the

property would be sold to pay the debts of the Monks Nonprofit.

     In September 1996, Father Stevens sold 210 acres of the land

to an unrelated third party for $63,000.   This left only the 30

acres around the monastic structures for the Monks Nonprofit to
                                -6-

sell.   (These 30 acres and the three structures on the 30 acres

shall be referred to collectively as the subject property.)

Father Stevens also arranged an auction of personal property

inside the buildings, such as the toilet fixtures, to raise money

to pay the debts of the Monks Nonprofit.

     Father Stevens began communicating to people in the

community that the subject property was for sale to buyers who

would use it for religious purposes and inquired of a local

convent whether the convent might be interested in purchasing the

subject property.   Father Stevens also informed the attorney for

the Monks Nonprofit that the subject property had to be sold.

Father Stevens stated that the subject property should be sold at

a price that would permit all the debts to be paid plus provide a

little seed money for future endeavors.    To preserve the

property’s religious purpose, Father Stevens insisted on a

contractual right giving the Monks Nonprofit the first

opportunity to repurchase the land if the purchaser wanted to

resell it.

     Father Stevens testified that he did not want the Monks

Nonprofit to sell the property to a buyer that would use it for

nonreligious purposes.   He further testified that he would have

caused the Monks Nonprofit to find another way for the Monks

Nonprofit to pay its bills rather than sell the property.    Father

Stevens also testified he would have had the Monks Nonprofit give

the property away to a group that would use it for religious
                                 -7-

purposes, if that were the only way to ensure the property would

retain its religious purpose.

Sale of the Monastery

     Father Stevens met Steven Archbold (Mr. Archbold), one

petitioner, when Mr. Archbold attended a retreat at the property

in January 1997.   At the time, Mr. Archbold was studying to be an

ordained deacon in the Catholic Church.4   Father Stevens showed

the retreat attendees around the property and told them that the

subject property was for sale.

     Father Stevens told Mr. Archbold that the subject property

would be sold for an amount to cover debts of the Monks Nonprofit

that approximated $75,000.   Mr. Archbold thought the geographical

isolation of the retreat center property would be perfect for the

religious education of junior high and high school students to

whom he taught confirmation classes and other religious classes.

Mr. Archbold thought the secluded location could help his

students focus on spiritual growth.    Mr. Archbold decided to talk

to other members of his church community to see whether they

concurred with his idea.

     The other petitioners, Michael Cain, Roger Wortmann, and

William Hesse, informed Mr. Archbold that they and their wives

would be interested in purchasing the subject property with him.

The four husbands and wives formed Tintern Retreat Center, LLC

(TRC) and each family became a 25-percent member of TRY.    On May

22, 1997, TRY purchased for $75,000 the subject property and any

     4
      Mr. Archbold was ordained as a deacon in 1999.
                                 -8-

remaining personal property inside the buildings that had not

been sold at auction.    TRY granted the Monks Nonprofit a right of

first refusal on the subject property, as Father Stevens wished,

which gave the Monks Nonprofit the right to repurchase the

property if TRY were ever to offer the subject property for sale.

     After TRY acquired the subject property, petitioners located

a separate, rural group of deacons to operate the subject

property.    This group of deacons incorporated their operation

under the name Tinter Retreat & Resource Center, Inc. (TRRC).

TRRC applied for and received a determination from respondent

that it operated as a section 501(c)(3) organization.    TRY leased

the subject property to TRRC for $1, and TRRC operated it for

approximately 17 months.    During this time, TRRC painted the

buildings, replaced carpeting, maintained the outside of the

structures, created separate sleeping areas for men and women,

completed the bathrooms, and added various sports fields.      These

improvements were essentially for general maintenance and upkeep.

Neither TRY nor petitioners individually expended any time or

money to make any structural improvements or additions to the

subject property.

     On October 29, 1998, TRY donated the subject property to

TRRC.    TRY claimed a charitable contribution of $475,000 for the

subject property.5   In connection with donating the subject

property to TRRC, Mr. Archbold suggested to a TRRC board member

     5
      TRC also claimed a charitable contribution of $76,082 for
the personal property inside the subject property buildings,
which is not at issue here.
                                 -9-

that an appraisal of the subject property be obtained.    TRRC

retained Keith White (Mr. White) of White Realty & Appraisal to

perform an appraisal of the property that was attached to TRC’s

information tax return, Form 1065, U.S. Partnership Return, for

1998.

Deductions at Issue

     TRY claimed a charitable contribution of $475,000 with

respect to the subject property, although TRY purchased the

subject property for $75,000 just 17 months before the date of

donation.    TRY included each petitioner husband and wife’s

respective portion of this charitable contribution on their

respective Schedules K-1, Partner’s Share of Income, Deductions,

Credits, etc., for 1998.

     Petitioners in each docket filed joint tax returns for 1998

and claimed their proportionate share of TRC’s $475,000

charitable contribution deduction for 1998, up to the statutory

limit of 30 percent of adjusted gross income.    Sec. 170(b)(1)(F),

170(b)(1)(B)(I).    Petitioners carried forward the remaining

portion of the charitable contribution and deducted portions on

their joint tax returns for 1999 and 2000, the years at issue in

this case.

     Respondent issued deficiency notices to petitioners for 1999

and 2000 on September 16, 2003, in which respondent determined

the subject property had a value of $76,200, rather than the

$475,000 claimed by petitioners.    Respondent accordingly

partially disallowed petitioners’ deductions for the charitable
                                 -10-

contribution that petitioners each carried forward to 1999 and

2000.    Petitioners timely filed petitions claiming that

respondent erred in reducing the $475,000 valuation to $76,200,

even though they, through TRY, had paid $75,000 for the subject

property6 only 17 months before the date of donation.

                               OPINION

     The sole issue in this case is the fair market value of the

subject property on October 29, 1998, the date TRY donated the

subject property to TRRC.    Respondent asserts the subject

property had a value of $76,200, while petitioners maintain the

subject property had a value of $475,000, even though they,

through TRY, purchased the subject property and personal property

17 months earlier for $75,000.    We begin with the burden of

proof.

I.   Burden of Proof

     In general, the Commissioner’s determinations in the

deficiency notice are presumed correct, and the taxpayer bears

the burden of proving that the Commissioner’s determinations are

in error.    See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).    The burden of proof may shift to the Commissioner under

certain circumstances, however, if the taxpayer introduces

credible evidence and establishes that he or she substantiated

items, maintained required records, and fully cooperated with the



     6
      We note that petitioners paid $75,000 for the subject
property plus personal property that remained. The personal
property component is not in dispute.
                                 -11-

Commissioner’s reasonable requests.     Sec. 7491(a)(2)(A) and (B).7

Here, both parties have presented evidence and introduced expert

witness reports.     We therefore decide the case based on the

preponderance of evidence without regard to the burden of proof.

See Blodgett v. Commissioner, 394 F.3d 1030 (8th Cir. 2005),

affg. T.C. Memo. 2003-212; Polack v. Commissioner, 366 F.3d 608,

613 (8th Cir. 2004), affg. T.C. Memo. 2002-145.

II.   Rules on Valuation

      We next address the value of the subject property at the

date of contribution to the charitable organization to determine

the charitable contribution deduction amount.     Section 170

generally permits a deduction for contributions made to

charitable institutions, subject to restrictions not at issue

here.     With respect to a contribution of property other than

money, the amount of the contribution is the fair market value of

the property at the time of contribution.     Sec. 1.170A-1(c)(1),

Income Tax Regs.     Fair market value is the price at which the

property would change hands between a willing buyer and a willing

seller, neither being under any compulsion to buy or sell and

both having reasonable knowledge of relevant facts.     Sec. 1.170A-

1(c)(2), Income Tax Regs.




      7
      Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of enactment of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                                -12-

     While fair market value is a question of fact to be

determined from the entire record, we were presented with four

valuations of the subject property.     See Zmuda v. Commissioner,

79 T.C. 714, 726 (1982), affd. 731 F.2d 1417 (9th Cir. 1984).

Three find fair market values of the subject property that are

close to one another, approximating $75,000, while one valuation,

which appraisal analysis and methodology we find troubling, is an

outlier.    We consider and evaluate each of these value

determinations in turn.    We first address the purchase of the

subject property by petitioners, through TRY, on May 22, 1997,

just 17 months before TRY contributed it to a qualifying

charitable organization on October 29, 1998.

     A.    Prior Sale of the Property

     We note that evidence of what property sold for within a

reasonable time before the valuation date generally is competent,

substantial, and persuasive evidence of its fair market value on

the valuation date.    Douglas Hotel Co. v. Commissioner, 190 F.2d

766, 772 (8th Cir. 1951), affg. 14 T.C. 1136 (1950).    Actual

sales between a willing buyer and a willing seller are generally

more reliable than estimates and approximations and indicate what

a hypothetical buyer and seller may agree on.     Estate of Hall v.
Commissioner, 92 T.C. 312, 338 (1989).    Windows of time between

the valuation date and the sale date have been found to be

reasonable under some circumstances, even when they are as long

as 15 months or 2 years.    See, e.g., Estate of Kaplin v.

Commissioner, T.C. Memo. 1986-167 (2-year window), revd. on
                               -13-

another ground 815 F.2d 32 (6th Cir. 1987); Estate of Shlensky v.

Commissioner, T.C. Memo. 1977-148 (15-month window).

     As fair market value is a factual determination and

necessarily inexact, evidence of the price obtained at a recent

arm’s-length sale may be extremely probative.   See Estate of

Keitel v. Commissioner, T.C. Memo. 1990-416 (citing Ambassador

Apartments Inc. v. Commissioner, 50 T.C. 236, 244 (1968), affd.

per curiam 406 F.2d 288 (2d Cir. 1969); Messing v. Commissioner,

48 T.C. 502, 512 (1967); Estate of Schroeder v. Commissioner, 13

T.C. 259, 263 (1949)).   The weight given to an actual sale price

is greatly diminished, however, where a material change in

circumstances occurs between the valuation date and the date of

sale.   See Estate of Spruill v. Commissioner, 88 T.C. 1197, 1233

(1987).

     We find that petitioners’ purchase through TRY of the

subject property for $75,000 is persuasive evidence of the fair

market value of the subject property.   Petitioners were willing

buyers, and the Monks Nonprofit through Father Stevens was a

willing seller.   Petitioners’ purchase of the subject property

was also within a reasonable time, approximately 17 months,

before the donation to the charitable organization.    Further,

there is no evidence of a material change in the subject property

between the valuation date and the date of purchase that would

cause us to diminish the weight of this evidence.   In fact, very

few alterations, only general cleaning and repair-type

improvements, were made to the subject property in the
                               -14-

intervening 17 months before petitioners contributed the subject

property to a qualifying charitable organization.   These

alterations included painting, maintaining the outside of the

structures, and completing the bathroom and sleeping areas.

Neither TRY nor petitioners individually spent any time or money

on structural improvements or additions to the subject property.

     Petitioners argue that the $75,000 purchase price is not

persuasive because it was a “forced sale”.   We disagree.

Although Father Stevens testified that he wanted the property to

sell at a price to pay the debts plus a little seed money, there

is no evidence of any foreclosure activity or that any creditor

had begun any collection action.   In fact, although the Monks

Nonprofit was experiencing difficulty paying bills and needed to

liquidate its assets, the Monks Nonprofit was continuing to make

payments on the debt when due in the ordinary course of business.

Further, we are mindful that Father Stevens expressed that the

subject property must retain its religious purpose.   In fact,

Father Stevens testified that he would have preferred that the

Monks Nonprofit not have sold the subject property at all if

there was a risk the subject property would be used for

nonreligious purposes.   In that case, Father Stevens testified

that he would have found another way for the Monks Nonprofit to

pay its liabilities.
                               -15-

     The evidence in this case shows that Father Stevens, through

the Monks Nonprofit, was a willing seller.   The Monks Nonprofit

would sell at the right price, provided that the purchaser would

use the subject property for religious purposes.    If no purchaser

came along who would use it for religious purposes, Father

Stevens was prepared to have the Monks Nonprofit keep the subject

property.   It turned out, however, that TRY, an unrelated party,

did come along and was willing to meet the Monks Nonprofit’s

conditions and offered a price that the Monks Nonprofit was

willing to accept.   The Monks Nonprofit was not an entity forced

to sell at a depressed value because aggressive creditors were

closing in.   It found a purchaser who was willing to accept the

conditions and who offered to pay a price that the Monks

Nonprofit was willing to accept.   Hence, we find that the May

1997 sale was between a willing buyer and seller.

     In sum, we find the sale of the subject property to be

probative evidence of the value of the subject property.    We

shall consider this evidence along with the other evidence of

valuation in reaching our conclusion, bearing in mind the

conditions the Monks Nonprofit placed on the subject property.

On balance, however, we do not find these conditions

significantly affected the ultimate purchase price of the

property.   The valuations of the Antelope County assessor and

respondent’s expert, both of which are reasonably close to the

purchase price, corroborate our finding.
                               -16-

     B.   Respondent’s Expert’s Appraisal

     Respondent’s expert’s appraisal, which found that the fair

market value of the subject property at the time of contribution

was $90,000, corroborates the purchase price as a persuasive

indication of the fair market value of the subject property.

Respondent engaged William C. Fischer (Mr. Fischer) to perform an

appraisal of the subject property as of the date of contribution.

Mr. Fischer, who has been a real estate appraiser for 45 years,

is MAI8 certified and Nebraska certified.   Mr. Fischer completed

60 hours of education every 3 years to retain his MAI

certification.   During his career, he has performed between 4,500

to 5,000 independent appraisals of commercial properties in 15

different States.   In addition, Mr. Fischer has experience in

appraising religious property, which is typically considered

special use property, including approximately 16 to 20 churches

as well as a mission area.   Mr. Fischer also has experience in

appraising special use property, such as event centers and school

buildings.

     We find Mr. Fischer’s appraisal to be thoughtful and

credible, and it closely corroborates the prior sale in

determining the fair market value of the property at the time of




     8
      MAI is a designation awarded to qualifying members of the
American Institute of Real Estate Appraisers and within the
appraisal community is viewed as the most highly regarded
appraisal designation. See Estate of Auker v. Commissioner, T.C.
Memo. 1998-185.
                                 -17-

contribution.9     Mr. Fischer used two of the three traditional

approaches to property valuation in his report, determining that

the income approach was not appropriate under the

circumstances.10

     Mr. Fischer used the sales comparison approach to estimate

the price the subject property would bring in a sale, based on an

analysis of comparable market transactions.     Under this approach,

comparable market transactions are identified and adjusted to

account for differences of market conditions, size, location,

physical features, and other factors.     American Institute of Real

Estate Appraisers, The Appraisal of Real Estate 417, 422-423

(12th ed. 2001).     Mr. Fischer identified two sales of property

comparable to the subject property for his analysis.     One of

these comparable sales was the sale of the subject property to

petitioners 17 months before the valuation date.     The other

comparable sale was a sale of a 15.89-acre monastery in Hastings,

Nebraska, in 2000 for $65,000.     Mr. Fischer adjusted these

     9
      We bear in mind that when TRC purchased the subject
property, much of the personal property inside the buildings had
already been sold by the Monks Nonprofit to pay their debt. The
purchase price paid by TRC included any remaining personal
property, but respondent’s expert’s appraisal values the real
estate alone.
     10
      The income approach is most relevant to determine the
value of income-producing property. The income approach
determines the value based upon the income stream that the
property is anticipated to produce in the future. American
Institute of Real Estate Appraisers, The Appraisal of Real Estate
471 (12th ed. 2001). Annual income and expenses are projected
and the difference between projected income and expenses is
discounted to present value to compensate for the risk and the
waiting period before the owner receives the income. Id. at 491-
495.
                               -18-

comparable sales to account for differences in construction, age,

condition, and size, and derived an indicated value of $90,000

for the subject property under the sales comparison approach.

     Mr. Fischer also used the cost approach to value the subject

property as of the date of contribution.    The cost approach

evaluates what it would cost to build the subject property at

today’s cost.   American Institute of Real Estate Appraisers, The

Appraisal of Real Estate 349 (12th ed. 2001).    This cost is then

adjusted to account for depreciation.11    Id. at 349.

     Under the cost approach, Mr. Fischer used the Marshall-Swift

valuation service to derive a 1998 value of the improvements of

approximately $533,000, and adjusted this value for physical

depreciation, functional obsolescence, and economic obsolescence.

After these adjustments, Mr. Fischer concluded that the value of

the improvements under the cost approach was approximately

$80,000.   Mr. Fischer relied on six different sales of vacant

land under the cost approach to arrive at the land value of the

subject property as if it were vacant.    Based on these six sales,

Mr. Fischer derived a land value of the subject property of

approximately $32,000.   He then combined the land value as if

vacant with the depreciated cost of improvements to derive a

     11
      Appraisers find the cost approach to be most useful when
buildings are relatively new. Id. at 354. Depreciation is a
subjective determination, and an evaluation of property with
older, more depreciated buildings therefore becomes more
subjective as larger amounts are subtracted for depreciation.
Id. at 357. As noted by respondent’s expert in his report,
appraisers find that the cost approach tends to set the upper
limit of value because no property would be worth more than what
it would cost to build another property of equal utility.
                               -19-

value of approximately $112,000 for the subject property under

the cost approach.

     Based on the values that he found under the sales comparison

approach and the cost approach, Mr. Fischer concluded that the

fair market value of the subject property was $90,000 as of the

date of contribution.   In his analysis, Mr. Fischer gave more

weight to the sales comparison approach than the cost approach

because he was able to rely on two comparable sales that, in his

opinion, were indicative of value and determined, as noted, that

the cost approach tended to set the upper limit of value.   Thus,

he found that the property would generally not be worth more than

$112,000 but that $90,000 was a more appropriate value based on

the facts of this particular situation.

     In sum, we place significant weight on the valuation

conclusions of Mr. Fischer, respondent’s expert.   Respondent’s

expert is experienced in the valuation of properties comparable

to the subject property, and we are impressed by the thoroughness

of his analysis and conclusions respecting the subject property.

We also note that the $90,000 value determined by respondent’s

expert is quite close to the prior purchase price of the subject

property and tends to corroborate the prior purchase price as

evidence of the valuation of the subject property.
                                -20-

     C.   Petitioners’ Expert’s Appraisal

     We now address the conclusions of petitioners’ expert, who

determined the subject property’s value to be $475,000, on the

date of contribution.    We find this valuation conclusion

problematic and give it considerably less weight.    TRRC engaged

Mr. White to perform an appraisal of the subject property as of

the contribution date.    Mr. White is a certified real estate

appraiser located in Neligh, Nebraska, where he has lived his

entire life.   He has had his appraiser’s license since 1976 and

his general certified appraiser’s license since 1993.

     The evidence in this case does not fully establish the

independence of Mr. White.    TRRC, not TRY, retained Mr. White, at

the suggestion of Mr. Archbold.    It was not explained at trial

why the donee, rather than the donor, hired the appraiser, and no

one testified why or how Mr. White was the appraiser chosen.

Lacking any evidence to answer these questions, we cannot

evaluate and satisfy ourselves that Mr. White’s valuation opinion

was truly independent.    We are troubled by the circumstances

under which Mr. White was retained and also by his analysis and

conclusions.   These concerns lead us to give significantly less

weight to Mr. White’s conclusions of value.

     Mr. White used two of the three traditional approaches to

value in his appraisal.    As with Mr. Fischer’s appraisal for

respondent, Mr. White also did not rely upon the income approach

as the subject property was not income-producing property.
                                -21-

     Under the sales comparison approach, Mr. White valued the

land only, not the land and improvements.      Mr. White identified

three sales of property to use as comparable sales, all of vacant

land located in or around Neligh or Oakdale, Nebraska, and all

purchased for special uses.    These special uses included a

transformer site, fertilizer plant and storage, and commercial

sales and inventory storage.    None of Mr. White’s comparable

sales involved agricultural land or pasture, even though

approximately half of the subject property was agricultural land

or pasture.    Mr. White also did not include the May 1997 sale of

the subject property to petitioners through TRY, nor the sale of

the 210 acres of the retreat center property sold for $63,000 in

1996.    Mr. White did not include the 1997 sale because he

considered the subject property sold for less than what it was

worth.    Mr. White failed to explain, however, why he considered

the subject property sold for less than what it was worth in May

1997.    We question this omission.

     We are also concerned by Mr. White’s reasoning that the

prior sale of the subject property should not be included as an

indication of value.    Mr. White’s subjective determination that

the property sold for less than it was worth is not sufficient to

disregard a prior sale of the exact property to be valued that

occurred only 17 months earlier.      While property valuation is

admittedly inexact, Mr. White’s subjective determination to

exclude this particular comparable sale, that of the subject
                                -22-

property itself, with no further explanation or analysis, causes

us considerable concern.

     Mr. White adjusted the sales prices of the comparable

properties to account for differences between the comparable

properties and the subject property.   Based on his assessment of

the comparable sales, Mr. White concluded under the sales

comparison approach that the subject property had an adjusted

land value of $2,000 per acre and that the subject property’s

value was $59,800 for the land alone as of the date of

contribution.

     Under the cost approach, Mr. White, like Mr. Fischer, used

the Marshall-Swift method to find the value of the buildings new

and then adjusted the value of each structure to account for

physical depreciation.   Unlike Mr. Fischer, however, Mr. White

did not adjust the building value for physical or economic

obsolescence.   We question why Mr. White did not discount the

value for economic and functional obsolescence.   Mr. White

admitted at trial that economic obsolescence included the

inability to operate the property economically, and Mr. White

knew that the subject property could not be operated as a

monastery on a cost effective basis based on the experiences of

the Monks Nonprofit.12   Yet, faced with these circumstances, Mr.

White did not adjust his values for economic obsolescence.


     12
      About 18 of the 30 acres of the subject property are dry
cropland and about 12 acres are pasture. Mr. White testified
that he did not believe hunting, farming, or ranching uses of the
subject property would be profitable either.
                               -23-

Similarly, Mr. White was aware that the subject property was

designed as a monastery and knew the subject property was sold

because it was not self-supporting as a monastery.   Despite this

overwhelming evidence, Mr. White did not adjust his values for

functional obsolescence.   We believe Mr. White’s valuation under

the cost approach does not appropriately account for these

essential elements.

     Mr. White concluded under the cost approach that the value

of improvements to the subject property was approximately

$414,000.   Mr. White then added this value of the improvements

under the cost approach to the value of the land he found under

the sales comparison approach to conclude that the fair market

value of the subject property was $475,000 as of the contribution

date.

     Mr. White’s methodology and omissions trouble us.   We

believe that respondent’s expert’s methodology is more thorough

and consistent with appraisal methodology.   Respondent’s expert

relied on two separate analyses of the subject property, one

under the sales comparison approach and one under the cost

approach, instead of applying each approach to value a portion.

Respondent’s expert then compared and reconciled the value

conclusions under each approach to reach one overall conclusion

of value, ultimately deciding to give more weight to the sales

comparison approach.   See American Institute of Real Estate

Appraisers, The Appraisal of Real Estate 65, 598-603 (12th ed.

2001).   Accordingly, we place less weight on petitioners’
                                 -24-

expert’s conclusions as to the value of the property as of the

contribution date.

     D.     Assessed Value of Subject Property

     We now address the assessed value of the subject property.

The assessed valuation of property is also evidence of the

property’s value where, as is the case in Nebraska, the assessed

value is defined as the property’s fair market value.    See N.

Trust Co. v. Commissioner, 87 T.C. 349, 382 (1986); Neb. Rev.

Stat. sec. 77-112 (1996 & Supp. 2000).     Assessed valuation may be

used to corroborate fair market value determined under the three

traditional approaches.     See N. Trust Co. v. Commissioner, supra.

     Here, the Antelope County assessor determined that the

assessed value of the subject property for 1998 was $70,424.      The

assessment took into account physical depreciation, economic

obsolescence, and functional obsolescence in valuing the

property.

     We place great weight on the assessed value of the subject

property because it corroborates the actual sale and the

valuation of respondent’s expert as indicators of the fair market

value of the subject property.    This unrelated third party

valuation, close to the values in the prior sale and determined

by respondent’s expert, reinforces our view that the purchase

price of the property is persuasive evidence of its true fair

market value.13

     13
      Petitioners contend that the value the Antelope County
assessor determined is somehow biased and the assessor was simply
                                                   (continued...)
                               -25-

III. Valuation of the Subject Property
     For the reasons stated above, we find that the most

persuasive evidence of the subject property’s value as of the

contribution date is the actual sale of the subject property 17

months before the contribution.   We also find that the record

justifies a slight upward adjustment to account for the minor

maintenance and upkeep that occurred between the purchase date

and the contribution date.   This adjustment is also warranted by

the slightly higher ultimate value conclusion of respondent’s

expert.   We therefore find that the record supports a valuation

of $76,200 as of the date of contribution.

     We further find that the record does not support

petitioners’ position that the subject property was worth

$475,000 at the time of contribution.    As explained previously,

we found the sale by Father Stevens through the Monks Nonprofit

to petitioners was between a willing buyer and seller, not a

“distressed” sale.   We also place no weight on petitioners’

accusation that the Antelope County assessor was somehow

inappropriately affected by the actual sale price and correlated

the assessed value with the sale price, rather than making an

independent determination.   Finally, we cannot disregard the


     13
      (...continued)
attempting to hit a mark of the purchase price. We find this
contention unfounded. To the extent the Antelope County assessor
considered the prior sale of the subject property when performing
the valuation, we find the assessor simply considered it, much as
we do, relevant to determine the fair market value. We do not
find that the 1997 sale of the subject property improperly
controlled the assessor’s valuation in any way.
                                 -26-

conclusions of respondent’s expert, an MAI certified appraiser

with significant experience appraising property similar to the

subject property.

     Instead, we have relied on three evidentiary bases showing

the determinations of value of the subject property, all of which

we find to be credible.   The actual sale price, respondent’s

expert’s valuation, and the Antelope County assessment are

reasonably close in their ultimate conclusions of value.

Petitioners’ valuation is the only outlier and is based upon an

expert opinion we find dubious and not well supported by

valuation methodology.    We find that Mr. Fischer’s report

provides a better indication of the fair market value.      It is

well reasoned and thorough.    In addition, it is consistent with

the previous purchase of the subject property 17 months before

the valuation date, and the assessed value of the subject

property corroborates this value.

     Accordingly, based on our review of all the valuation

evidence, giving due consideration to our observation at trial of

the witnesses for both parties and considering their testimony

and the expert reports, we conclude that the fair market value of

the subject property was $76,200 on the date of contribution.       We

therefore sustain respondent’s determinations in each deficiency

notice regarding the fair market value of the subject property.

     To reflect the foregoing,


                                             Decisions will be entered

                                        for respondent.
