                        T.C. Memo. 1996-30




                      UNITED STATES TAX COURT



ESTATE OF WILLIE C. LLOYD, DECEASED, IVA NELL HOLMAN, EXECUTRIX,
   Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5223-91.              Filed January 29, 1996.



     Stewart R. Dudley, J. Birch Bowdre, Samuel H. Frazier,

Elizabeth Ann McMahan, and Paul S. Leonard, for petitioner.

     Linda J. Wise, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WRIGHT, Judge:   Respondent determined a deficiency in

petitioner's Federal estate tax in the amount of $1,275,416.

After concessions, the sole issue remaining for our decision is
                                - 2 -

the date-of-death value of decedent's one-half interest in two

parcels of real estate held in trust.

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are found

accordingly.   The stipulation of facts and the attached exhibits

are incorporated herein.    Willie C. Lloyd (decedent) died on

February 20, 1987.   Executrix Iva Nell Holman (Holman) and

executrix Myrtle Lee Spraggins (Spraggins) both resided in

Anniston, Alabama, at the time the petition was filed in this

case.   Spraggins died during the pendency of this case.

1.   General Background

     On February 25, 1987, Holman and Spraggins offered

decedent's will for probate.    Decedent's will, dated February 5,

1987, left one-third of his estate to Mary Ann Brewer.

Decedent's will also left a pecuniary bequest of $7,500 to his

daughter, Jan Lloyd Rivers (Rivers).    Both bequests were subject

to an in terrorem clause intended to prevent a will contest.

Decedent's will divided the residuary of his estate equally

between his sisters, Holman and Spraggins, the executrices of his

estate.

        On March 5, 1987, Rivers initiated a will contest,

contending that decedent died intestate and that Rivers was the

sole heir and distributee of his estate.      On that same date,

Rivers petitioned for and received an appointment as special

administratrix ad colligendum in the estate proceedings.
                                 - 3 -

     Decedent's Federal estate tax return was due to be filed on

November 20, 1987.   Rivers, however, requested and received an

extension of time to file that return.     An additional extension

was requested and received, extending the due date of the return

to November 20, 1988.   On June 16, 1988, an order was issued by

the Circuit Court of Calhoun County authorizing Rivers to file

the Federal estate tax return.    On June 22, 1988, consistent with

that order, Rivers filed the Federal estate tax return (original

return).   The original return, however, was not in a form capable

of being processed by the Internal Revenue Service (IRS).     It

contained the word "unknown" on essentially every line of the

return.    Only line 1, involving the total gross estate, and lines

9 and 11, involving the unified credit, contained values of any

significance.    The total gross estate, as listed on the original

return, equaled $10,902,474.64.

     In computing the total gross estate, it was necessary for

Rivers to value two parcels of real estate (trust property) held

in trust (trust) in which decedent possessed an undivided one-

half interest on the date of his death (valuation date).     The

first parcel (parcel A) contains approximately 65 acres of land,

and the second parcel (parcel B) consists of approximately 10

acres of land.   Through her attorney, William Henry Agee (Agee),

Rivers retained the services of T.E. Young (Young) and Gene

Dilmore (Dilmore), two unaffiliated professional appraisers, for

the purpose of valuing both parcels.     Relying on the appraisal
                                - 4 -

reports prepared by Young and Dilmore, the original return

reflects the date-of-death values of decedent's interests in

parcels A and B as $3,400,000 and $897,500, respectively.

       On July 28, 1988, the Circuit Court of Calhoun County

entered a Judgment of Final Settlement in the special

administration in which the court approved a final accounting of

the special administration, awarded fees to Rivers and her

attorneys for the special administration, and directed that fees

be paid to Holman and Spraggins as coexecutrices of decedent's

estate.    The parties to the will contest resolved their dispute

shortly thereafter.

       After the settlement of the will contest, Holman and

Spraggins hired an accounting firm to facilitate their

responsibilities as executrices of decedent's estate.    In

preparing an amended estate tax return (amended return), the

accounting firm hired the Hearn Co. (Hearn) for the purpose of

conducting another appraisal of the trust property.    Relying on

the Hearn appraisal, the amended return reflects the date-of-

death values of decedent's interests in parcels A and B as

$650,000 and $375,000, respectively.    Holman and Spraggins filed

the amended return on October 6, 1988.    Unlike the original

return, the amended return included specific amounts for each

applicable line thereon and was capable of being processed by the

IRS.
                                - 5 -

     Respondent accepted the amended return but, relying on the

appraisals conducted by Dilmore and Young, subsequently

determined that the date-of-death values of decedent's one-half

interests in parcels A and B were $3,400,000 and $900,000,

respectively.

2.   Trust Background

     On December 17, 1963, decedent, Jack E. Held (Held), Leonard

M. Held, Sidney D. Held, and C. Ray Dudley (Dudley) entered into

a trust agreement in which Held and Dudley were named trustees

(trustees).    Decedent held a one-half interest in the trust and

the remaining one-half interest was divided among the other

grantors.    At the time the grantors created the trust, they

entered into an agreement to purchase certain real estate.      A

principal purpose of holding the real estate in trust was to

facilitate sales of such property to interested purchasers.

The real estate acquired by the trust consisted of approximately

348 acres of unimproved land located in Jefferson County,

Alabama.    The property purchased was not within the corporate

limits of any municipality.    The tract was bisected by U.S.

Highway 280 (Highway 280) and was bound on its southwestern

border by Cahaba River Road.

     Sometime during 1976, the State of Alabama condemned

approximately 113 acres of the property held in trust in order to

construct Interstate 459 (I-459).    In an Alabama condemnation

proceeding the State gives notice of the condemnation and takes
                                - 6 -

title immediately.    The condemnation award is thereafter

determined.   Held and Dudley employed Henry V. Graham (Graham) to

determine the value of this taking by the State of Alabama.

Graham determined that the land subject to the taking was

suitable for both residential and commercial development, and the

value of the taking was $536,110.    Held and Dudley also retained

Sidney W. Smyer, Jr. (Smyer), and Joe Scotch, Jr. (Scotch), to

assess the value of the taking.    In his appraisal report, Smyer

concluded that the highest and best use of the property subject

to the taking was commercial in nature.    Scotch, though not

expressly determining the highest and best use of the property

subject to the taking, based his report on an analysis of

comparable sales involving only commercial properties.    Scotch's

conclusions paralleled Smyer's conclusions, and both determined

that the value of the taking exceeded $2 million.    Upon its

completion, I-459 bisected the trust property and intersected

Highway 280, forming an angle of approximately 90 degrees.

     Throughout the course of the 7-year period ending in 1980,

the trust was involved in the sale of between 7 and 10 acres of

trust property to Cahaba Mall, Inc., a company owned by James

Grimmer (Grimmer).    This property is located west of Highway 280

and south of I-459.    Grimmer paid $15,000 per acre in partial

consideration for the property.

     In March 1977, the trust and South Central Bell Telephone

Co. (Bell) initiated arrangements for the purchase of some of the
                                 - 7 -

property held in trust.    Approximately 50 acres, located west of

Highway 280 and north of I-459, was acquired by Bell in March

1978 at a price of $17,750 per acre.     The deed from the trust

granted Bell an easement over a portion of the remaining trust

property separating the subject property from Cahaba River Road

for the purpose of connecting necessary utilities.

     Subsequent to its purchase of the property, Bell filed an

application requesting to have the subject property rezoned to

accommodate commercial office usage.     Bell's rezoning request was

approved by the county zoning commission.     Approval of the

rezoning request, however, was contingent upon Bell's agreement

not to build an access road to its property from Cahaba River

Road for a period of 25 years.    The minutes of the zoning

commission's hearing suggest that a principal factor underlying

this restriction was the zoning commission's desire not to

subject the residential area west of Cahaba River Road to

commercial development and an accompanying increase in traffic

along Cahaba River Road.   Bell agreed to the restriction, but

expressly reserved the right to apply to the commission for

relief from the prohibition in the event that the character of

the surrounding area experienced sufficient change to warrant

reconsideration.

     In 1981, approximately 7 acres of trust property located

east of Highway 280 and south of I-459 was sold to T.S. O'Rourke

(O’Rourke) and Marion Bradford (Bradford).     The property subject
                                - 8 -

to this sale was to be coupled with abutting property already

owned by O'Rourke and Bradford for the purpose of constructing a

commercial building.   This property was sold at a price of

$25,000 per acre.

     Following the condemnation and the sales to Bell, Grimmer,

and O'Rourke and Bradford, the property held in trust consisted

of approximately 65 acres located west of Highway 280 and north

of I-459 (parcel A), and approximately 10 acres located east of

Highway 280 and north of I-459 (parcel B).   The property

encompassed by parcels A and B is the subject matter of the

instant case.

3.   Trust Property

     Parcel A abuts and somewhat straddles the Bell property.

Cahaba River Road serves as its western border.   It contains a

substantial amount of vegetation and an extensive amount of

exposed rock.   The terrain varies throughout the parcel.   The

southwestern portion of parcel A comprises a large ravine with

slopes varying in degree, with some estimated as being as much as

30 degrees.   The remainder of parcel A contains rough, rolling

terrain and in various places consists of slopes approaching 30

degrees.    Cahaba River Road intersects both Highway 280, to the

north of parcel A, and I-459, near the southwesternmost point of

parcel A.   As a result, a crude right triangle is formed with

Cahaba River Road serving as the hypotenuse and the intersection

of Highway 280 and I-459 forming the right angle.    Parcel A,
                                 - 9 -

however, does not extend to the intersection of Cahaba River Road

and Highway 280.    Rather, an Alabama Power Co. right-of-way,

intersecting both Cahaba River Road and Highway 280, forms the

northern border of parcel A.    As a result of this right-of-way,

parcel A only abuts Highway 280 for approximately 300 feet.      The

Bell property consists of much of the center of this triangular

area of land.    The Bell property is a somewhat square piece of

land abutting the intersection of Highway 280 and I-459 and

extending almost to Cahaba River Road, leaving parcel A with an

irregular shape resembling an hourglass.

       Parcel B is a triangular piece of land located immediately

across Highway 280 from the Bell property.     A small hill or ridge

separates parcel B from the intersection of Highway 280 and I-

459.    Prior to the construction of I-459, parcel B contained a

large depression roughly 4 acres in size.     Approximately 2 of the

remaining 6 acres were moderately flat, and the remaining 4 acres

consisted of steep, sloping terrain.     As the depression

subtracted from the utility of the parcel, Held and Dudley

arranged to have it filled with excess earth and rock which had

accumulated during the I-459 construction project.     In some

areas, the fill is estimated to be as much as 40 feet in depth.

With the fill in place, approximately 6 acres of parcel B have a

reasonably level grade.

       Prior to 1985, parcels   A and B were outside the corporate

limits of the city of Birmingham, Alabama, and were zoned for
                              - 10 -

residential purposes.   In 1985, the city of Birmingham annexed

all of parcel B and approximately 31 acres of parcel A on its own

initiative.   The annexation program was primarily designed to

increase the tax base of the city by bringing outlying commercial

properties into the city's corporate limits.    The portion of

parcel A not annexed by the city of Birmingham included a strip

of land, approximately 200 feet in width, running the length of

that portion of parcel A which abuts Cahaba River Road.    Despite

this annexation, however, parcels A and B remained zoned for

residential usage under the zoning classifications of the city of

Birmingham and Jefferson County as of the valuation date.    In

November 1987, however, the zoning of parcel B was changed by the

city of Birmingham to a business classification.    Similarly, the

zoning classification of that portion of parcel A within the

corporate limits of the city of Birmingham was changed to permit

business usage in 1991.

4.   Transactions Involving Parcels A and B

     In December 1976, Kovach & Associates (Kovach) offered to

purchase approximately 25 acres of trust property located north

of I-459 and west of Highway 280.    The offer was for $40,000 per

acre but was subject to numerous contingencies.    In December

1977, the parties entered into a purchase and sale agreement

involving 14 of the 25 acres at $43,571 per acre.    This agreement

was expressly contingent on the receipt of a zoning change with

respect to the subject property.    Shortly thereafter, Held, on
                               - 11 -

behalf of Kovach, filed a request to have the subject property

rezoned to permit commercial office usage.    The rezoning request

was denied on July 25, 1978.    The contractual agreement between

the parties was never consummated as a result of the denial of

the rezoning request.

     Commencing in 1980, Held and Dudley received several offers

to purchase parcel B.    In 1980, John Runnion (Runnion) made an

offer to purchase parcel B at a price of $2 per square foot, or

$894,722.   This offer was rejected by Held as not being

reflective of the property’s fair market value.

     Also sometime during the early 1980's, Institutional

Investment Corp. sought to purchase parcel B for $3,200,000.

This offer, which was subject to numerous conditions, was never

consummated.

     In April 1985, Held entered into an agreement with an

unidentified realty company with respect to the sale of parcel B.

This agreement called for the purchase of parcel B at a price of

$325,000 per acre, or a total of approximately $3,250,000.

Nothing further developed from this offer.

     In June 1985, Lincoln Property Co. (Lincoln) sought an

option to purchase a portion of the trust property for

$1,850,000, subject to a feasibility study.    This offer was

denied.   Lincoln also sought to form a partnership with the trust

to develop parcel B.    The proposal, which was subject to numerous
                              - 12 -

contingencies, called for the contribution of parcel B to the

partnership at a value of $3,200,000.   This proposal was denied.

Following the denial of the partnership proposal, Lincoln and

Held continued to negotiate with regard to parcel B.   In June

1986, Lincoln and the trustees entered into an agreement for

Lincoln to purchase parcel B at a price of $7.35 per net usable

square foot, or approximately $3 million.   The agreement also

involved a partnership affiliation between Lincoln and the trust.

Lincoln possessed the right to terminate the agreement on

feasibility grounds if it so desired.   In September 1986, citing

concerns with how modifications to Highway 280 might affect

accessibility, Lincoln terminated the agreement.

     Sometime prior to March 21, 1986, the trustees declined an

offer to purchase parcel B at a price of $8 per foot, or

approximately $3,550,000.   The remaining terms and other

conditions of this offer are unknown.

     On October 9, 1987, Held wrote a letter to Jeffrey Bayer

(Bayer), a listing agent, regarding past discussions involving

parcel B.   This letter informed Bayer that Held was willing to

consider an offer for the purchase of parcel B that would net

$3,200,000.   Nothing further developed as a result of this

letter.

     In 1989, Held negotiated with Midland Title Security

(Midland) for the sale of parcel B for $3,500,000.   The property

was to be used as a gas station and convenience store.   Midland
                              - 13 -

purchased an option to purchase parcel B in April 1989.    In July

1989, Midland purchased an extension of the option acquired in

April 1989.   The option, which contained numerous contingencies,

was permitted to lapse by Midland on November 15, 1989.

5.   Respondent's Appraisal Reports

     During the special administration of decedent's estate, two

appraisals of parcels A and B were conducted.    These appraisals

were conducted by Dilmore and Young, both professional real

estate appraisers with noteworthy credentials.   Dilmore and Young

were unaffiliated with each other at the time the appraisals were

performed, and neither collaborated with the other while

conducting his appraisal.
                                - 14 -

     a.   Dilmore's Appraisal

     In response to a request by Agee, Dilmore reported the

results of his appraisal on June 8, 1988.   Dilmore's results are

presented in what he refers to as a letter appraisal.    A letter

appraisal is an informal presentation of the appraisal results.

In Dilmore's professional judgment, the brevity of a letter

appraisal was appropriate under the circumstances, as he was

under the impression that the use of the appraisal was to be

limited to private matters involving the parties related to

decedent's estate.   In the cover letter to Agee, Dilmore explains

that, consistent with Agee's request, the report is in

abbreviated form and that data supporting the valuations

presented are maintained in Dilmore's file.

     In his appraisal report, Dilmore conducted a comparable

sales analysis using 12 real property sales.   Each of the

comparable sales used in Dilmore's analysis involved the sale of

a commercial property which preceded decedent's date-of-death.

Dilmore's report is based upon his conclusion that the highest

and best use of the trust property, as of the valuation date, was

commercial and that the zoning of both parcels could be changed

from residential to commercial.    In his appraisal, Dilmore made

adjustments to the comparable sales properties to account for the

relative desirability of location, topography, accessibility,

shape, and size.   An adjustment was also made to account for the

year of sale.   These adjustments were made with respect to parcel
                                  - 15 -

B only.    Once the value of parcel B was determined, Dilmore used

parcel B as the sole base property in determining the value of

parcel A.

      The results of Dilmore's analysis can be summarized as

follows:

                                              FMV of Decedent’s
Parcel      FMV per Acre    FMV of Parcel        50% Interest

  A          $100,000           $6,800,000        $3,400,000
  B           179,000            1,790,000           895,000


      b.    Young's Appraisal

      Young furnished the results of his appraisal to Agee on June

10, 1988.    Unlike the letter appraisal prepared by Dilmore, Young

prepared a lengthy formal report.      Young conducted a highest and

best use analysis and concluded that the highest and best use of

both parcels of trust property was commercial in nature.       Young

performed a comparable sales analysis using six real property

sales all of which preceded the date of decedent's death.      The 6

properties used by Young were among the 12 properties used by

Dilmore in his appraisal.    Each comparable sale property used by

Young consisted of commercial property and was located in the

vicinity of Highway 280 and both parcels of trust property.       In

arriving at his conclusions, Young's analysis involved making

adjustments to the comparable sale properties for numerous

factors, including location, frontage influence, corner

influence, zoning, and utilities.      The comparable sale properties
                                  - 16 -

were also adjusted to account for the date upon which the

comparable sale occurred and the physical characteristics of the

land involved.

      The results of Young's analysis can be summarized as

follows:

                                                 FMV of Decedent’s
Parcel      FMV per Acre    FMV of Parcel          50% Interest

  A          $100,000           $6,800,000         $3,400,000
  B           180,000            1,800,000            900,000


6.    Petitioner’s Appraisal Reports

      Petitioner bases its argument on the results of appraisal

reports prepared by two experts, Hearn and Lonnie Tidwell

(Tidwell).    Like Dilmore and Young, Hearn and Tidwell are

professional appraisers with respectable credentials.      The Hearn

report provided the basis for the amended return, while the

Tidwell report was prepared approximately 2 years thereafter.

      a.    Hearn's Appraisal

      Hearn provided its valuation report of parcels A and B to

Dudley on September 28, 1988.      Hearn conducted an individual

comparable sales analysis with respect to both parcels of trust

property.    Both individual analyses involved the use of five

comparable sales.    Neither analysis involved the use of a

comparable sale used in the other analysis.      Hearn concluded that

the highest and best use of parcel A at the time of decedent's

death was residential in nature.      Each comparable sale Hearn used
                                 - 17 -

with respect to parcel A had a residential zoning classification.

With respect to parcel B, Hearn concluded that its highest and

best use was commercial in nature.        The properties used by Hearn

with respect to parcel B had office and commercial zoning

classifications.   All 10 comparable property sales used by Hearn

involved the sale of real estate located in the general vicinity

of the trust property.    Hearn's conclusions as to the values of

parcels A and B were made subject to each parcel’s obtaining

access to a sanitary sewer system.        Hearn's conclusion with

respect to parcel B was further contingent on that parcel’s being

accessible to development and able to support improvements.

Hearn's appraisal involved making numerous adjustments to the

comparable property sales.    Adjustments were made for date of

sale, location, market, utilities, and size.        The results of

Hearn's analysis can be summarized as follows:

                                                   FMV of Decedent’s
Parcel     FMV per Acre      FMV of Parcel           50% Interest

  A          $20,000          $1,300,000             $650,000
  B           75,000             750,000              375,500

These results were used in the completion of the amended return.

      b.   Tidwell's Appraisal

      In October 1990, 2 years after the amended return was filed

by Holman and Spraggins, Tidwell responded to an earlier request

by Dudley to conduct an appraisal of parcels A and B.        Tidwell

presented an extensive analysis of both parcels.        Consistent with

standard appraisal techniques, Tidwell conducted a highest and
                                - 18 -

best use analysis of both parcels A and B.    In his judgment,

Tidwell concluded that the highest and best use of parcel A at

the time of decedent's death was residential in nature.     In

reaching his conclusion, Tidwell focused on the topography of

parcel A.   His report explains that the rough topography

throughout parcel A would require extensive site preparation and

that such preparation would likely be hindered by the presence of

the developed Bell property.    In his report, Tidwell admits that

commercial use would be desirable for parcel A, but he explains

that its topography made such use infeasible.    Tidwell also

explains in his report that parcel A's limited access to Highway

280 and its existing residential zoning classification led him to

conclude that parcel A's highest and best use was residential in

nature.

     Tidwell concluded that the highest and best use of parcel B,

at the time of decedent's death, was commercial in nature.       In

support of this conclusion, Tidwell's report explains that the

frontage of parcel B along Highway 280 helps to make it suitable

for engaging in a commercial undertaking.    Tidwell's report

continues by noting that parcel B is not well suited for

residential use because of its exposure to traffic noise.

     Tidwell performed a comparable sales analysis with respect

to both parcels A and B.   With respect to parcel A, Tidwell used

four comparable sales of real estate properties located in the

general vicinity of parcel A.    Each comparable property used had
                                 - 19 -

a residential zoning classification.       Adjustments were made in

order to account for the date of sale, location, size, and

utility.   The adjustment for utility accounted for numerous

factors, including topography, shape, availability of utilities,

and site development estimates.

      Tidwell's comparable sales analysis for parcel B also

involved four real estate sales of properties located in the

general vicinity of the subject property.       All four properties

had a commercial zoning classification and similar adjustments

were made to account for the variables noted above with respect

to parcel A.

      The results of Tidwell's appraisal can be summarized as

follows:

                                                  FMV of Decedent’s
Parcel     FMV per Acre    FMV of Parcel            50% Interest

  A            $19,000      $1,235,000              $617,500
  B             95,000         975,000               487,500

7.    Schoel Engineering Study

      On September 18, 1992, the Walter Schoel Engineering Co.,

Inc. (Schoel), provided Holman's attorney with a brief report

(Schoel report) regarding parcel A.       The Schoel report was in

response to a request that Schoel evaluate the physical

characteristics of parcel A.     The objective of the Schoel report

was to identify the development potential of the parcel.

      Schoel is an organization consisting of numerous engineers,

land surveyors, and hydrologists.     As part of its business,
                              - 20 -

Schoel advises interested parties of the feasibility of

development plans for specified real estate.    It conducts

evaluations of subject properties and identifies restraints and

obstacles associated with such properties in light of existing

development plans.   The evaluation process involves the

consideration of numerous criteria, including zoning

classification, utility availability, accessibility, topography,

soil conditions, and development costs.

     The Schoel report states that the general location of parcel

A is favorable, but the parcel suffers due to its limited

accessibility.   The report all but dismisses the value of the

approximately 300 feet of frontage parcel A has to Highway 280

and concludes that access to parcel A would likely be limited to

that which could be achieved from Cahaba River Road.    The Schoel

report characterizes the topography and soil conditions of parcel

A as "extreme" and likely to result in significant development

costs.

     The findings of the Schoel report indicate, however, that

parcel A was benefited by the availability of utilities,

including gas, electricity, and water.    The sole exception

involved sewer access, and the report indicates that further

study would be necessary in order to obtain a more definite

opinion in that regard.   The Schoel report also states that a

serious drainage condition exists on parcel A as a result of

runoff from the Bell property.   According to the report, this
                                - 21 -

condition has the potential of inflicting a severe financial

burden on plans to develop the parcel.

     The Schoel report also briefly addresses the shape of parcel

A and its zoning classification.     With regard to its shape, the

report describes parcel A as essentially two distinct parcels

because of the location of the Bell property.     As to the zoning

of parcel A, the Schoel report generally concludes that a change

in the zoning classification of that portion of parcel A without

the corporate limits of the city of Birmingham from residential

to commercial would be difficult.

                                OPINION

     Both parties introduced appraisal reports compiled by

qualified appraisers, each of whom was familiar with property

values in the vicinity of Birmingham, Alabama.    Such expert

opinion evidence is admissible if it will assist the trier of

fact to understand evidence that will determine the fact in

issue.   See Fed. R. Evid. 702.   We must weigh expert opinion

evidence in light of the demonstrated qualifications of the

expert and all other credible evidence.     Johnson v. Commissioner,

85 T.C. 469, 477 (1985).    However, we are not bound by the

opinion of any expert witness when that opinion is contrary to

our judgment.     Estate of Newhouse v. Commissioner, 94 T.C. 193,

217 (1990).     While we may choose to accept the opinion of one

expert in its entirety, Buffalo Tool & Die Manufacturing Co. v.

Commissioner, 74 T.C. 441, 452 (1980), we may also be selective
                              - 22 -

in the use of any portion of such an opinion, Parker v.

Commissioner, 86 T.C. 547, 562 (1986).

1.   Appraisal Reports

     All four expert appraisers used the comparable sales method

in arriving at values for the property.    The comparable sales

method functions by (1) locating properties as physically similar

as possible to the subject property which (2) have been sold on

the open market in noncollusive, nonforced sales for cash or cash

equivalent, within (3) a reasonable time of the date for which a

value of the subject property is desired.    Once these properties

are located, those features of the subject property that are most

pertinent to its value are compared to those same features on the

comparable properties.   Since no two sales and no two properties

can be identical, the value of those features of the comparable

properties which are relevant to the value of the subject

property are adjusted until they are of a quality equivalent to

those of the subject property.    This Court has found the

comparable sales valuation method to be a reasonable one and has

used it in the past.   See Frazee v. Commissioner, 98 T.C. 554

(1992); Wolfsen Land & Cattle Co. v. Commissioner, 72 T.C. 1, 19

(1979).

     The parties have gone to great lengths in their attempts to

discredit the validity and usefulness of the appraisal reports

relied upon by their opponents.    Petitioner, in particular,

adamantly maintains that the Dilmore report is devoid of utility
                               - 23 -

because of its brevity.    We disagree.   The brevity of the Dilmore

report was intentional.    The report was prepared in response to a

request by an attorney representing Rivers in the estate

proceedings.    The purpose underlying the request was simply to

aid Rivers in the performance of her obligations as special

administratrix ad colligendum.    Dilmore testified that, in his

professional opinion, the report was appropriate for its intended

purpose and consistent with guidelines established by the

American Institute of Real Estate Appraisers (AIREA).    Dilmore

further testified that he would not have agreed to prepare a

letter report had he known that the report was to be used in a

trial.   Instead, Dilmore further testified, he would have

prepared a formal report or none at all.

     Although their conclusions differ considerably, there is

little contrast in the substance of the reports advanced by

either party.    The lengthier reports contain collateral

information that, while perhaps helpful and informative to

clients, is of little value to a fact finder.    We do not think

that the presence or absence of this collateral information

should be considered as either benefiting or hindering

respondent's reliance upon such documents in reaching her

determinations.    We therefore accept the Dilmore report, as we

accept each of the remaining three, cognizant of its original

purpose.
                                  - 24 -

        We decline to address in any significant detail any of the

further attempts by either party to discredit the appraisal

reports presented by the party’s opponent.       We recognize and

accept that Tidwell, Hearn, Young, and Dilmore are each experts

in their profession of real estate appraising, but we further

recognize that reasonable experts specializing in the same

profession often disagree.       It is to such disagreement that we

attribute any differences in substance, style, and quality among

the appraisal reports presented by each party.

2.      Property Valuation

        Property includable in a decedent's gross estate is

generally reported at its fair market value on the date of the

decedent's death.       Sec. 2031(a);1 sec. 20.2031-1(b), Estate 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 to sell and both

having reasonable knowledge of relevant facts."       United States v.

Cartwright, 411 U.S. 546, 551 (1973); Estate of Bright v. United

States, 658 F.2d 999, 1005-1006 (5th Cir. 1981); Frazee v.

Commissioner, supra at 562; sec. 20.2031-1(b), Estate Tax Regs.

The determination of value is to be made as of the valuation

date, and knowledge of unforeseeable future events that may have

        1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at the date of the decedent’s
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                              - 25 -

affected the value cannot be considered.   Estate of Gilford v.

Commissioner, 88 T.C. 38, 52 (1987); sec. 20.2031-1(b), Estate

Tax Regs.

     As we noted in Estate of Spruill v. Commissioner, 88 T.C.

1197, 1228 (1987), valuation is not an exact science; rather, the

issue is factually based and requires a consideration of the

particular facts of each case.   Respondent's determinations of

value, however, are benefited by a presumption of correctness,

and petitioner is burdened with the task of refuting such

presumption.   Rule 142(a).

     We have compared the substance and reasoning of each

appraisal report, as well as the testimony presented at trial by

the appraisers, and, although we find respondent's argument

generally superior, we find that petitioner has successfully

established that respondent's determinations with respect to both

parcels of trust property are deserving of adjustment.

     It is a fundamental principle of valuation that the fair

market value of property must reflect its highest and best use.

See Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 400

(1986).   Accordingly, our discussion proceeds with an analysis of

the highest and best use of each parcel at issue.

3.   Highest and Best Use

     Property should be valued to reflect the highest and best

use of the property on the date of the valuation.   Frazee v.

Commissioner, supra; Stanley Works & Subs. v. Commissioner, supra
                              - 26 -

at 400.   In determining the highest and best use, and in turn the

fair market value of property, the realistic, objective potential

uses control the valuation process.    Stanley Works & Subs. v.

Commissioner, supra at 400.   The highest and best use of property

is the reasonable and probable use that supports the highest

present value.   Symington v. Commissioner, 87 T.C. 892, 897

(1986).   To determine what uses are reasonable and probable, we

focus on the "highest and most profitable use for which the

property is adaptable and needed or likely to be needed in the

reasonably near future".   Olson v. United States, 292 U.S. 246,

255 (1934).   The fair market value of property is not governed by

whether the owner has actually put the property to its highest

and best use, nor whether he or she ever intends to do so.

Stanley Works & Subs. v. Commissioner, supra at 400.

     Each expert, Dilmore, Young, Tidwell, and Hearn, being

certified by the AIREA, recognizes and accepts AIREA's definition

of highest and best use.   That definition is as follows:

     The reasonably probable and legal use of vacant land or
     an improved property, which is physically possible,
     appropriately supported, financially feasible, and that
     results in the highest value. The four criteria the
     highest and best use must meet are legal
     permissibility, physical possibility, financial
     feasibility, and maximum profitability. [American
     Institute of Real Estate Appraisers, The Dictionary of
     Real Estate Appraisal (2d ed. 1989).]


     While the guidelines of the AIREA may control the profession

to which these witnesses belong, that entity's guidelines are not
                                - 27 -

binding on this Court.   We recognize, however, that the

definition of highest and best use set forth immediately above is

consistent with the principles of Frazee v. Commissioner, 98 T.C.

554 (1992); Symington v. Commissioner, supra; and Stanley Works &

Subs. v. Commissioner, supra.

     a.     Parcel A

     Young and Dilmore both concluded that the highest and best

use of parcel A on the date of decedent's death was commercial in

nature.    Tidwell and Hearn, on the other hand, disagreed and

concluded that, as of the date of decedent's death, the highest

and best use of parcel A was residential in nature.    The

classification as either commercial or residential is significant

because such classification is directly related to the appraisal

value of the property.    More specifically, with other factors

remaining constant, the value of commercial real estate generally

exceeds the value of residential real estate.    Respondent's

determinations rely upon the Young and Dilmore conclusions, while

petitioner’s argument is based upon the Tidwell and Hearn

conclusions.

     Much of the present dispute involves the zoning

classification of parcel A as of the valuation date.    As of the

date of decedent's death, February 20, 1987, roughly half of

parcel A was within the city limits of the city of Birmingham,

Alabama.    The remaining portion of parcel A was located outside

the corporate limits of the city and in Jefferson County,
                               - 28 -

Alabama.   Despite this division, however, the entire parcel had

an R-1 (residential) zoning classification.

       The reports prepared by Young and Dilmore are based upon

the belief of each that it was reasonable to expect that the

zoning classification of the parcel could be changed from

residential to commercial with relatively little difficulty.      The

Tidwell and Hearn reports, on the other hand, are premised on

their opinions that such a change in the zoning classification of

parcel A would have been difficult and unlikely.

     Respondent maintains as a threshold matter that the location

of parcel A speaks for itself.    That is, respondent contends that

the proximity of parcel A to the intersection of I-459 and

Highway 280 is sufficient to establish that highest and best use

of the parcel could not be residential.    We do not think that

location alone can be held to be determinative.    Rather, we think

that location is merely a factor among the many factors to be

considered.

     Respondent also argues that at the time Young and Dilmore

were appraising the trust property, the area in the vicinity of

such property was undergoing an obvious trend toward commercial

development.   Respondent maintains that this trend supports the

conclusions reached by Young and Dilmore regarding the likelihood

of a rezoning.   There appears to be much validity to this

assertion.    The record contains testimony involving the area in

the vicinity of the intersection of Highway 280 and I-459.    The
                               - 29 -

record also contains a significant amount of evidence involving

the area south of the intersection of Highway 280 and I-459.

This corridor has indeed undergone significant commercial

development over the years.    Most notably, in this regard, was

the development of the Bell property, which is contiguous to

parcel A, and the large Colonnade complex located immediately

across I-459 from parcel A.    Respondent recognizes that the vast

majority of this commercial development has occurred south of I-

459, but she points out that there are pockets of commercially

developed land to the north of the I-459 intersection with

Highway 280 as well.    It is respondent's contention that the

commercial development, so obviously apparent south of I-459, was

continuing its northerly progression and that it was upon such

conspicuous progression that Young and Hearn based their

conclusions.   In support of this assertion, respondent points to

changes in the zoning classification of numerous parcels of real

estate located north of the intersection of I-459 and Highway 280

that have occurred since decedent's death.    Respondent places

particular emphasis on several of these changes which occurred

within a year of decedent's death.

     Respondent also cites the findings of Smyer and Scotch as

support for her conclusion that Young and Dilmore correctly

concluded that the highest and best use of parcel A was

commercial in nature.    Smyer and Scotch, two unaffiliated

appraisers, were hired by Held and Dudley in 1979 to value the
                              - 30 -

land condemned by the State of Alabama for the purpose of

constructing I-459.   Smyer concluded that the highest and best

use of the property condemned for such purpose was commercial.

Scotch's extremely brief report did not address the concept of

highest and best use; however, it involved an analysis of

comparable real estate sales in which he used only commercial

property sales.   Respondent contends that petitioner is applying

the concept of highest and best use selectively so as to maximize

the benefits of its application.

     Petitioner disagrees with respondent and contends that Hearn

and Tidwell were correct in concluding that, as of the valuation

date, it would have been difficult, if not unlikely, to have the

residential zoning classification of parcel A changed to a

commercial classification.   Petitioner advances several arguments

in support of its contention that a change in the zoning of

parcel A was unlikely.   On brief, petitioner explains that parcel

A is in the middle of a residential community.    Petitioner

contends that Hearn's and Tidwell's conclusions that a commercial

rezoning was unlikely were supported by the contractual agreement

between the Jefferson County zoning commission (zoning

commission) and Bell, prohibiting Bell from constructing a road

connecting its property to Cahaba River Road.    Petitioner

maintains that this agreement reflected the desire of the zoning

commission to insulate the residential property west of Cahaba

River Road from what was referred to as "creeping commercialism".
                              - 31 -

     Petitioner further argues in favor of the conclusions by

Hearn and Tidwell that a commercial rezoning was unlikely by

pointing to a zoning dispute involving a nearby church.     The

dispute arose when officials from the church proposed to

construct a church in an area with an existing residential zoning

classification.   The county zoning commission denied the

requested change, citing an unacceptable increase in traffic

within the residential area surrounding the proposed location as

the basis for its denial.   The church officials ultimately

prevailed, however, when a State court reversed the zoning

commission and ordered a rezoning.     Petitioner argues that this

dispute clearly indicated that the zoning commission was

generally inclined to deny rezoning requests involving land in

the vicinity of parcel A.   Accordingly, petitioner contends,

Hearn and Tidwell were both justified in reaching their

conclusions with regard to the zoning of parcel A.

     Petitioner further argues in support of the conclusions

advanced by Hearn and Tidwell by pointing to what it refers to as

a 200-foot buffer zone extending the length of parcel A along

Cahaba River Road, which was created when the city of Birmingham

partially annexed parcel A in 1985.    Petitioner contends that the

existence of this buffer zone, which remained under the control

of the county zoning commission, in effect, served to make any

likely commercial rezoning of the portion of parcel A within the

corporate limits of the city of Birmingham irrelevant because the
                                - 32 -

county zoning commission would deny commercial access from Cahaba

River Road through the zone.    The effect, petitioner suggests, is

indistinguishable from the contractual agreement between the

county zoning commission and Bell preventing Bell from

constructing a road connecting its property to Cahaba River Road.

      The mere fact that the current zoning restrictions of a

parcel of real estate do not permit a particular use does not

necessarily preclude a consideration of the unpermitted use when

conducting a highest and best use analysis.    Frazee v.

Commissioner, 98 T.C. at 564.    When there is a reasonable

probability that the zoning regulations will change within the

near future, such change can be considered in the determination

of value.    Id. (citing Investors Funding Corp. v. Bloor, 592 F.2d

134, 136 (2d Cir. 1979); Estate of Pattison v. Commissioner, T.C.

Memo. 1990-428).   For example, in Estate of Wolfe v.

Commissioner, a Memorandum Opinion of this Court dated Jan. 15,

1954, the status of a rezoning was on appeal on the date of

valuation.   We noted that, while the property could not properly

be valued as though the rezoning had already been completed, the

fact that a change in zoning was in prospect was an element

deserving of consideration in the process of determining value.

Id.

      We have little doubt that there existed at the time of

decedent's death a reasonable probability that parcel A could be

rezoned from residential to commercial.   In fact, considering the
                               - 33 -

facts and circumstances involved in this case, we think that such

rezoning was quite likely.    The facts generally illustrate that

the Highway 280 corridor in the vicinity of I-459 was undergoing

a northerly progression of commercial development.   Not only was

this progression occurring at the time of decedent's death, but

it had been occurring for many years prior to his death.     This is

clearly evident from a series of events and transactions dating

back to at least 1979.   A reading of the Smyer and Scotch

appraisal reports, both of which are dated March 29, 1979,

suggests as much.    In particular, in support for concluding that

the highest and best use of the property condemned for the

purposes of constructing I-459 was commercial, Smyer explains in

his report that the corridor south of the condemned property has

shown "phenomenal development" with "substantial improvements

being constructed" prior to the condemnation.

     Petitioner concedes the existence of this growth and

development but maintains that the progression ceased with the

construction of I-459.   However, the development of the Bell

property in the early 1980's is an indication to the contrary.

With the development of the Bell property came the presence of a

large commercial operation north of I-459 on real estate once

zoned residential.

     Petitioner, however, considers the presence of the Bell

property to be an exception to its underlying argument that the

progression of commercial development stopped at I-459 and points
                              - 34 -

to the contractual restriction prohibiting Bell from accessing

its property from Cahaba River Road as evidence.     Petitioner

maintains that such a restriction indicates the zoning

commission's desire to insulate the area west of Cahaba River

Road from commercial growth and development.     This may very well

be the case, but the existence of the restriction also suggests

that the zoning commission is willing to negotiate the issue of

rezoning.   As a result, we decline to construe the restriction,

which is obviously the product of good-faith negotiation, as

strictly as petitioner suggests.

     Another indication of the trend toward commercializing the

area north of I-459 is that several investors and developers were

interested in parcels A and B.   Although none of the offers or

options to purchase evolved into a sale, none of them were made

or acquired with the expectation of developing the underlying

property for residential purposes.     Rather, the investors and

developers expressing interest in such properties all did so with

plans to develop commercially.   The offer by Runnion in 1980 was

made with an office development project in mind.     The offer made

by Institutional Investment Corp. for the purchase of parcel B

was made with the objective of constructing "commercial

buildings".   The agreement between Lincoln and the trustees to

enter into a partnership arrangement also involved plans to

develop property north of I-459 commercially.
                               - 35 -

     Perhaps the most conspicuous indication that the

commercialization of the Highway 280 corridor was continuing

north of I-459, and that a reasonable probability existed that

parcel A could be rezoned, was the annexation of roughly one-half

of parcel A and all of parcel B by the city of Birmingham in

1985.   The purpose of this annexation was to expand the city's

tax base by increasing the number of commercial properties within

its corporate limits.    It seems to us that the natural

consequence of this unilateral expansion was an inevitable

rezoning.   As to why the city of Birmingham did not rezone the

annexed properties concurrently with the annexation remains

unclear.    But the fact that the annexation occurred with such

rezoning in mind is evident.

     Petitioner attempts to detract from this seemingly

unambiguous indication of the commercial progression north of I-

459 by pointing to the so-called buffer zone separating that

portion of parcel A annexed by the city of Birmingham from Cahaba

River Road.   Petitioner contends that the existence of the buffer

zone effectively operates in a manner much the same as the

restriction Bell contractually agreed to with regard to gaining

access to Cahaba River Road.    To the extent that petitioner’s

contention may be accurate, we need only refer to our discussion

above pertaining to the Bell restriction.    However, we think the

existence of this so-called buffer zone is markedly different

from the restriction placed on the Bell property.    There is no
                                - 36 -

evidence in the record suggesting that county zoning commission

officials, or any other county officials for that matter, had any

involvement regarding the creation of this buffer zone.

Moreover, the record lacks conclusive evidence concerning the

reason the annexation stopped where it did.     Petitioner’s

speculation with regard to the purpose and effect of the buffer

zone may indeed be plausible, but it is speculation nonetheless.

     In recognition of this series of events, we conclude that at

the time of decedent's death there existed numerous indications

that the Highway 280 corridor was experiencing a northerly

progression of commercial development and that such progression

was extending beyond I-459.     We further conclude that parcel A

was within the parameters of this expansion as of the valuation

date.     Accordingly, we conclude that there was a reasonable

probability that parcel A could likely be rezoned to a commercial

classification within a relatively short period of time following

decedent's death.     See Frazee v. Commissioner, 98 T.C. at 564.

        To a lesser extent, the current dispute involves the

accessibility of parcel A.     Respondent recognizes that parcel A

suffers from an accessibility standpoint.     Respondent maintains,

however, that the extent of the accessibility problem is not

significant enough to warrant a finding that its highest and best

use is not commercial in nature.     Petitioner disagrees and

contends that parcel A was so inaccessible as to preclude

commercial development.     Accordingly, petitioner contends that
                              - 37 -

Tidwell and Hearn correctly concluded that the highest and best

use of Parcel A was residential in nature.

     There is little question that parcel A has only limited

access to Highway 280.   We do not think, however, that this is

sufficient, as petitioner generally suggests, to conclude that

the highest and best use of parcel A is not commercial.   Although

the 300 feet of Highway 280 frontage parcel A does have would

likely require substantial modification to facilitate

accessibility, the accompanying costs could be accounted for in

the valuation process.   Even if, as one of petitioner’s witnesses

claimed, regulations promulgated by the State highway commission

may prevent or restrict such access due to the proximity of this

frontage to the entrance of the Bell property, Cahaba River Road

provides a means of alternative access to parcel A.   In fact,

such latter access might be preferable for commercial

development.   In any event, the extent to which parcel A is less

attractive from a commercial development perspective, due to the

lack of convenient access to Highway 280, can be sufficiently

accounted for in the process of value estimation and should not

be construed as denuding the parcel of commercial utility.

     We are unwilling to accept petitioner’s contention that the

so-called buffer zone separating Cahaba River Road from that

portion of parcel A annexed by the city of Birmingham in 1985

imposed an absolute barrier to the accessibility of parcel A from

Cahaba River Road.   At best, the record establishes only that a
                              - 38 -

prospective commercial developer would experience friction in

attempting a rezoning.   Accordingly, the asserted difficulties in

gaining access to parcel A do not persuade us that the highest

and best use of the parcel is other than commercial in nature.

     Other factors involved in this dispute with respect to

parcel A include its size, shape, available utilities, and

topography.   Perhaps the most significant of these factors

involves the topography of parcel A.   This Court, accompanied by

counsel for both parties, conducted a viewing of parcel A.

Petitioner contends that the steep slopes and extensive rock

throughout the parcel effectively preclude development of the

parcel commercially for profit.   Respondent, on the other hand,

recognizes that the slopes and rock impose barriers to commercial

development, but contends that such barriers do not make

commercial development physically impossible.   Considering our

viewing of the property, we are inclined to agree with

respondent.   We recognize that the terrain of parcel A may, in

fact, prevent various types of commercial development projects,

but we are not persuaded by petitioner’s argument that parcel A

cannot be developed commercially for profit under any

circumstance.   Instead, we think the development costs elaborated

upon by many of petitioner’s experts can and should be accounted

for during the valuation process.

     Petitioner also cites the irregular shape and size of parcel

A as contributing to its conclusion that its highest and best use
                              - 39 -

cannot be commercial in nature.    Petitioner does not, however,

advance a meaningful argument with respect to these two factors.

Parcel A is indeed an awkwardly positioned large piece of real

estate.   However, we fail to see how these factors lend material

support to the conclusion reached by petitioner.

     Much of the testimony offered by petitioner through its

witnesses involves the availability of utilities on parcel A.      In

particular, petitioner maintains that the establishment of sewer

facilities to parcel A would likely be cost prohibitive.

Considering the testimony by the several witnesses called by

petitioner, we can appreciate that parcel A suffers in this

regard, but this should not be considered unusual.    At issue is

the development of a piece of undeveloped real estate, and it

would seem that such development commonly occurs on real estate

lacking direct sewer facilities.    It seems odd that petitioner

maintains that the lack of immediate sewer connections on parcel

A presents an insurmountable hurdle with respect to commercial

development while simultaneously contending that such an obstacle

does not equally impair residential development.    In any event,

the extent to which parcel A is burdened by the lack of immediate

sewer connections can be accounted for in valuing the parcel.

     Petitioner has expended an enormous effort in its attempt to

convince this Court that Hearn and Tidwell were both correct in

concluding that the highest and best use of parcel A was

residential rather than commercial as of the date of decedent's
                                - 40 -

death.    Petitioner contends that respondent is transfixed on the

concept of location and that she has failed to factor into her

analysis the many characteristics of parcel A which detract from

its utility.   Petitioner’s argument suffers from at least one

significant flaw.     Just as respondent has placed considerable

reliance on the location of parcel A, contending that such

location evinces its commercial qualities, petitioner has relied

to an equal extent in arguing that parcel A is located in a

residential area.     We do not regard either argument as

determinative.

     We are convinced that the highest and best use of parcel A

as of the date of decedent's death was commercial in nature;

such use was reasonable and probable.     See Symington v.

Commissioner, 87 T.C. at 897.     Considering the entire record,

with particular emphasis on the appraisal reports prepared by

Tidwell, Hearn, Young and Dilmore, we find that the conclusions

reached by both Dilmore and Young relating to the highest and

best use of parcel A were realistic and objective under the

circumstances of this case.     See Stanley Works & Subs. v.

Commissioner, 87 T.C. at 400.

     b.    Parcel B

     The parties are in agreement that the highest and best use

of parcel B, as of the valuation date, was commercial in nature.

Each of the four appraisers, Tidwell, Hearn, Young, and Dilmore,

concluded that a rezoning of parcel B from residential to
                              - 41 -

commercial was reasonable and likely.   See Symington v.

Commissioner, supra.   These appraisers, however, are not in

agreement with respect to the way factors such as topography,

size, shape, accessibility, visibility, and available utilities

influence the commercial utility of parcel B.   Respondent

maintains that these factors do not impair the use of parcel B in

any significant manner.   Petitioner disagrees and contends that

such factors impose substantial limitations on plans to develop

the parcel commercially for profit.

     Perhaps the most significant point of dispute involves the

topography of parcel B.   Parcel B consists of approximately 10

acres of land.   Prior to the construction of I-459, parcel B

contained a large depression, roughly 4 acres in size.     As part

of the plan to dispose of excess earth and rock accumulated

during the I-459 construction project, Held agreed to accept as

much of this excess accumulation as needed to bring the 4-acre

depression to grade level.

     Petitioner maintains that the 4 acres of filled area on

parcel B constitute the only portion of that parcel suitable for

any type of commercial development.    Petitioner contends that the

remaining 6 acres consist of excessively steep sloping terrain

with a substantial amount of exposed surface rock.   Petitioner

further contends that significant evidence exists which brings

the integrity of the fill into question.   Pointing to an

engineering report prepared in 1985 that presents an analysis of
                               - 42 -

the quality and characteristics of the fill, petitioner contends

that the variety of potential commercial development is limited

considerably in light of the poor quality and inferior

characteristics of the fill.

     Respondent disagrees with petitioner’s contention that only

4 acres of the filled area on parcel B are sufficiently flat to

permit development.   Respondent contends that an additional 2

acres are relatively flat and would support a variety of

commercial development projects.    Respondent also dismisses the

findings of the engineering study with regard to the quality of

the fill.   Respondent contends that the restrictions and

requirements necessary to build a foundation in the area of the

fill would be of little difference from the restrictions and

requirements otherwise necessary to construct foundations

throughout the region.

     This Court, accompanied by counsel for both parties, viewed

parcel B.   We agree with respondent that roughly 6 acres are

sufficiently flat.    We recognize that the engineering study

expressed genuine concerns as to the quality of the fill, but we

further recognize that the testimony at trial with regard to the

extent such quality might impair potential development was less

than conclusive.   A legitimate concern was raised with regard to

the depth and frequency of soil samples used in the analysis.

Therefore, the engineering study must be viewed accordingly.
                              - 43 -

     The parties agree that parcel B lacks access to I-459 and

has access to Highway 280.   Petitioner contends, however, that

the limited amount of access to parcel B significantly burdens

the property.   Petitioner further argues that any benefit parcel

B experienced due to its access to Highway 280 at the time of

decedent's death must be discounted to account for pending plans

by the State of Alabama to modify Highway 280.   Such

modification, petitioner contends, might eliminate access to

Highway 280 altogether.

     Respondent replies to petitioner’s concern regarding future

modification plans of Highway 280 by pointing to St. Clair County

v. Bukacek, 131 So. 2d 683 (Ala. 1961).   Respondent explains that

St. Clair County would require the State of Alabama to compensate

the owner of parcel B if such modification resulted in denying

that owner access to Highway 280.

     We agree with respondent.   At the time of decedent's death,

parcel B had the benefit of direct access to Highway 280.

Problems similar to those cited as besetting the accessibility of

parcel A did not impair the accessibility of parcel B.   Although

the record is not entirely clear as to the approximate amount of

Highway 280 frontage that existed on parcel B, it contains

sufficient evidence to conclude that ample usable frontage did,

in fact, exist.   We recognize that pending plans to modify the

existing highway raise legitimate concerns from a valuation

standpoint, but we are unconvinced that petitioner properly
                               - 44 -

accounted for such concerns.   There is nothing in the record that

suggests that plans to modify Highway 280 were anything more than

mere speculation.   We agree with respondent that the St. Clair

County case explains how any ill effects experienced by an owner

of parcel B are to be dealt with if some future modification

prevents that owner from accessing Highway 280 from parcel B.

     Petitioner also maintains that parcel B suffers from a lack

of visibility from I-459.   This lack of visibility, petitioner

contends, is caused by a hill, which petitioner refers to as a

large ridge or mountain, that separates parcel B from I-459.     We

cannot grant much weight to petitioner’s argument in this regard

because even its own witnesses, Hearn and Tidwell, disagree as to

the extent visibility is an issue.

     Both parties also consider the size, shape, and available

utilities of parcel B, but their arguments in that regard are

essentially limited to a discussion concerning the lack of

immediate sewer connections.   Again, the parties disagree

extensively as to the effect on valuation caused by the lack of

immediate sewer connections to parcel B.   Petitioner contends

that establishing sewer connections to parcel B would be cost

prohibitive because doing so would require either boring or

tunneling under Highway 280 or connecting to a sewer line located

roughly 1 mile to the north of parcel B.   Respondent agrees with

petitioner as to where sewer connections might be made; however,

she contends that such connections would not be cost prohibitive.
                                 - 45 -

     The record is anything but conclusive with regard to the

effect that a lack of immediate sewer connections has on the

value of parcel B.    The testimony of several witnesses supports

petitioner’s argument, but evidence also exists in support of the

contention advanced by respondent.

     We agree with both parties that the highest and best use of

parcel B was commercial in nature at the time of decedent's

death.   Such use was both realistic and objective under the

circumstances.    See Stanley Works & Subs. v. Commissioner, 87

T.C. at 400.     Additionally, we are generally inclined to agree

with respondent with regard to the extent that the several

characteristics discussed above influence the commercial utility

of parcel B.     While we recognize that petitioner’s argument on

that score has some merit, much of petitioner’s concern is

exaggerated.

4.   Evidentiary Value of the Offers and Options

     On brief, petitioner advances a rather lengthy argument with

respect to how this Court should view respondent's introduction

into evidence of several offers to buy and option contracts to

purchase portions of the trust property.     We find this argument

to be without merit.     It is clear that as a general rule,

unaccepted offers have no more than limited probative weight in

estimating value.     Sharp   v. United States, 191 U.S. 341 (1903);

Jayson v. United States, 294 F.2d 808 (5th Cir. 1961).     Indeed,

this general rule has been held applicable to both offers and
                               - 46 -

options.    See, e.g., United States v. Certain Land in the City of

Fort Worth, 414 F.2d 1029 (5th Cir. 1969); United States v.

Smith, 355 F.2d 807 (5th Cir. 1966); United States v. Playa De

Flor Land & Improvement Co., 160 F.2d 131 (5th Cir. 1947); St.

Joe Paper Co. v. United States, 155 F.2d 93 (5th Cir 1946).       The

Supreme Court in Sharp questioned the integrity of such evidence

and stated that for a variety of reasons it often fails to

provide a reliable reference for estimating the value of

property.    Sharp v. United States, supra at 348.    However, the

rule in Sharp was designed to serve specific purposes and was not

meant to be enforced mechanically or without regard to the

reasons for its existence.    University Computing Co. v. Lykes-

Youngstown Corp., 504 F.2d 518 (5th Cir. 1974).      In any event, we

need not consider its application to the instant case as

petitioner correctly asserts that there is no evidence in the

record suggesting that any of the four appraisers, Tidwell,

Hearn, Young, and Dilmore, considered the offers or options to

purchase in their estimation of the fair market value of either

parcel.    Although respondent advanced considerable argument with

regard to how this Court should interpret the contents of the

offers and options, we do not think it is necessary for us to

rely upon such evidence in deciding the issues at hand.     The

testimony at trial, coupled with the four appraisal reports,

provides ample evidence to support our decision without

consideration of the offers and options to purchase.
                              - 47 -

5.   Conclusion

     We have concluded that the appraisal reports presented by

respondent correctly identify that the highest and best use of

both parcels was commercial in nature at the time of decedent's

death.   However, petitioner has raised many concerns with respect

to each parcel.   Having viewed both parcels, and in light of the

testimony contained in the voluminous record, we believe that

some of these concerns are credible.    Accordingly, we feel it

necessary to adjust the fair market value of each parcel as

determined by respondent.   With respect to parcel A, our

adjustment stems primarily from the topography of the terrain and

the parcel’s limited accessibility to and from Highway 280.    With

respect to parcel B, our adjustment stems principally from the

parcel’s lack of proximity to sewer facilities and the

questionable integrity of the fill.

     Taking into account the foregoing, we hold that on February

20, 1987, the fair market value of parcel A was $5 million.

Similarly, we hold that the fair market value of parcel B was

$1.5 million on February 20, 1987.     Consequently, the fair market

value of decedent's one-half interest on February 20, 1987, was

$2.5 million in parcel A and $750,000 in parcel B.

     To reflect the foregoing,

                                           Decision will be entered

                                      under Rule 155.
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