                        T.C. Memo. 2005-217




                      UNITED STATES TAX COURT



ESTATE OF NORA KOLCZYNSKI, DECEASED, MATTHEW HOFFMEIER, EXECUTOR,
                           Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22096-03.              Filed September 20, 2005.


     John T. Catterson and Susan A. Teschner, for petitioner.

     Monica E. Koch, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   Respondent determined a Federal estate tax

deficiency of $843,146 against the Estate of Nora Kolczynski (the

estate).   After concessions, the issue for decision is the value

of a tract known as Dawn Plantation (DP) which Nora Kolczynski
                               - 2 -

held at her death.1   The parties disagree as to the highest and

best use of DP on the valuation date and the method to value DP.

We hold that the highest and best use for    DP was a mixed use of

recreation purposes and timber management.   We further hold that

the fair market value of DP on the valuation date was $4,829,252.

                         FINDINGS OF FACT

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

The stipulation of facts is incorporated herein by this

reference.




     1
       The estate filed a sec. 2032A protective election with its
estate tax return. The estate has indicated its intent to
perfect this protective election by filing an additional notice
of election if we determine the value of DP to be greater than
the amount it asserted at trial. Respondent has indicated his
intent to deny any such attempt. This dispute raises the
question of when the 60-day period begins to run for the estate
to file a notice of election, and turns on the phrase “as finally
determined” in sec. 20.2032A-8(b), Estate Tax Regs.
Specifically, respondent argues that the value finally determined
is his determination in the notice of deficiency, and the estate
argues that it is this Court’s determination of the property’s
value. This issue will be addressed only if the estate files an
additional notice of election and respondent denies the estate’s
filing. An appropriate order will be issued addressing these
contingencies.

     Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent’s
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 3 -

     On July 8, 1999, Nora Kolczynski (decedent) died testate as

a resident of the State of New York.     The executor had a mailing

address at c/o John T. Catterson, Esq., Hauppauge, New York,

11788, when the petition was filed.     The executor’s actual

address is not in the record.

     On the date of decedent’s death, she held, among other

things, 100-percent ownership of DP.     Decedent’s interest was

reported by the estate on its Form 706, United States Estate (and

Generation-Skipping Transfer) Tax Return.     The date of death is

the valuation date in this case.   The estate reported that the

value of DP on the valuation date was $4,378,013.     The estate

also made a protective election on Schedule A-1, Section 2032A

Valuation.

Dawn Plantation

     DP is in Greenpond, Colleton County, South Carolina, in an

area known as ACE Basin.   ACE is an acronym for the Ashepoo,

Combahee, and Edisto Rivers, and ACE Basin includes about 350,000

acres of land.    ACE Basin is part of the South Carolina lowlands,

and the rivers are affected by tidal changes.     Because of ACE

Basin’s location, it provides a notable ecosystem, and the ACE

Basin Commission was founded to preserve ACE Basin in its natural

and pristine condition.    Colleton County is in southeastern South

Carolina and is approximately 60 to 70 miles northwest from

Hilton Head, a resort and retirement community.
                                - 4 -

     Colleton County was ranked 21st in population growth in

South Carolina, with an 11.3-percent increase during the period

1990 through 2000.    There are neither zoning nor use restrictions

in Colleton County.

     The parties stipulate that DP comprises 2,095.12 acres. The

record establishes that the main tract is 1,931.30 acres, and the

five smaller tracts total 133.82 acres.2    DP is north of U.S.

Highway 17 and south of the Ashepoo River and is bisected east to

west by Clover Hill Road.   DP features timberlands, open fields,

access to a shallow branch of the Ashepoo River, and 226 acres of

what were historically rice fields.     The rice fields have not

functioned as such for decades and no longer have dikes to

regulate water flow from tidal changes.     DP is inhabited by an

array of wildlife including deer and migratory water fowl.

Procedural History

     On September 30, 2003, respondent issued a notice of

deficiency in which he determined a Federal estate tax deficiency

of $843,146.   The deficiency included three increases to the

value of decedent’s taxable estate:     (1) A $157,500 increase to

the fair market value of decedent’s residence; (2) a $1,112,979

increase to the fair market value of DP (a total value of

$5,490,992); and (3) a $390,315 increase for the disallowance of

executor’s commissions and attorneys’ fees.


     2
      The record does not explain the 30-acre discrepancy.
                                 - 5 -

     The estate timely petitioned the Court and challenged each

adjustment respondent made.   The estate claims that the value of

DP is overstated on the estate tax return.   The estate contends

that the value of DP was $4,238,000 on the valuation date, which

is $140,013 less than it reported on the estate tax return.

     The estate has since conceded the $157,500 increase to the

fair market value of decedent’s residence.   The parties also

agree that the estate may deduct 5 percent of the value of the

probate assets located in South Carolina as executor’s

commissions, New York executor’s commissions of $23,832, and

$277,750 for attorney’s fees.    These deductions require payment

of the corresponding amounts.

                                OPINION

     Section 2001 imposes a Federal tax “on the transfer of the

taxable estate of every decedent who is a citizen or resident of

the United States.”   The value of a decedent’s gross estate

includes the fair market value of any interest the decedent held

in property.   See secs. 2031(a), 2033; United States v.

Cartwright, 411 U.S. 546, 551 (1973); sec. 20.2031-1(b), Estate

Tax Regs.   Fair market value reflects 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.”   Sec.

20.2031-1(b), Estate Tax Regs.; United States v. Cartwright,
                                 - 6 -

supra at 551.   Fair market value is an objective test that relies

on a hypothetical buyer and seller.      See Estate of Bright v.

United States, 658 F.2d 999, 1005-1006 (5th Cir. 1981); Estate of

Andrews v. Commissioner, 79 T.C. 938, 956 (1982).

     A valuation analysis of property must reflect the highest

and best use to which the property could be put on the relevant

valuation date.     Symington v. Commissioner, 87 T.C. 892, 896

(1986); Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 400

(1986).   The highest and best use is a factual issue, Symington

v. Commissioner, supra at 896; Skripak v. Commissioner, 84 T.C.

285, 320 (1985), in which we consider “‘[t]he realistic,

objective potential uses’”,     Symington v. Commissioner, supra at

896-897 (quoting Stanley Works & Subs. v. Commissioner, supra at

400 (citing United States v. Meadow Brook Club, 259 F.2d 41, 45

(2d Cir. 1958))).    This determination is not affected by whether

the owner has or intends to put the property to such use.

Symington v. Commissioner, supra at 897.      Instead, 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, 255-256

(1934).
                               - 7 -

      The parties disagree as to the highest and best use and the

valuation method to be applied.   Both parties presented the

testimony of expert witnesses to support their respective

positions.

A.   Burden of Proof

      The estate argues that respondent’s notice of deficiency was

arbitrary, and the burden of proof should shift to respondent.

We do not find the notice of deficiency arbitrary.   In addition,

we decide this case on the preponderance of the evidence, and our

analysis is not affected by the burden of proof.   See Blodgett v.

Commissioner, 394 F.3d 1030, 1035 (8th Cir. 2005), affg. T.C.

Memo. 2003-212.

B.   Experts

      A witness that qualifies as an expert by knowledge, skill,

experience, training, or education can give opinion testimony if

his special knowledge will assist the Court in understanding the

evidence or determining a fact at issue and if his opinion is

supported by sufficient facts and is based on reliable principles

and methods that were applied reliably to the facts of the case.

See Fed. R. Evid. 702.   We are, however, not bound by expert

opinions and may reach a decision based on our own analysis of

all the evidence in the record.   Helvering v. Natl. Grocery Co.,

304 U.S. 282, 295 (1938); Silverman v. Commissioner, 538 F.2d

927, 933 (2d Cir. 1976), affg. T.C. Memo. 1974-285; Estate of
                                 - 8 -

Newhouse v. Commissioner, 94 T.C. 193, 217 (1990).    Where experts

offer conflicting estimates of fair market value, we must weigh

each estimate by analyzing the factors they used to arrive at

their conclusions.   Silverman v. Commissioner, supra at 933;

Casey v. Commissioner, 38 T.C. 357, 381 (1962); see also Estate

of Davis v. Commissioner, 110 T.C. 530, 538 (1998).

     Each party offered expert testimony with respect to the

value of DP.   The estate presented the testimony of Charles

Middleton (Mr. Middleton), a South Carolina State-certified

general real estate appraiser.    Mr. Middleton’s report was

attached to the estate tax return, which was received into

evidence.   Respondent concedes that Mr. Middleton is an expert in

appraising real estate.   The Court, however, limited Mr.

Middleton’s testimony to that of a rebuttal witness since the

estate failed to comply with the Court’s standing pretrial order

to identify him in its pretrial memorandum as a witness it

intended to call at trial.

     The estate also presented the testimony of Thomas Hartnett

(Mr. Hartnett), a South Carolina general real estate appraiser

and a certified real estate brokerage manager, as an expert in

land valuation.   Mr. Hartnett prepared an expert report in

accordance with Rule 143(f), and the estate properly identified

him as a witness in its pretrial memorandum.
                                - 9 -

     Respondent presented the testimony of Robert O’Rear (Mr.

O’Rear).    Mr. O’Rear has a B.S. in forestry and has taken at

least two valuation classes.    His 30 years of work experience

include appraising timber, timberland, cropland, and forest

plantations.    He prepared an expert report in accordance with

Rule 143(f), and respondent identified Mr. O’Rear as a witness in

his pretrial memorandum.    Mr. O’Rear’s professional training and

work experience qualify him as an expert to value DP for estate

tax purposes.

     Each party urges us to reject the other party’s expert’s

opinions.    We may, however, accept or reject the opinion of an

expert in its entirety, or we may be selective in the use of any

portion thereof.    Estate of Davis v. Commissioner, supra at 538;

Parker v. Commissioner, 86 T.C. 547, 562 (1986); Buffalo Tool &

Die Manufacturing Co. v. Commissioner, 74 T.C. 441, 452 (1980).

Stated differently, we decide, as the trier of fact, the weight

afforded any witness’s testimony, and we are not compelled to

accept any testimony even if it is uncontradicted.    McGraw v.

Commissioner, 384 F.3d 965, 972 (8th Cir. 2004), affg. Butler v.

Commissioner, T.C. Memo. 2002-314; Paul E. Kummer Realty Co. v.

Commissioner, 511 F.2d 313, 315 (8th Cir. 1975), affg. T.C. Memo.

1974-44.
                                  - 10 -

C.   Valuation Methodology and Highest and Best Use

      The parties’ disagreement over DP’s value stems from two

issues.    First, what was the highest and best use to which DP

could have been put on the valuation date?     Second, what method

should be used to value DP?    We note that the valuation method

petitioner urges us to apply and the method J. Richard Cox (Mr.

Cox), an attorney and C.P.A., used to determine the value of DP

that the estate reported on the estate tax return are different.

Given this difference we will analyze the appraisals attached to

the estate tax return in addition to the reports of the experts

who testified.

      1.    The Estate Tax Return

      Mr. Cox’s report was attached to the estate tax return, but

he was deceased at the time of trial.      The valuation method Mr.

Cox used aggregated the timber value and the land value.     A land

appraisal by Mr. Middleton and a timber appraisal by Scott Pellum

(Mr. Pellum), a registered forester, were also attached to the

estate tax return.

            a.   Land Appraisal

      To determine the highest and best use for DP, Mr. Middleton

considered four factors:    (1) Physical possibility, (2) legal

permissibility, (3) financial feasibility, and (4) maximum

productivity (profitability).      After considering these factors,

Mr. Middleton concluded that DP’s highest and best use was a
                                - 11 -

mixed use of agriculture, including timber, cow, and hog farming,

and recreation, including hunting.

     To value DP, he used the sales comparison approach (also

referred to as the comparative sales approach).      A sales

comparison approach relies on recent sales of comparable

properties to determine the value of the subject property.        Mr.

Middleton performed two separate analyses, one with respect to

the main tract and a second with respect to the five smaller

tracts.

     In comparing DP’s main tract to other tracts recently sold,

Mr. Middleton subtracted the value of any improvements, such as

the value of a house or other erected structures, and the

merchantable timber on DP.   In addition, he made adjustments for

the size, waterfront access, and location and the period between

the sale date and the valuation date.      He identified sales of six

comparable properties to value DP’s main tract; however, he

accorded greater weight to three given their geographic

similarities to DP.   Mr. Middleton concluded that the value of

DP’s largest tract on the valuation date was $1,275 per acre, for

a total value of $2,500,275 (1,961 acres x $1,275 per acre).       He

rounded this to $2.5 million.

     To value the five separate small tracts he again identified

sales of six comparable properties.      Because each tract was

different in size and had different attributes, such as road
                               - 12 -

access, Mr. Middleton grouped similar tracts for valuation

purposes.   Using the comparable properties with similar

attributes, he determined the combined value of the smaller

tracts was $226,000 on the valuation date.

     Mr. Middleton calculated the total appraised land value of

DP as follows:

     Main tract value--1,961.3 acres                $2,500,000
     Improvement value                                 100,000
     Combined value of the five small tracts           226,000
      Total                                          2,826,000
      Rounded to                                     2,825,000

            b.   Timber Appraisal

     Mr. Pellum determined the value of standing merchantable

timber, and his report was attached to the estate tax return.

Mr. Pellum did not testify at trial.    In his report, Mr. Pellum

used stands to identify specific forested acres on DP and

determined the quality (pine sawtimber, chip-n-saw, pine

pulpwood, hardwood sawtimber, and hardwood pulpwood) and volume

of the timber in each stand.   Using the Timber Mart-South, South

Carolina Stumpage Prices, 2nd Quarter 1999, which provided per-

ton prices for different timber qualities, he calculated the

value of the merchantable timber on DP’s 1,481 forested acres.
                                - 13 -

He determined, on the basis of these calculations, that the value

of the merchantable timber on DP was $2,665,992.3

             c.   Value Reported on the Estate Tax Return

     Mr. Cox valued DP as a business, specifically a sole

proprietorship.    Mr. Cox’s valuation of DP relied on, among other

things, Mr. Middleton’s land appraisal and Mr. Pellum’s timber

appraisal.    In his report, Mr. Cox stated:   “While it is simple

to add the land value to the timber value, such simple addition

would result in a value determination greatly in excess of the

true fair market value of the property.”    Mr. Cox opined that

none of the timber acreage tracts with a value of less than

$1,000 per acre should be harvested since cutting the timber in

these areas would “result in tremendous decreases in value of

these and the immediately surrounding acreage.”     Accordingly, he

decreased the total timber value by $225,729.    This adjustment

resulted in a timber value of $2,440,263.

     To determine the land value Mr. Cox referenced three

different methods, one of which was Mr. Middleton’s report.

However, Mr. Cox ultimately accepted a single method for the land

value in his report.    The method he used was based on the State

of South Carolina’s assessed land value of DP of $1,470,200.      His

report indicates that the State’s assessed value was

approximately 80 percent of the fair market value.    He therefore


     3
      The parties stipulated this was the correct value.
                               - 14 -

concluded that the true fair market value of the land was

$1,837,750 ($1,470,200/.80).   As a result, Mr. Middleton’s land

value played no role in the amount reported by the estate on the

Estate tax return.

     Aggregating the adjusted timber value of $2,440,263, the

adjusted land value of $1,837,750, and the $100,000 value of the

improvements on the land, as determined by Mr. Middleton, Mr. Cox

concluded that the fair market value of DP was $4,378,013.

     2.   Respondent’s Valuation Method in the Notice of
          Deficiency

     In his notice of deficiency, respondent stated that the

value of DP was $5,490,992 on the valuation date.    This was

determined by aggregating the timber value in Mr. Pellum’s report

and the land value in Mr. Middleton’s report.    This method

essentially disregarded any discounts Mr. Cox had applied and

rejected Mr. Cox’s land valuation method.

     Mr. O’Rear concluded in his report that the highest and best

use that DP could have been put to on the valuation date was a

mixed use of recreation and agriculture.    However, at trial he

opined that DP should be valued as timberland since that was its

only profitable use on the valuation date.    Accordingly, he

applied a summation approach to arrive at the value stated in the

notice of deficiency.

     3.   Mr. Hartnett’s Valuation Method

     As stated above, the estate contends that the value of DP is
                              - 15 -

less than the amount it reported on the estate tax return.     The

estate offered the testimony of Mr. Hartnett to support this

lesser value.   In determining the highest and best use he

considered the same four criteria considered by Mr. Middleton:

(1) Physical feasibility, (2) legal permissibility, (3) financial

feasibility, and (4) maximum productivity.    Mr. Hartnett

determined that the highest and best use that DP could have been

put to on the valuation date was mixed.   He effectively concluded

that recreation was the primary use and timber management was the

means to cover maintenance expenses.

     Mr. Hartnett then used a sales comparison approach to

determine the value of DP, which differed from the method Mr. Cox

employed.   Mr. Hartnett identified sales of five comparable

properties and made adjustments to the sale price of each for

differences in size, date of sale, physical characteristics,

location, and timber value.   He also adjusted for improvements on

the properties.   The timber adjustment was determined by

subtracting the per-acre timber value of the property from the

per-acre value of the timber on DP; the difference was then

multiplied by the property’s total acreage.    After applying the

improvement and timber adjustments, the adjusted sale price was

determined and broken down to the per-acre sale price.    A time

adjustment was next applied to the per-acre price of the

property.   The amount of this adjustment depended on the number
                                  - 16 -

of years between the property’s date of sale and decedent’s date

of death.       After applying the time adjustment, the per-acre sale

price was adjusted by the aggregate of the waterfront and size

adjustments.      The waterfront adjustment was made by comparing the

water access of the comparable property with that of DP.         Mr.

Hartnett made positive and negative adjustments for water access

where he thought appropriate.      The size adjustment took into

account a premium paid for smaller parcels.         The greater the

difference between the acreage of DP and the comparable property,

the greater the amount of the adjustment.

           4.       Highest and Best Use Analysis

     The estate’s position is that DP’s highest and best use on

the valuation date was mixed--recreation supported by timber

farming.    Respondent contends that DP’s highest and best use on

the valuation date was as timberland since timber farming had

been the sole profitable activity of DP until decedent’s death.

We disagree with respondent.
                                - 17 -

     We begin by noting that Mr. O’Rear’s rebuttal report states:

“The current use is as a timberland/hunting plantation; and this

is the highest and best use of the property.”   At trial, Mr.

O’Rear explained that the best way to measure both uses was to

value DP as timberland since, until decedent’s death, that was

its sole profitable activity.    Given this apparent discrepancy,

we give little weight to Mr. O’Rear’s testimony on the highest

and best use for DP.

     As stated previously, 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. at 255-256 (emphasis added).    Real

property may be adaptable for multiple uses that are profitable

in the reasonably near future.    One such use may include leaving

land in its natural and pristine state when considering the

supply and demand for similar land.

     ACE Basin is an exceptional ecosystem with many potential

recreational uses, and property in ACE Basin is often purchased

for those purposes.    ACE Basin’s attributes include diversified

wildlife, open fields, and standing timber.   Decedent used the

land for recreational purposes such as hunting and horseback

riding.   DP’s standing timber was cut only to assist in covering

the expenses of maintaining the property.   There are no zoning or

use restrictions to limit DP’s uses, but the record is devoid of
                                - 18 -

evidence indicating that DP could be used successfully for

commercial or residential development in the reasonably near

future.     These facts, taken together, support a finding that the

highest and best use for DP was a mixed use.

       The testimony of Lucas Carter (Mr. Carter), the curator of

DP, also indicates the highest and best use for DP was a mixed

use.    Mr. Carter credibly testified that clear-cutting the

standing timber on DP would have significant adverse effects, the

most significant being that wildlife would seek refuge elsewhere.

When questioned about the period before such wildlife would

return, Mr. Carter estimated that it would likely take 15 to 20

years for the timberland to regenerate before that would occur.

The loss of wildlife and standing timber would clearly have a

negative effect on the recreational value of DP.

       After reviewing the record, we conclude that both the

hypothetical buyer and seller having reasonable knowledge of all

relevant facts would not disregard either the recreational or the

timberland use.    Accordingly, DP’s highest and best use on the

valuation date was a mixed use of recreation and timberland, with

selective timber farming supporting the recreational value.

       5.   Valuation Method Analysis

       The estate argues that a comparative sales approach is the

proper method to value DP.    Respondent, in contrast, contends

that a summation method should be used.    The summation method
                               - 19 -

proposed by respondent aggregates the merchantable timber value,

the value of the land without timber and improvements (the bare

land value), and the value of any improvements.   The land value

component in the summation method is based on the comparative

sales approach.

     Respondent relies on Estate of Sturgis v. Commissioner, T.C.

Memo. 1987-415, to support his position.   The facts in Estate of

Sturgis indicate that both parties agreed that the highest and

best use of the Sturgis property was as timberland, and each

expert had valued the Sturgis property by a standard methodology

that aggregated the values of the separate components.    The land

valuation analysis relied on by the Court took into consideration

accessibility for cutting the timber, soil data, timber data, and

shape.

     We find respondent’s reliance on Estate of Sturgis is

misplaced for three reasons.   First, we are unpersuaded that Mr.

Pellum’s timber valuation did not apply a clear-cutting approach.

Mr. Pellum did not testify, and his report does not indicate

whether he considered the negative effects of clear-cutting all

of the standing timber on more than 70 percent of DP’s total

acreage (1,481 forested acres/2,095.12 total acres).   Second,

none of the land valuations in this case, including Mr.

Middleton’s, considered timber-related issues such as soil

quality, accessibility, and drainage as did the land valuation
                               - 20 -

relied on in Estate of Sturgis.    Clear-cutting DP would

negatively affect a subsequent land appraisal since the

recreational uses would be significantly diminished.   Third, the

historic use of DP was a mixed use of recreation supported by

timber management.   Similarly, the comparable properties

identified by the parties appear to have been sold for this use.

We believe that arm’s-length transactions provide a more accurate

basis to value DP, compared to a summation of components as

proposed by respondent.

D.   Valuation

     1.   Comparable Properties

     Mr. Hartnett identified sales of five comparable properties.

Unlike Mr. Middleton, he compared those five properties with the

entire DP acreage.   Since Mr. Hartnett gave greater weight to two

of these sales, we shall review those in detail.

     The first sale was part of a section 1031 exchange in which

Birchwood Holdings transferred 1,766 acres in Colleton County to

Westvaco Corporation (collectively, the Birchwood sale), on

January 29, 1999.    Mr. Hartnett alleged that the total sale price

was $3,620,000 because the purchaser transferred 2,344 acres of

land, with roughly $1,370,000 of merchantable timber, and

$2,250,000 of “boot”.

     The second sale involved 447.75 acres in Colleton County,

known as the White House Plantation, on May 1, 1997.   This tract
                              - 21 -

was contiguous with DP and sold for $1.1 million.   Mr. Hartnett

estimated that the values of the improvements and marketable

timber were $150,000 and $425,000, respectively.

     On the basis of the two principal sales of comparable

properties, Mr. Hartnett determined a per-acre value of $1,975

for DP, which totaled $4,137,862 (2,095.12 acres x $1,975/acre).

He then added $100,000 for the estimated value of all

improvements to DP and concluded that the estimated market value

of DP was $4,237,862, which he rounded to $4,238,000.

     Respondent contests the use of the Birchwood sale on the

basis that it was part of a section 1031 exchange and it was not

in the “prestigious ACE Basin”.   Respondent argues that the

public records reveal that the total value of the property

transferred by the buyer was more than the amount Mr. Hartnett

included in his report.   We agree.

     The facts regarding the Birchwood sale are insufficient for

us to use it as a comparable property because we do not know the

value of the 2,344 acres of land transferred by the purchaser.

Mr. Hartnett could provide only the value of the merchantable

timber thereon.   Given this shortcoming, we do not believe that

the Birchwood sale is relevant.

     In contrast, we find the White House Plantation sale is

relevant.   The White House Plantation is contiguous with DP, and

the sale occurred only about 2 years before decedent’s death.
                                 - 22 -

The main issue with this property is that it includes

significantly less acreage than DP.       While valuation is

inherently imprecise, we should limit this inexactitude by

relying on sales that require the fewest and smallest

adjustments.   Accordingly, this is the best available sale of

comparable property.

     2.   Adjustments to the Sale Price of the White House
          Plantation

     Mr. Hartnett made five adjustments to the sale price of the

White House Plantation which took into consideration the

distinctive characteristics of DP and the comparable property.

The adjustments he made are summarized in the following table:

                                            White House
                    Adjustments              Plantation

                Sale price                $1,100,000
                Improvement                     (50,000)
                  adjustment
                                            1
                Timber adjustment            144,625
                Adjusted price             1,194,625
                Per-acre value                      2,668
                                                      2
                Time adjustment                        213
                Per-acre value with                 2,881
                  time adjustment
                Water front                         -0-
                  adjustment
                                                3
                Size adjustment                     (1,008)
                              - 23 -

               Aggregate water           (1,008)
                 front and size
                 adjustments
               Total adjusted per-        1,873
                 acre value
     1
       This adjustment consists of the difference between
     the per-acre value of the timber on DP ($1,273) and the
     per-acre value of the timber on the White House
     Plantation ($950), multiplied by the White Houses
     Plantation’s 447.75 acres. Mr. Hartnett rounded to get
     this amount.
     2
       Based on a time adjustment of 8 percent.
     3
       Based on a 35-percent size adjustment.

After adjustments, Mr. Hartnett determined in his report a per-

acre value of $1,873 for the White House Plantation.    We shall

review each adjustment.

          a.   Improvement Adjustment

     Mr. Hartnett decreased the White House Plantation sale price

by the amount its improvements exceeded the improvements on DP.

The White House Plantation had improvements valued at $150,000.

Thus, Mr. Hartnett reduced the sale price by $50,000.   We find

this adjustment acceptable.

          b.   Timber Adjustment

     The timber adjustment Mr. Hartnett used increased the per-

acre value of the White House Plantation by the difference

between the per-acre value of the timber on DP and the per-acre

value of the timber on the White House Plantation.   Respondent

argues that this method does not account for the total value of

the timber on DP.   Respondent contends that the timber adjustment
                               - 24 -

should equal the excess of the value of the merchantable timber

on DP over the value of the timber on the White House Plantation.

We disagree with respondent.

     We find that Mr. Hartnett’s adjustment adequately accounts

for the greater value of the standing timber on DP.    We are

determining DP’s per-acre value using the comparable sales

approach, and adjusting the per-acre value is consistent with

this approach.   Thus, we accept the amount of the adjustment in

Mr. Hartnett’s report.

          c.     Time

     The White House Plantation sale occurred about 2-1/3 years

before the valuation date.   Mr. Hartnett made a positive 8-

percent adjustment to the per-acre value of the White House

Plantation for this difference.    Respondent did not object to

this adjustment, and we have no reason to reject this adjustment.

Thus, we will apply an 8-percent time adjustment.

          d.     Size Adjustment

     Mr. Hartnett made a 35-percent size adjustment to the per-

acre sale price of the White House Plantation since it was about

one-fourth the size of DP.   Respondent objects to the size of

this adjustment.

     While we agree that some size adjustment is appropriate, we

think that a 35-percent adjustment was unduly large.    If the

facts had demonstrated the White House Plantation was purchased
                                - 25 -

for residential or commercial development on account of its size,

then Mr. Hartnett’s 35-percent size adjustment might have been

justified.    Those facts are, however, not present.   We therefore

apply a 20-percent size adjustment.

          e.      Location Adjustment

     Mr. Hartnett did not make a location adjustment for the

White House Plantation.     Since the White House Plantation is

contiguous with DP, we find that no adjustment is necessary.

     3.      The Value of DP

     Taking into account the adjustments described above, we find

that the adjusted per-acre value of the White House Plantation is

$2,305, as computed in the following chart:
                               - 26 -

                                          White House
                       Adjustments         Plantation

                Sale price              $1,100,000
                Improvement                (50,000)
                  adjustment
                Timber adjustment          144,625
                Adjusted price           1,194,625
                Per-acre value               2,668
                Time adjustment                   213
                Per-acre value with          2,881
                  time adjustment
                Waterfront                    -0-
                  adjustment
                Size adjustment               (576)
                Location adjustment           -0-
                Total adjusted per-          2,305
                  acre value

     Applying this per-acre value using Mr. Harnett’s

methodology, we conclude that the value of DP on the valuation

date was $4,829,252.

     To reflect the foregoing,


                                          An appropriate order will

                                     be issued.
