                         T.C. Memo. 1998-412



                       UNITED STATES TAX COURT



 JOHN T. TALKINGTON AND MARGARET K. TALKINGTON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     HENRY A. SESSIONS AND BARBARA SESSIONS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 19315-96, 19321-96.      Filed November 16, 1998.



     William Norton Baker and J. Mark Wagnon, for petitioners.

     George E. Gasper, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined deficiencies in

petitioners' Federal income taxes as follows:

          Docket No.       Year      Deficiency

           19315-96        1992        $71,828
                           1993         89,717
                                  - 2 -


             19321-96      1992            58,332
                           1993           202,886

After concessions, the only issue for decision in this case is

the fair market value of (1) real property consisting of 11.656

acres of land with a building upon it and 30.3 acres of adjoining

land on December 17, 1992, and (2) real property consisting of

50,507 square feet of land with a building upon it on September

23, 1992, for purposes of determining the proper amount of

petitioners' charitable contribution deductions.1

                          FINDINGS OF FACT

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

The stipulations of fact and the attached exhibits are

incorporated herein by this reference.      Petitioners John T.

Talkington and Margaret K. Talkington, husband and wife, and

petitioners Henry A. Sessions and Barbara Sessions, husband and

wife, resided in Lubbock, Texas, at the time they filed their

petitions.    Mr. and Mrs. Talkington and Mr. and Mrs. Sessions

filed Federal income tax returns for 1992 and 1993.

The Litton Property

     The Litton property consists of:      (1) A 48,215-square foot

building (the Litton building) located on 11.656 acres of platted

land rectangular in shape at the intersection of Loop 289, which

     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                                 - 3 -


is to the south of the lot, and Martin Luther King Boulevard

(MLK),2 which is to the west of the lot (the 11.656 acres); (2)

30.3 acres of vacant, unplatted land irregular in shape that

adjoins the 11.656 acres on the east and north of the 11.656

acres (the parcel of 30.3 acres);3 and (3) 8.56 acres of vacant,

unplatted land rectangular in shape fronting on MLK and adjoining

the 11.656 acres on the north of the 11.656 acres and adjoining

the parcel of 30.3 acres on the west of the parcel of 30.3 acres

(the 8.56 acres).    The Litton property was located in the

northeast part of Lubbock and was zoned M-1 for light

manufacturing.   The predominant use of the land around the Litton

property is currently agricultural.

     In 1964, Litton Industries, Inc. (Litton), constructed the

Litton building, and Litton occupied it until 1983 when Litton

ceased operations.    In 1983, after Litton ceased operations, it

offered the Litton property for sale.    From 1983 through 1985,

Litton asked $1,200,000 for the Litton property.    In 1985, Litton

reduced the price to $900,000.    In April of 1986, Litton again

reduced the price to $600,000.

     2
         MLK was formerly North Quirt Avenue.
     3
        Access to the parcel of 30.3 acres was available through
two places: (1) Approximately 400 feet of frontage on Loop 289
on the south side of the parcel of 30.3 acres, and (2)
approximately 615 feet of frontage on Ursuline Street on the
north side of the parcel of 30.3 acres. Ursuline Street was a
one-lane gravel road. The 8.56 acres, see infra, essentially
restricts access from MLK to the parcel of 30.3 acres.
                               - 4 -


     In July of 1986, Mr. Talkington and Mr. Sessions purchased

the Litton property from Litton for $600,000.    Mr. Talkington and

Mr. Sessions each owned a 50-percent undivided interest in the

Litton property.

     During the 6 years that Mr. Talkington and Mr. Sessions

owned the Litton property, it was never occupied or leased.     Also

during this time, the Litton building suffered from normal wear

and tear, deferred maintenance, and vandalism.   The deferred

maintenance on the Litton building included the following:    (1)

The parking lot asphalt was cracked, and the face was coming off

in places (the cracks needed sealing and the lot possibly needed

to be resurfaced); (2) the concrete flatwork on the sidewalks,

drives, and walks was cracked, and the face was coming off; (3)

there was a broken window in the north entrance; (4) the

landscaping had been neglected, and some shrubs and trees were

dead; (5) the floor tiles were damaged due to flooding in the

past; (6) many ceiling tiles were missing, stained, and/or in

poor repair; and (7) the walls were dirty and/or stained from

draining of the building's sprinkler system.    Additionally, the

copper hot and chilled water piping had been stolen from the

Litton building.

     The Lubbock Central Appraisal District (LCAD) determined the

appraised value of the Litton property to be $570,912 as of July

14, 1989.   Petitioners appealed this assessed value and hired
                               - 5 -


James Stanley Blacklock to protest the valuations placed on the

Litton property by the LCAD.   Mr. Blacklock, in a document

presented to the LCAD on petitioners' behalf, represented that

all copper plumbing had been stolen from the Litton building, and

for all practical purposes the building was a shell.   Mr.

Blacklock indicated that the best possible use for the Litton

building was as a warehouse which would require stripping the

inside.   In 1989, Mr. Blacklock estimated the value of the Litton

property to be $336,000.

     The LCAD determined the appraised value of the Litton

property to be $499,338 as of July 19, 1990.    The LCAD determined

the appraised value of the Litton property to be $499,338 for the

years 1991 and 1992.

     On December 17, 1992, petitioners gave the 11.656 acres, the

parcel of 30.3 acres, and the Litton building (the gifted Litton

property) to the South Plains Food Bank, Inc.   Petitioners

retained the 8.56 acres.   The South Plains Food Bank, Inc., is a

qualified charitable organization under section 170.

     Based on an appraisal that determined the fair market value

of the gifted Litton property to be $1,805,0004 on December 15,

1992, Mr. and Mrs. Talkington and Mr. and Mrs. Sessions deducted

$900,000 and $902,500, respectively, as charitable contributions

     4
        We note that both petitioners' and respondent's
appraisers occasionally rounded their estimates of fair market
value to the nearest hundred or thousand dollars.
                                - 6 -


on their 1992 Federal income tax returns for the gift of the

gifted Litton property.5

     Respondent determined that the fair market value of the

gifted Litton property on December 17, 1992, was $800,000.

The Bates Center

     The Bates Center consists of a 10,022 square foot building

(the Bates Center building) located on 50,507 square feet of land

(the Bates Center land) on the 1700 block of 46th Street in

Lubbock, Texas.    The Bates Center land was zoned R-2 residential

with a church variance.

     The Bates Center land consists of six lots.     Five of the

lots were contiguous (the 5 lots).      Three of the five lots were

located on 45th Street.    The westernmost lot was approximately 60

feet from Avenue S, and the easternmost lot was approximately 300

feet from Avenue Q.   Two of the five lots were located on 46th

Street.   The westernmost lot was approximately 120 feet from

Avenue S, and the easternmost lot was approximately 300 feet from

Avenue Q.   The other lot (the excess lot) was noncontiguous with

the five lots and was located across the street from the five

lots on the northeast corner of the intersection of Avenue S and

45th Street.



     5
        None of the parties explained why Mr. and Mrs. Talkington
deducted $900,000 rather than $902,500 on their 1992 Federal
income tax return.
                               - 7 -


     The Bates Center building was primarily a gymnasium with a

full length basketball court, but it also contained some small

classrooms, a storage area, a parlor, a small kitchen, locker

rooms, rest rooms, and a small fireplace.   The Bates Center could

be used as a church.

     On June 7, 1991, Mr. Sessions acquired the Bates Center and

the adjoining church (located directly to the east of the Bates

Center) in a trade with the First Church of the Nazarene.   The

traded properties were each valued at $600,000.   Mr. Sessions

owned the entire fee simple interest in the Bates Center.

     On September 23, 1992, Mr. Sessions gave the Bates Center to

the Northwest Texas Church of God in Christ.   The Northwest Texas

Church of God in Christ purchased the church that adjoins the

Bates Center for $550,000.6   The Northwest Texas Church of God in

Christ is a qualified charitable organization under section 170.

     Based on an appraisal that determined the fair market value

of the Bates Center to be $350,000 on December 23, 1992, Mr. and

Mrs. Sessions deducted $350,000 as a charitable contribution on

their 1992 Federal income tax return for the gift of the Bates

Center.

     Respondent determined that the market value of the Bates

Center on September 23, 1992, was $178,000.

     6
        Although it is unclear from the record, it appears that
the gift of the Bates Center and the purchase of the adjoining
church occurred relatively close in time to one another.
                              - 8 -


                    ULTIMATE FINDINGS OF FACT

     The fair market value of the gifted Litton property on

December 17, 1992, was $986,589.   The fair market value of the

Bates Center on September 23, 1992, was $237,154.

                             OPINION

     The issue for decision is the fair market value of the

transferred properties for purposes of determining the proper

amount of petitioners' charitable contribution deductions.

Petitioners bear the burden of proving that the fair market value

of the transferred properties exceeds the value determined by

respondent in the notices of deficiency.    Rule 142(a).

     Section 170 allows an individual to deduct charitable

contributions, subject to certain percentage limitations, with a

carryover of any excess contributions.7    See sec. 170(b), (d).

If a charitable contribution is made in property other than

money, the amount of the taxpayer's contribution is the fair

market value of the property at the time of the contribution.

Sec. 1.170A-1(c), Income Tax Regs.    Section 1.170A-1(c)(2),

Income Tax Regs., defines fair market value as "the price at

which the property would change hands between a willing buyer and

a willing seller, neither being under any compulsion to buy or

sell and both having reasonable knowledge of relevant facts."

     7
        The parties have stipulated that the transfers of the
gifted Litton property and the Bates Center qualify for
charitable contribution deductions pursuant to sec. 170(c).
                                 - 9 -


     The fair market value of donated property as of a given date

is a question of fact to be determined from the entire record.

Symington v. Commissioner, 87 T.C. 892, 896 (1986); Zmuda v.

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

Cir. 1984).   Fair market value reflects the highest and best use

of the property on the date of valuation.     Stanley Works & Subs.

v. Commissioner, 87 T.C. 389, 400 (1986).    The highest and best

use of property is the realistic, objective potential use to

which the property can be put.     Id.; see also Olson v. United

States, 292 U.S. 246, 255-256 (1934).    The determination of fair

market value is not dependent upon whether the property is

actually being put to its highest and best use.     Symington v.

Commissioner, supra at 897.   Thus, in determining the reasonable

and probable use that supports the highest present value, 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, supra at 255.

     In this case, the parties have relied extensively on the

testimony of expert witnesses to support their respective views

on the fair market value.   Before turning to an analysis of the

divergent expert opinions, we note that, as the trier of fact,

the Court must weigh the evidence presented by the experts in

light of their demonstrated qualifications in addition to all

other credible evidence.    Estate of Christ v. Commissioner, 480
                              - 10 -


F.2d 171, 174 (9th Cir. 1973), affg. 54 T.C. 493 (1970).    We are

not bound by the opinion of any expert witness, especially when

that opinion is contrary to our judgment.     Estate of Kreis v.

Commissioner, 227 F.2d 753, 755 (6th Cir. 1955), affg. T.C. Memo.

1954-139; Chiu v. Commissioner, 84 T.C. 722, 734 (1985).     Rather,

we may accept or reject expert testimony as we find appropriate

in our best judgment.   Helvering v. National Grocery Co., 304

U.S. 282, 294-295 (1938); Seagate Tech., Inc., & Consol. Subs. v.

Commissioner, 102 T.C. 149, 186 (1994).     Moreover, even if we

accept the general methodology of an expert witness, we may

reject that expert's ultimate conclusion if it is unsupported by

the record.   Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d

1315, 1331 (5th Cir. 1987), affg. T.C. Memo. 1985-267.

     Furthermore, we are dismayed at the time and energy both the

parties and the Court have had to expend in the course of the

trial and decision in this case.   As we have repeatedly stated in

regard to valuation cases:

          Too often in valuation disputes the parties have
     convinced themselves of the unalterable correctness of
     their positions and have consequently failed
     successfully to conclude settlement negotiations--a
     process clearly more conducive to the proper
     disposition of disputes such as this. The result is an
     overzealous effort, during the course of the ensuing
     litigation, to infuse a talismanic precision into an
     issue which should frankly be recognized as inherently
     imprecise and capable of resolution only by a Solomon-
     like pronouncement. * * * [Messing v. Commissioner, 48
     T.C. 502, 512 (1967).]
                               - 11 -


See also Buffalo Tool & Die Manufacturing Co. v. Commissioner, 74

T.C. 441, 451-452 (1980).    We are now faced with the task of

rationally resolving differences in the opinions and often

subjective analyses of two qualified experts.    In reaching our

ultimate conclusions as to the valuation of the parcels here in

issue, we must, because of the possibility of an appeal, set out

a trail for the appellate court to follow.    See Symington v.

Commissioner, supra at 904.    We are constrained to admit,

however, that by necessity our conclusions are to some extent

based upon Solomon-like pronouncements.    We remain convinced, as

we have repeatedly stated, that valuation cases should be

disposed of by the parties by way of settlement or other

procedures short of court proceedings.    See, e.g., Symington v.

Commissioner, supra at 904-905.

I.   The Experts

     Petitioners' expert was Tommy Cantrell, MAI, RM.    Mr.

Cantrell has been an appraiser of property for approximately 28

years.    On December 31, 1992, on behalf of petitioners, Mr.

Cantrell appraised the gifted Litton property.    On January 7,

1993, on behalf of Mr. Sessions, Mr. Cantrell appraised the Bates

Center.

     Respondent's expert was Dr. Jack Friedman, Ph.D., MAI, CRE,

ASA, C.P.A., and a Texas State Certified General Appraiser.      In
                                     - 12 -


1997, on behalf of respondent, Dr. Jack Friedman appraised the

gifted Litton property and the Bates Center.

II.    Highest and Best Use

       The parties differ over the highest and best use of the

various properties in issue in this case.        We note that our

determination of the highest and best use of the various

properties in issue presents a problem of judgment, not

mathematics.       Stanley Works & Subs. v. Commissioner, 87 T.C. at

408.

       A.      The Litton Building

       Dr. Friedman's report determined that the highest and best

use of the Litton building at the time of the gift was as an

industrial facility.       Dr. Friedman based his determination on the

fact that the Litton building was an existing industrial

building, and this use was consistent with legal and possible

uses.       Additionally, the building was functionally adequate for

this purpose.       Furthermore, Dr. Friedman noted that the

oversupply of such buildings in Lubbock drastically curtailed new

construction of such buildings.         He felt that the Litton building

had the potential for generating market rent upon further

tightening of the local real estate market.

       Mr. Cantrell determined that the highest and best use of the

Litton building at the time of the gift was as a specialty

manufacturing facility (also known as a research and development
                              - 13 -


facility).   Mr. Cantrell testified that the Litton building was

originally built as a special manufacturing facility by Litton--

it was used to assemble electronics.   In addition, Mr. Cantrell

based his determination on the fact that the Litton building was

fully heated and air-conditioned and had suspended ceilings,

heavy-duty fluorescent lights, a Muzak system, and sprinklers.

     Additionally, Mr. Cantrell testified that, during the period

in which Mr. Talkington and Mr. Sessions owned the Litton

property, the U.S. Army Corps of Engineers considered buying or

leasing the Litton building for use as a "hospital-type

environment".   In his report, however, Mr. Cantrell wrote that

the expense to convert the Litton building to the use that the

U.S. Army Corps of Engineers desired was considerable and, in all

likelihood, was the reason this use never came to pass.

     Mr. Cantrell's report also states that research and

development style industrial buildings were relatively scarce in

the Lubbock market, demand for research and development buildings

was somewhat weak, once vacant these properties stay vacant for

several years, research and development buildings tend to be

built to the owner/occupant's specifications, and conversion to

other uses for other occupants could be an expensive process.

Furthermore, Mr. Cantrell's report states that some other

possible uses of the Litton building were warehouse use and
                              - 14 -


warehouse/office use; however, these uses would probably produce

less income than research and development use would.

     We also note that the Litton building's bathrooms were

designed to accommodate 400 people per shift, and it had a

cafeteria and a significant number of offices.

     Based upon our review of all the evidence, giving due

consideration to our observation at trial of the witnesses for

both parties and considering their testimony and the expert

reports, we conclude that the highest and best use of the Litton

building on the date of valuation was as an industrial facility

such as a warehouse or warehouse/office.

     B.   The Parcel of 30.3 Acres

          1.   Mr. Cantrell's Report and Petitioners' Contentions

     Mr. Cantrell determined that the highest and best use of the

parcel of 30.3 acres at the time of the gift was as an industrial

subdivision (11 industrial lots).    In reaching this conclusion,

Mr. Cantrell states in his report that the lots had good and

typical access, the site was zoned M-1 for light industrial use,

and the location of the parcel of 30.3 acres would almost

certainly dictate commercial or industrial uses while excluding

agricultural and residential uses.

     Petitioners also contend that the parcel of 30.3 acres was

part of the "Lubbock Industrial Park".   Henry Huneke, an employee

of Mr. Sessions who has worked in the construction business in
                              - 15 -


Lubbock since 1944, testified that the Lubbock Industrial Park

lies north and east of MLK and Loop 289.   He stated that the

Lubbock Industrial Park was created by the Board of City

Development and the Lubbock Chamber of Commerce back in the early

1950's.   Mr. Huneke testified on direct examination that the

Lubbock Industrial Park was a platted, ready-to-use industrial

park with utilities and that the Lubbock Industrial Park had its

own zoning classification.   Mr. Huneke further testified that the

Litton property was in the Lubbock Industrial Park.   On cross-

examination, Mr. Huneke changed his testimony and stated that the

Lubbock Industrial Park was "preliminary platted" so that a user

might immediately file a plat and move quickly through the

platting process.

     Mr. Cantrell also testified about the Lubbock Industrial

Park.   Mr. Cantrell testified that the Lubbock Industrial Park

contained platted lots, and it was developed by the City of

Lubbock to promote industrial development in the area in which it

was located.   Mr. Cantrell further testified that the Litton

property was in the Lubbock Industrial Park.   Mr. Cantrell's

report does not specifically mention the Lubbock Industrial Park;

however, petitioners suggest that the maps included in Mr.

Cantrell's report, which do not show the boundaries of the

Lubbock Industrial Park but do make reference to the Lubbock
                                - 16 -


Industrial Park, are evidence that the Lubbock Industrial Park

exists.

     Mr. Cantrell, in a report prepared in 1988 for the U.S. Army

Corps of Engineers, described the parcel of 30.3 acres and 8.56

acres as "VACANT AGRICULTURE" and did not mention the Lubbock

Industrial Park.

            2.   Dr. Friedman's Report and Respondent's Contentions

     Dr. Friedman determined that the highest and best use of the

parcel of 30.3 acres at the time of the gift was agricultural.

In reaching this conclusion, Dr. Friedman's report states that

the parcel of 30.3 acres was located in an area primarily devoted

to agriculture.    Dr. Friedman noted that the parcel of 30.3 acres

had approximately 400 feet of frontage on the (one-way) access

road of Loop 289, nearly 620 feet on Ursuline Street (a one-lane

gravel road), and no frontage on MLK.    He felt that this modest

amount of frontage, relative to the parcel of 30.3 acres size,

relegated the tract to agricultural uses and that the parcel of

30.3 acres proximity to the Litton building renders the parcel of

30.3 acres less desirable for industrial uses than it otherwise

would be.    In further support of his analysis, Dr. Friedman

pointed out that the industrial submarket had been weak over the

few years preceding 1992 and that industrial development was

unlikely in the neighborhood because market rental rates did not

justify new construction on an investment basis.
                                 - 17 -


     Respondent argues that, despite the fact that the parcel of

30.3 acres was zoned M-1, there was not a reasonable probability

in 1992 that it would be used as an industrial park in the

reasonably near future.      Furthermore, respondent contends that

petitioners' retention of the 8.56 acres effectively eliminated

the possibility of the parcel of 30.3 acres' becoming an

industrial park because of the lack of reasonable access to a

main commercial thoroughfare.

           3.   Additional Information

     The Litton property was located in the northeast part of

Lubbock.   Respondent contends that, during the last 20 years,

most of the real estate development has taken place in the

southeast and southwest parts of Lubbock.      Mr. Cantrell indicated

in his report that the bulk of industrial development had been in

southeast Lubbock.

     Mr. Cantrell's report further stated that Lubbock had

virtually no growth since 1984 and that general business activity

was still somewhat depressed in Lubbock, but had improved over

the recent past.   Additionally, Mr. Cantrell's report states that

there was a relatively slow market for land in the neighborhood

in which the Litton property was located.

           4.   Conclusion

     We have reviewed the maps submitted with the expert reports.

The maps clearly identify two properties as lots that were part
                              - 18 -


of the Lubbock Industrial Park.   One lot was labeled "Lubbock

Industrial Park Add. Lot 1" and was located directly south of the

11.656 acres on the opposite side of the intersection of Loop 289

and MLK.   The other lot was labeled "Lubbock Indus. Park Add. Lot

5" and was located to the east of the Litton property.     Neither

the 11.656 acres nor the parcel of 30.3 acres was labeled as part

of the Lubbock Industrial Park on the maps submitted by the

experts.

     While we do agree with petitioners that the Lubbock

Industrial Park indeed existed, on the basis of the evidence

presented we do not believe that the parcel of 30.3 acres was a

part of the Lubbock Industrial Park.   The parcel of 30.3 acres

was unplatted, and we believe from the evidence and testimony

that the lots in the Lubbock Industrial Park were platted.     Mr.

Cantrell's report fails to mention that the parcel of 30.3 acres

was part of the Lubbock Industrial Park.   Furthermore, the parcel

of 30.3 acres was not zoned with the special industrial park

classification about which Mr. Huneke testified.

     Although the parcel of 30.3 acres was zoned M-1 for light

industrial use, we do not believe that there existed a reasonable

probability that the parcel of 30.3 acres would be used for

industrial purposes in the reasonably near future at the time of

its donation.   See Olson v. United States, 292 U.S. at 255.     The

evidence suggests that access to the parcel of 30.3 acres was
                              - 19 -


fairly restricted, that the bulk of industrial development had

been taking place in south Lubbock rather than in the northeast

section of Lubbock where the parcel of 30.3 acres was located,

and that the market for land around the Litton property was slow.

Furthermore, the parcel of 30.3 acres was unplatted, and platting

property to the City of Lubbock cost approximately 45-to-50 cents

per square foot.

     Based upon our review of all the evidence, giving due

consideration to our observation at trial of the witnesses for

both parties and considering their testimony and the expert

reports, we conclude that the highest and best use of the parcel

of 30.3 acres on the date of valuation was as agricultural land.

     C.   The Bates Center

     Mr. Cantrell determined that the highest and best use of the

Bates Center at the time of the gift was for use in conjunction

with the adjoining church property.    In reaching this conclusion,

Mr. Cantrell states in his report that by virtue of its size, the

Bates Center building could not accommodate much more in the way

of improvements.   He further states that the adjoining church

needs the Bates Center building and its parking lot to make a

more functional package.   Mr. Cantrell reached his ultimate

conclusion based on the fact that he felt that the Bates Center

was limited to church and church-related uses.   Furthermore, Mr.
                              - 20 -


Cantrell states in his report that the land was too far off

Avenue Q to be feasible for commercial uses.

     Dr. Friedman determined that the highest and best use of the

Bates Center at the time of the gift was as follows:   (1)

Continued use of the five lots as an activity building, and (2)

use of the excess lot for residential purposes.   In reaching this

conclusion, Dr. Friedman noted that the Bates Center was in a

neighborhood of single-family homes, it was one-half block west

of Avenue Q (a heavily traveled commercial street), and it lacks

a driveway or visibility from Avenue Q.   Dr. Friedman also

pointed out that the Bates Center was zoned R-2, which allowed

duplexes as well as single-family residences and that a church

was a legal nonconforming use.   Although commercial uses were

allowed by zoning within 85 feet of Avenue Q, Dr. Friedman

pointed out that the Bates Center was located more than 300 feet

from Avenue Q.   Dr. Friedman suggested that for the five lots a

church-related facility would likely provide a higher residual

value than residential use and for the excess lot a single-family

or duplex home would be appropriate.

     Petitioners devote much of their argument to the proposition

that the Bates Center could be rezoned for commercial use.    Mr.

Sessions' expert, however, determined in his report that the

highest and best use of the Bates Center was for continued use by

the adjoining church and that commercial use of the property was
                                - 21 -


not feasible.    Neither expert considered the highest or best use

of the Bates Center to be a commercial property, and the record

does not support such a determination.

       Bishop William H. Watson testified that some churches in

Lubbock started in a gymnasium without a sanctuary.    Bishop

Watson testified, "I had made up my mind if I had to take just

the gym only, I would stay in the gym as the church because I see

some other churches do that kind of thing."    We find that the use

of the Bates Center as a stand-alone church is supported by the

record.

       Based upon our review of all the evidence, giving due

consideration to our observation at trial of the witnesses for

both parties and considering their testimony and the expert

reports, we conclude that the highest and best use of the Bates

Center on the date of valuation was as a church.

III.    Valuation Methodology

       The parties presented the following methods of valuing the

various properties in issue in this case:    (1) The sales

comparison method, (2) the cost approach, and (3) the income

approach.

       The sales comparison method involves gathering information

on sales of property similar to the subject property, then making
                                - 22 -


adjustments8 for various differences between the "comparables"

and the property being appraised.     Estate of Spruill v.

Commissioner, 88 T.C. 1197, 1229 n.24 (1987).     This Court has

found the sales comparison method to be a reasonable one and has

used it in the past.   See, e.g., Wolfsen Land & Cattle Co. v.

Commissioner, 72 T.C. 1, 19 (1979).      Additionally, we have found

that it is generally the most reliable method of valuation.

Estate of Spruill v. Commissioner, supra at 1229 n.24.

     The cost approach is based on the principle of substitution.

The cost approach derives the value of a property by estimating

the reproduction or replacement cost of the improvements,

deducting therefrom the estimated depreciation, and then adding

the market value of the land.    This approach estimates value

based on the assumption that a prudent person will not pay more

for a property than it would cost to acquire a site and erect a

comparable structure (less accrued depreciation).     This approach

is especially applicable to new or nearly new structures when the

land value is also reliable.    The major limitation of this

approach is that in properties that are several years old it is

often difficult to precisely estimate the accrued depreciation




     8
        Positive adjustments are made to comparable properties
that are inferior in some fashion to the subject property;
negative adjustments are made to comparable properties that are
superior in some fashion to the subject property.
                               - 23 -


and the problem is compounded if depreciation exists in more than

one form (e.g., physical, functional, and economic obsolescence).

     The income approach estimates value based upon future

benefits (cash-flow) to be derived from the ownership of a

property.   This approach is most applicable to income-producing-

type properties as it involves estimating gross income and then

deducting estimated vacancy, losses, and expenses to compute net

income.   This net income is processed into an indication of value

by using several different methods and techniques to determine

the proper capitalization and/or discount rate.

     In their reports, both experts used all three methods to

value the Litton building.    In their reports, both experts used

the sales comparison method to value the 11.656 acres.   In his

report, Mr. Cantrell used a "development approach", which is

equivalent to the income approach, to value the parcel of 30.3

acres.    In his report, Dr. Friedman used the sales comparison

method to value the parcel of 30.3 acres.    In their reports, both

experts used the sales comparison method and the cost approach to

value the Bates Center.   Both experts agree that the income

approach was not applicable to determining the value of the Bates

Center.

     The sales comparison method was the methodology most

important to both experts in valuing the gifted Litton property.

The sales comparison method was the methodology most important to
                              - 24 -


Dr. Friedman in valuing the Bates Center.   The cost approach was

the methodology most important to Mr. Cantrell in valuing the

Bates Center.

      As Mr. Cantrell states in his report, buildings like the

Litton building are built for owner occupants and tend to be

owner occupied and not to be rented in the market.      Additionally,

Mr. Cantrell's report states that the sales comparison method is

generally recognized as being the best method for valuing land as

if vacant and ready for improvement to its highest and best use.

      Based on our review of the record and the weight accorded

the sales comparison method by both parties, we deem it

appropriate to set aside the cost and income approach to

valuation in this case.   Instead, we rely on the sales comparison

method in determining the value of the gifted Litton property and

the Bates Center.



IV.   Fair Market Value of the Gifted Litton Property

      Mr. Cantrell determined the fair market value of the gifted

Litton property on December 15, 1992, to be $1,805,000.     Dr.

Friedman determined the fair market value of the gifted Litton

property on December 17, 1992, to be $800,000 (before subtracting

costs required to place the building into service).

      A.   The 11.656 Acres

      Under the sales comparison method, Mr. Cantrell determined

the fair market value of the 11.656 acres (which was 507,728
                               - 25 -


square feet) on December 15, 1992,9 to be $380,000 based on a

value of $0.75 per square foot.    Mr. Cantrell compared the 11.656

acres to eight other land comparables that ranged in size from

25,264 square feet to 1,408,948 square feet, that were sold or

were being offered for sale between January of 1986 and December

of 1992, and that had sale prices or offers between $0.12 and

$1.10 per square foot.    After adjusting his comparables, he

determined that the comparable properties had a mean price per

square foot of $0.57.

     Mr. Cantrell did not adjust the comparables for changes in

market conditions (time).    Mr. Cantrell's report states that

there was a relatively slow market for land in the neighborhood

in which the Litton property was located.    According to Mr.

Cantrell, this supported his decision not to adjust the

comparables for changes in market conditions.    Mr. Cantrell

adjusted the comparables for location, size, and "other".10

Almost all of Mr. Cantrell's adjustments were positive, although

he did make negative adjustments to three comparables for size

and to one for "other".

     We believe Mr. Cantrell's conclusions to be unrealistic and

unreliable.   In his analysis, virtually every property was

inferior except the highest price sale ($1.10 per square foot)--a

property that was considerably smaller in size and located in a

     9
        Petitioners donated the gifted Litton property on Dec.
17, 1992, not on Dec. 15, 1992.
     10
          It is unclear what "other" adjustment was for.
                               - 26 -


different part of Lubbock--and a comparable that was being

offered for sale at $1.00 per square foot.    Additionally, Mr.

Cantrell chose to use offers for sale and uncompleted sales in

his analysis.    Furthermore, Mr. Cantrell's reason for applying

positive adjustments totaling 50 percent to a property that was

similar in size to the 11.656 acres, that had a better location

than the 11.656 acres, and that sold for $0.25 per square foot

was "perhaps the purchasers just got a good deal when they bought

this land."    We conclude that Mr. Cantrell's adjustments are

unwarranted.

       Under the sales comparison method, Dr. Friedman determined

the fair market value of the 11.656 acres on December 17, 1992,

to be $97,000 based on a value of $0.19 per square foot.      Dr.

Friedman compared the 11.656 acres to four other land comparables

that ranged in size from 217,800 square feet to more than

1,409,000 square feet, that were sold between August of 1985 and

April of 1993, and that had sale prices between $0.23 and $0.75

per square foot.    Three of the four comparables Dr. Friedman used

were also used by Mr. Cantrell.

       We find that Dr. Friedman's report provides a better

indication of the fair market value of the 11.656 acres.      Dr.

Friedman reasonably discounted all of his comparables due to

their more desirable location--two were located closer to the

airport and the two were located on more desirable parts of Loop

289.    Dr. Friedman's adjustment for time, however, was
                                    - 27 -


unreasonable, and we shall not apply an adjustment for time.

There was a slow market for land in the neighborhood in which the

Litton property was located, and since 1984 Lubbock had virtually

no growth.

     After removing Dr. Friedman's time adjustment, the adjusted

sale prices of the four comparables he used are $0.24, $0.25,

$0.25 and $0.38 per square foot.

     Based upon our review of all the valuation evidence, giving

due consideration to our observation at trial of the witnesses

for both parties and considering their testimony and the expert

reports, we conclude that the 11.656 acres was worth $0.28 per

square foot for a total value of $142,164.

     B.      The Litton Building

     Under the sales comparison method, Mr. Cantrell determined

the fair market value of the Litton building (which was 48,215

square feet) on December 15, 1992, to be $819,655 based on a

value of $17 per square foot.         Under the sales comparison method,

Dr. Friedman determined the fair market value of the Litton

building on December 17, 1992, to be $723,225 based on a value of

$15 per square foot.

     Mr. Cantrell compared the Litton building to five other

comparables which were as follows:
     Building   Sale Date   Bldg. Size (Sq. Ft.)   Price Per Sq. Ft. For Bldg.

       LB1       12/88            72,500                   $12.69
       LB2        3/90            24,140                    28.47
       LB3        1/89            26,505                    41.58
       LB4        9/92            10,850                     6.08
       LB5       12/92            34,560                    12.17
                              - 28 -


Dr. Friedman compared the Litton building to four of these same

five comparables.   Mr. Cantrell adjusted the comparables for

time, location, size, quality, condition, and "other".   Dr.

Friedman adjusted the comparables for location, quality,

condition, and "other".

     Dr. Friedman did not adjust the comparables for time, but

Mr. Cantrell applied a negative time adjustment of 5 percent to

LB1 and LB3.   These two properties were sold in December of 1988

and January of 1989.   We conclude that these adjustments are

reasonable due to the slow market in Lubbock and the fact that

since 1984 Lubbock had virtually no growth.

     LB1 was located near the Litton building, but LB2, LB3, LB4,

and LB5 were located in southern Lubbock.   As both parties

pointed out, southern Lubbock was where the bulk of industrial

development had taken place; therefore, comparable properties

located in southern Lubbock were in a more desirable location

than the Litton building.   Mr. Cantrell's report, however, only

made a negative location adjustment to LB3 (negative 10 percent).

Instead, he made positive location adjustments to LB2 and LB5 and

none to LB4.   Dr. Friedman, however, applied negative location

adjustments to LB2 (negative 10 percent), LB3 (negative 20

percent), and LB5 (negative 5 percent).

     We are more persuaded by Dr. Friedman's location adjustments

than by Mr. Cantrell's.   We shall not adjust LB1 for location and

shall apply a negative adjustment of 10 percent to the other four
                             - 29 -


comparables for location in order to determine the value of the

Litton building.

     The conclusory statements in Mr. Cantrell's report that the

Litton building was of a superior construction to LB1, LB2, LB4,

and LB5 do not explain how the Litton building was superior.      Mr.

Cantrell made positive adjustments to LB1, LB2, LB4, and LB5 of

30 percent, 10 percent, 30 percent, and 20 percent, respectively,

for the Litton building's superior construction.   He made no

adjustment, however, to LB3 even though he noted it was newer

than the Litton building.

     Dr. Friedman, however, explained that LB1 was inferior

because it was a metal exterior building, and therefore he made a

10-percent positive adjustment to LB1.   Dr. Friedman also noted

that LB3 was a superior quality building due to its age and

modern quality construction standards.   Therefore, he applied a

20-percent negative adjustment.

     We are unconvinced by Mr. Cantrell's unexplained quality

adjustments and shall not apply his adjustments for quality in

order to determine the value of the Litton building.   We are

persuaded by Dr. Friedman's quality adjustments and shall use

them in order to determine the value of the Litton building.

     Mr. Cantrell also adjusted the comparables for size.    He

applied a positive adjustment of 10 percent to the one comparable

(LB1) that was larger than the Litton building and applied

negative adjustments of 10 percent, 10 percent, and 15 percent to
                               - 30 -


the comparables LB2, LB3, and LB4, respectively, which were

smaller than the Litton building.   We are convinced that these

adjustments are reasonable and shall use them in order to

determine the value of the Litton building.

     Mr. Cantrell also adjusted the comparables for condition

(age).   He applied negative adjustments of 10 percent, 25

percent, 5 percent, and 10 percent to the LB2, LB3, LB4, and LB5,

respectively.    Dr. Friedman also applied a negative adjustment of

20 percent to LB4 due to its age.   We are convinced by Mr.

Cantrell's condition adjustments and shall use them in order to

determine the value of the Litton building.

     Mr. Cantrell adjusted the comparables under "other" as

follows:   (1) LB1 positive 10 percent for inferior features, (2)

LB3 negative 10 percent for lease influence, and (3) LB4 positive

10 percent for motivation of the seller.   Dr. Friedman also

adjusted LB5 positively 10 percent under "other" for motivation

of the seller.

     Based on the record, we fail to understand why Mr. Cantrell

adjusted LB1 for inferior features under "other".   He already

applied a positive 30-percent adjustment under quality noting

that LB1 was inferior.   We are unconvinced by Mr. Cantrell's

unexplained additional quality adjustment to LB1 under "other"

and shall not apply this adjustment to LB1 in order to determine

the value of the Litton building.
                                       - 31 -


     We are convinced that the lease adjustment and adjustments

for motivated sellers are well founded and shall apply a positive

adjustment to LB3 of 10 percent and shall apply a positive

adjustment to LB4 and LB5 of 10 percent.

     After applying the adjustments we find proper to the

comparables, the adjusted price per square foot for the five

comparables is as follows:
                                 LB1        LB2       LB3       LB4      LB5

     Price Per Square Foot     $12.69     $28.47    $41.58    $6.08    $12.17
     Adjustments
        - Location                 0%      (10%)     (10%)    (10%)     (10%)
        - Quality                 10%        0%      (20%)      0%        0%
        - Size                    10%      (10%)     (10%)    (15%)       0%
        - Condition                0%      (10%)     (25%)     (5%)     (10%)
        - Other                    0%        0%       10%      10%       10%
        - Time                    (5%)       0%       (5%)      0%        0%
    Total Adjustment               15%      (30%)     (60%)    (20%)    (10%)
    Adjusted Price Per
       Square Foot              $14.59     $19.93    $16.63    $4.86    $10.95

     Based upon our review of all the valuation evidence, giving

due consideration to our observation at trial of the witnesses

for both parties and considering their testimony and the expert

reports, we conclude that the Litton building was worth $15 per

square foot for a total value of $723,225.

     C.     The Parcel of 30.3 Acres

     Mr. Cantrell used the development approach to appraise the

parcel of 30.3 acres.        He determined the fair market value of the

parcel of 30.3 acres as of December 15, 1992, to be $605,000.

According to Mr. Cantrell, the development approach, which

discounts the income stream from lot sales over a period of time,

is the equivalent of an income approach.              As we have previously
                              - 32 -


stated, we do not believe that the income approach was an

appropriate way to value the property at issue in this case.

     In his report, Mr. Cantrell set forth various problems

inherent in the development approach including that (1) the large

number of variables involved that makes this method susceptible

to error; (2) it is impossible to accurately predict when lots

will sell, and the best anyone can do is to make a "reasonable"

guess; (3) the expenses incurred in developing the property are

unknown and must be estimated; and (4) the discount factor

applied to the estimated cash-flows must be estimated and is

subject to disagreement.   Additionally, Mr. Cantrell's report

states that the sales comparison method is generally recognized

as being the best method for valuing land as if vacant and ready

for improvement to its highest and best use.   Furthermore, as we

have found that the highest and best use of the parcel of 30.3

acres was as agricultural land, and because Mr. Cantrell's

development analysis was based upon developing the parcel of 30.3

acres into an industrial subdivision, Mr. Cantrell's report is

not helpful to our determination of the value of the parcel of

30.3 acres.

     Under the sales comparison method, Dr. Friedman determined

the fair market value of the parcel of 30.3 acres on December 17,

1992, to be $91,000 based on a value of $3,000 per acre.    Dr.

Friedman compared the parcel of 30.3 acres to six other

comparables which were as follows:
                                      - 33 -

           Land           Sale Date     Size (Acres)    Price Per Acre

               TA1           8/85         290.0            $2,000
               TA2          12/92          20.4             5,144
               TA3           4/91          62.0             3,387
               TA4           4/97          31.0             2,063
               TA5           N/A           68.4             2,000
               TA6           N/A          172.5               381

TA1, TA2, and TA3 were completed sales; TA4 was a listing on a

property that had been held for sale for 5 years; TA5 and TA6

were tax comparables and were not for sale, and the price per

acre was based on the assessed value of the land.              Dr. Friedman

adjusted the comparables for time, location, size, and the nature

of the site.

     We note that Dr. Friedman, in reaching his conclusion about

fair market value, relied on the three sales (TA1, TA2, and TA3)

and the property listed for sale (TA4).            He did not rely on the

tax comparables (TA5 and TA6).          On this basis, we also shall not

rely on the tax comparables in reaching our conclusion as to the

fair market value of the parcel of 30.3 acres.

     Dr. Friedman's negative adjustment for time was

unreasonable.        There was a slow market for land in the

neighborhood in which the Litton property was located, and since

1984 Lubbock had virtually no growth.             We shall not adjust any of

the comparables for time in order to determine the value of the

parcel of 30.3 acres.

     TA1 was located closer to the airport than the parcel of

30.3 acres, and TA1 had extensive frontage along MLK.               Dr.

Friedman did not adjust TA1 for location because he felt that the

parcel of 30.3 acres' frontage on Loop 289 offset TA1's proximity
                               - 34 -


to the airport.   TA2 was located closer to Lubbock's central

business district than the parcel of 30.3 acres, and therefore

Dr. Friedman applied a negative location adjustment of 50 percent

to TA2.   TA3 was located on the access road to Loop 289 and was

much closer to Interstate 27 than the parcel of 30.3 acres.       Dr.

Friedman, therefore, applied a negative location adjustment of 10

percent to TA3.   TA4, located one-half mile from the parcel of

30.3 acres, had access to MLK but no frontage on Loop 289.      Based

on these facts, Dr. Friedman applied a positive location

adjustment of 30 percent to TA4.    We are convinced that the

adjustments Dr. Friedman made for location are appropriate,

except we believe that the adjustment to TA2 was excessive.       We

believe that a negative adjustment to TA2 of 20 percent is more

appropriate.   We shall use these location adjustments in order to

determine the value of the parcel of 30.3 acres.

     Dr. Friedman also adjusted the comparables for size.    He

applied a positive adjustment of 10 percent to TA3 because it was

approximately twice the size of the parcel of 30.3 acres and a

positive adjustment of 30 percent to TA1 because it was much

larger than the parcel of 30.3 acres.    We are convinced that

these adjustments are reasonable and accept them in order to

determine the value of the parcel of 30.3 acres.

     Dr. Friedman also made a "site" adjustment to TA2 because

TA2 was a pit.    He applied a positive adjustment of 20 percent.

We are convinced that an upward adjustment is appropriate because
                                       - 35 -


of the nature of the site; however, we shall apply a positive

adjustment of 40 percent.

     Petitioners contend that TA3 was a highly motivated sale.

There was credible testimony that this sale was motivated.           We

therefore shall apply a positive adjustment of 20 percent to TA3

for motivation of the sellers in order to determine the value of

the parcel of 30.3 acres.

     After applying the adjustments we find proper to the

comparables, the adjusted price per acre for the four comparables

is as follows:
                                 TA1       TA2      TA3      TA4

     Price Per Acre             $2,000    $5,144   $3,387   $2,063
     Adjustments
        - Location                 0%      (20%)    (10%)     30%
        - Size                    30%        0%      10%       0%
        - Site                     0%       40%       0%       0%
        - Motivation               0%        0%      20%       0%
        - Time                     0%        0%       0%       0%
     Total Adjustment             30%       20%      20%      30%
     Adjusted Price
         Per Acre               $2,600    $6,173   $4,064   $2,682

We give less weight to TA4 because it was a listing rather than a

completed sale.         Based upon our review of all the valuation

evidence, giving due consideration to our observation at trial of

the witnesses for both parties and considering their testimony

and the expert reports, we conclude that the parcel of 30.3 acres

was worth $4,000 per acre for a total value of $121,200.

     D.     Conclusion

     We have found the fair market values of the 11.656 acres,

the Litton building, and the parcel of 30.3 acres on December 17,

1992, to be $142,164, $723,225, and $121,200, respectively.
                              - 36 -


Therefore the total value of the gifted Litton property on

December 17, 1992, was $986,589.

V.   Fair Market Value of the Bates Center

      Mr. Cantrell determined the fair market value of the Bates

Center on December 23, 1992, to be $350,000.   His report found

that the value indicated by the cost approach was $379,000, and

the value indicated by the sales comparison method was $342,000.

Mr. Cantrell placed greater weight on the cost approach in

determining his final estimate of the Bates Center's fair market

value.

      We note that we are skeptical of the accuracy of Mr.

Cantrell's conclusion regarding the value of the Bates Center on

its date of donation.   First, one of his basic premises--the date

of donation of the Bates Center--is wrong.11   Second, he places

greater weight on a method of valuation--the cost approach--that

we have found not helpful in this case.   Last, he contradicted

himself regarding his basis for valuing the Bates Center--he

testified that he computed the value of the Bates Center based on

its possibility of development into a commercial property because

he assumed that the land, which was zoned R-2 residential with a

church variance, could easily be rezoned as commercial;12

      11
        Mr. Sessions donated the Bates Center on Sept. 23, 1992,
not on Dec. 23, 1992.
      12
        We note that Mr. Sessions never took any action to have
the Bates Center land rezoned by the City of Lubbock.
Furthermore, although petitioners point to a letter from Randy
Henson, Senior Planner, Lubbock Planning Department, that
                                                   (continued...)
                                 - 37 -


however, in his report he concluded that the highest and best use

for the Bates Center was for use in conjunction with the

adjoining church property and that the Bates Center's location

made commercial uses not feasible.

     Dr. Friedman determined the fair market value of the Bates

Center on September 23, 1992, to be $170,000.    Dr. Friedman

placed greater weight on the sales comparison method in

determining his final estimate of the Bates Center's fair market

value.

     A.      Bates Center Land

     Under the sales comparison method, Mr. Cantrell determined

the fair market value of the Bates Center land (which was 50,507

square feet) to be $177,000 based on a value of $3.50 per square

foot.     Under the sales comparison method, Dr. Friedman determined

the fair market value of the Bates Center land to be $45,000

based on a value of $1 per square foot for the five lots, which

comprised 39,298 square feet, and $0.43 per square foot for the

excess lot, which was 11,209 square feet.

     Mr. Cantrell compared the Bates Center land to five other

comparables which were as follows:




     12
      (...continued)
indicated that the zoning of the Bates Center could be changed,
petitioners did not call him as a witness. We infer that his
testimony would not have been favorable to petitioners. Wichita
Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946),
affd. 162 F.2d 513 (10th Cir. 1947).
                                     - 38 -

          Land       Sale Date   Land Size (Sq. Ft.)        Price Per Sq. Ft.

           BL1         12/85           9,249                     $4.87
           BL2         12/87          18,900                      2.65
           BL3          2/88           6,758                      3.26
           BL4          5/92           8,793                      5.69
           BL5         10/92          21,000                      3.81

Dr. Friedman compared the Bates Center land to two of these same

five comparables (BL1 and BL4).

     Dr. Friedman also compared the Bates Center land to four tax

comparables.       These tax comparables, however, were not for sale,

and the price per square foot was based on the assessed value of

the land.13

     Although the tax comparables may provide some insight into

the value of the Bates Center land, we instead choose to rely on

the completed sales listed above (BL1 through BL5).                  The

completed sales were located near the Bates Center, and some took

place close to the time of its donation.               We believe that, in

this case, they are better indicators of the value of the Bates

Center land at the time of its donation.

     BL1, BL2, BL4, and BL5 were located on a six-lane, heavily

traveled road (Avenue Q).         Dr. Friedman made a negative

adjustment of 50 percent for this factor; Mr. Cantrell, however,

made negative adjustments of 5 percent to BL2 and BL5 and

negative adjustments of 10 percent to BL1 and BL4 based on their

location.        BL3 was located on 44th Street; however, it was

located closer to Avenue Q than the Bates Center property.                      We


     13
        The       Texas Property Tax Code and the Texas Constitution
require the       LCAD to appraise property at fair market value. See
Tex. Const.       art. VIII, sec. 20; Tex. Tax Code Ann. secs. 1.04(7),
23.01 (West       1992).
                              - 39 -


are more persuaded by Dr. Friedman's adjustment for the better

location of the comparables, and we shall apply negative

adjustments of 40 percent to BL1, BL2, BL4, and BL5 and a

negative adjustment of 10 percent to BL3 for location in order to

determine the value of the Bates Center land.

     Dr. Friedman adjusted the comparables for size and zoning.

He applied negative size adjustments of 10 percent to the

properties he used as comparables (BL1 and BL4) because they were

smaller than the Bates Center property.   He also applied negative

zoning adjustments of 20 percent to these properties because they

were zoned C-4 (commercial) and the Bates Center land was zoned

R-2 with a church variance.   We are convinced that these

adjustments are reasonable and shall apply negative adjustments

of 10 percent to all the comparables due to their smaller size

and shall apply negative adjustments of 20 percent to BL1, BL4,

and BL5 because they were zoned C-4 (commercial) in order to

determine the value of the Bates Center land.   BL2 and BL3 were

zoned R-3 and R-2, respectively, at the time of their sales;

therefore, we conclude that they require no adjustment for

zoning.

     Mr. Cantrell adjusted all of the comparables under "other".

Mr. Cantrell, however, only explained the "other" adjustment as

it related to BL1 and BL2--he made the adjustments in order to

adjust for the motivations of the seller/buyer.   We are convinced

that the adjustments for motivation of seller/buyer are well
                                     - 40 -


founded and shall apply a positive adjustment to BL2 of 10

percent and a negative adjustment to BL1 of 10 percent.                     We are

unconvinced, however, by Mr. Cantrell's unexplained "other"

adjustments to BL3, BL4, and BL5 and shall not apply Mr.

Cantrell's proposed "other" adjustments to these properties in

order to determine the fair market value of the Bates Center

property.

     After applying the adjustments as we find proper to the

comparables, the adjusted price per square foot for the five

comparables is as follows:
                               BL1       BL2      BL3      BL4      BL5

     Price Per Square Foot    $4.87     $2.65    $3.26    $5.69    $3.81
     Adjustments
        - Location             (40%)     (40%)    (10%)    (40%)    (40%)
        - Size                 (10%)     (10%)    (10%)    (10%)    (10%)
        - Zoning               (20%)       0%       0%     (20%)    (20%)
        - Other                (10%)      10%       0%       0%       0%
     Total Adjustment          (80%)     (40%)    (20%)    (70%)    (70%)
     Adjusted Price Per
         Square Foot          $0.97     $1.59    $2.61    $1.71    $1.14

     Based upon our review of all the valuation evidence, giving

due consideration to our observation at trial of the witnesses

for both parties and considering their testimony and the expert

reports, we conclude that the Litton building was worth $1.60 per

square foot for a total value of $80,811.

     B.     Bates Center Building

     Under the sales comparison method, Mr. Cantrell determined

the fair market value of the Bates Center property, which was

10,022 square feet, to be $165,363 based on a value of $16.50 per

square foot.      Under the sales comparison method, Dr. Friedman
                              - 41 -


determined the fair market value of the Bates Center building to

be $125,000 based on a value of $12.48 per square foot.

     Mr. Cantrell compared the Bates Center building to five

other churches that were sold in Lubbock between January of 1989

and September of 1992.   He made no adjustments to these sales

prices.   He determined that the sales price per square foot for

these buildings ranged from $6.01 to $26.46.   He removed the low

and high sales prices and was left with sales prices of $10.82,

$13.95 (the adjoining church), and $18.74 per square foot.     He

determined that $16.50 per square foot was the most reasonable

value estimate based on these three sales.

     Dr. Friedman compared the Bates Center building to four

other churches that were sold in Lubbock between January of 1989

and September of 1992.   Three of these four sales were

comparables that Mr. Cantrell used in his report.   He determined

that the sales price per square foot for the buildings he

compared the Bates Center building to ranged from $12.06 to

$20.47.   He determined that the sales price for the adjoining

church building was $16.70 per square foot.

     Dr. Friedman calculated that the average unadjusted sale

price for the buildings was $15.60 per square foot.   He adjusted

this average price downward by 20 percent because he believed

that the motivation to purchase a church building was stronger

than to purchase an activities building.   He determined the

adjusted price per square foot to be $12.48.
                              - 42 -


     We are not convinced that the comparable properties required

a negative adjustment for motivation.   Bishop William H. Watson

testified that some churches in Lubbock started in a gymnasium

without a sanctuary.   Bishop Watson testified, "I had made up my

mind if I had to take just the gym only, I would stay in the gym

as the church because I see some other churches do that kind of

thing."   As we previously stated, the use of the Bates Center as

a stand-alone church is supported by the record.   We shall not

apply a negative adjustment for motivation in determining the

value of the Bates Center building.

     Furthermore, we believe that the sale of the adjoining

church, which Mr. Sessions sold to the Northwest Texas Church of

God in Christ--to which he donated the Bates Center--is

particularly relevant to our determination of the value of the

Bates Center building.   The sales price of the adjoining church

was $550,000 with the building costing $13.95 per square foot

according to Mr. Cantrell or $16.70 per square foot according to

Dr. Friedman.

     Bishop Watson testified that he felt that the church

building was more important than the Bates Center.   He also

testified that Mr. Sessions offered to sell the Bates Center and

the adjoining church together to the Northwest Texas Church of

God in Christ for $750,000.   After negotiations, the Northwest

Texas Church of God in Christ purchased the adjoining church for
                             - 43 -


$550,000, and Mr. Sessions donated the Bates Center to the

Northwest Texas Church of God in Christ.

     Based upon our review of all the valuation evidence, giving

due consideration to our observation at trial of the witnesses

for both parties and considering their testimony and the expert

reports, we conclude that the Bates Center building was worth

$15.60 per square foot for a total value of $156,343.

     C.   Conclusion

     We have found the fair market values of the Bates Center

land and Bates Center building on September 23, 1992, to be

$80,811 and $156,343, respectively.    Therefore, the total value

of the Bates Center on September 23, 1992, was $237,154.

     To reflect the foregoing,

                                           Decisions will be entered

                                      under Rule 155.
