FCG Valuation Case E-Flash Whitehouse v. Commissioner

Authored by Fawntel Romero, AM, and Chris D. Treharne, ASA, MCBA, BVAL of Gibraltar Business Appraisals, Inc. a member firm of FCG Issue 12:13

Whitehouse Hotel Limited Partnership, ET AL., Petitioners – Appellants, v. Commissioner of Internal Revenue, Respondent – Appellee
No. 09-60085, Appeal from the United States Tax Court No. 12104-03, Filed August 10, 2010

The U.S. Court of Appeals considered whether the Tax Court properly determined the value of a historic facade easement claimed as an income tax deduction. Ultimately, the court of appeals vacated the Tax Court‟s decision because it failed to consider the highest and best use of the property and failed to consider the easement‟s effect on a building adjacent to the easement.

The Takeaway
While this appeal is centered on the value of a real estate facade easement, it presents issues that are applicable to other appraisal professions, too:

  • After considering his extensive real estate appraisal experience, the appeals court upheld the Tax Court‟s ruling that the IRS‟ expert was qualified to appraise the subject interest even though the taxpayer asserted he lacked significant experience valuing facade easements.
  • Strict compliance with the Uniform Standards of Professional Appraisal Practice (“USPAP”) is not required for an appraisal to be admissible in court. However, failure to comply with USPAP may determine the relevant weight the report will be given.
  • On remand, the Tax Court will be required to consider a “reasonable and probable” future event that likely will impact the fair market value of the easement.
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