Opinion ID: 407987
Heading Depth: 2
Heading Rank: 1

Heading: The Finding as to Value

Text: 9 The estate argues that the Tax Court's finding as to the value of the Frieders farm was in error. The Tax Court's determination as to fair market value is a question of fact which we will uphold unless clearly erroneous. Tripp v. Commissioner, 337 F.2d 432, 434 (7th Cir. 1964). The fair market value is the oft repeated concept of 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. Treas.Reg. § 20.2031-1(b). See also United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir. 1980); United States v. 344.85 Acres of Land, 384 F.2d 789, 791 (7th Cir. 1967). 10 The estate's argument appears to be that the sales of the properties near the Frieders farm were not comparable because they involved unwilling sellers, that is, sellers who only sold their property at a premium and who could hold out for that high price because of the investor's desire and need to buy properties as part of an assemblage. The estate is implicitly arguing that a seller is unwilling if he is interested in selling only because of a high offer. And it is common knowledge that an assembler of large tracts of land will often have to offer premium prices to potential sellers who are indifferent about selling or not interested in selling at current market prices. 11 The estate's other objection to the Tax Court's valuation is that the court erred in considering evidence which was incompetent. The estate relies on Mercer County v. Wolff, 237 Ill. 74, 86 N.E. 708, 711 (1908), which held that records of the assessed value of a piece of property were incompetent and immaterial to show the value of the property. 12 Although we are concerned with the effect of this decision in light of the substantial inflation occurring the past decade, after reviewing all the evidence presented at the trial we cannot call the Tax Court's decision clearly erroneous. First, the Tax Court found that the highest and best use of the Frieders farm was a speculative, that is, an investment use. There was substantial evidence to support this conclusion. There were plans for a large shopping center two miles from the Frieders farm. There were plans to construct a freeway very near the Frieders farm. (The project, according to the estate, can now be considered abandoned.) Even without the Crowns, there would have been some investment activity in the area. 13 Second, the fact that there was investment activity does not in itself make the nearby sales not comparable. The lack of investment activity is not a prerequisite to having willing sellers. The only guidance the applicable regulation gives in defining an unwilling seller is this statement: The fair market value ... is not to be determined by a forced sale price. Treas.Reg. § 20.2031-2(b). The sales near the Frieders farm certainly did not involve unwilling sellers in the sense that there was a forced sale. Likewise, one cannot say that the people involved in the sales near the Frieders farm were literally under any compulsion to buy or to sell. Id. There may be a question as to whether an unwilling seller exists only in a forced sale situation. See 429.59 Acres of Land, 612 F.2d at 462 (a willing seller is one who desires to sell), but we would not call a property owner an unwilling seller simply because his property has development potential due to its proximity to a proposed freeway. 14 Third, the fact that the Crowns were buying property as part of an assemblage, which could be a situation that might involve an unwilling seller, does not change our conclusion. We can assume that the estate is correct in suggesting that the purchase of property in an assemblage makes for a higher price than if a property is sought independent of other properties. In this case, the five properties which the Tax Court used as comparables and which were part of the Crown assemblage sold for much more than $5,000 per acre. These properties sold for from $5,693 to $7,653 per acre. Also, the Frieders farm apparently could have been sold in 1973 for $6,000 per acre as part of an assemblage if the other owners were not holding out for a higher price. The Tax Court, in adopting the lower figure of $5,000 per acre, appears to have assumed that assemblage purchases bring higher prices. 15 Fourth, there was one comparable which was not part of an assemblage. It sold for $5,090 per acre. The estate argues that this property had greater development potential than the Frieders farm because of its size, road frontage, and the possibility of getting sewer and water service. The estate suggested at trial that the Frieders farm could not get sewer service. However, we cannot say as a matter of law its development potential-and hence its value-was substantially greater than that of the Frieders farm. 16 Fifth, the Tax Court did not err in considering the assessment records. Mercer County held that an assessor's book, offered to prove the assessment value of property, was incompetent. The court said the assessed value of the property was immaterial to the issue, although the assessor could have testified as to his judgment of the value of the property. 86 N.E. at 711. However, under Illinois law at the time of Frieders' death, assessment records could be material. An Illinois statute required that property be assessed at its fair cash value, Ill.Rev.Stat. ch. 120 § 501(1) (1971), and defined fair cash value as fifty percent of the actual value. Id. at § 482(24). In light of this statutory requirement, the assessed value would be material. The records showed the assessed value of the Frieders farm to be $229,331, twice which is $458,662, or $4,986 per acre. 17 When we look at all the evidence presented to the Tax Court, we conclude that its decision was not clearly erroneous.