"But I too have not seen a response to this latest argument from the IRS."
Appraisal methods are 1) Cost to build 2) Market Value 3) Income Approach. Themost appropriate in tnis case wouldbe the income approach utilizing a discounted cash flow analysis (DCF). It ay appear that the original auditors valuation weighed heavily on tne cost approach? The actual valuation is probably much higher on the income approach, particularly since Interest rates have declined significantly. Under the DCF method, the Net Operating Income( Net Income before Depreciation and Interest NOI) divided by the Capitalization Ratio (Cap Ratio) which isbased on current interest rates. A lower Cap Ratio produces a higher valuation fr the property. My educated guess is that the initial auditorsvaluation was an unsophisticated approach (Cost Badis) and when the more sophisticated apprach (Income Basis or DCF) a more accurate valustion is determined hence the recent determination of value by the CDD which the IRS may have a diffucult time disproving.
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