Sterling Realty Co. v. Commissioner

*1001OPINION.

MuRdock:

No testimony was introduced as to the date of acquisition or the original cost of these properties to the petitioner and both parties concede that the only issue in this case is the March 1, 1913, value of the lots sold by the petitioner in 1919 and 1920. In order to prove such value the petitioner has relied upon the testimony of a number of real estate experts whose total valuations for the lots sold in the above years varied from $179,270 to $218,650. It has also introduced the testimony of two abstracters of title, who have arrived at their values by an analytical method, based upon a single sale in 1914, but who have disregarded a sale of the same piece of property in 1912.

*1002The Commissioner based his determination upon a report of revenue agents who had examined the property and the tax assessments for various years from 1912 to 1920, and who had interviewed certain real estate agents of the city. We do not know who these real estate agents were except that it appears that two were witnesses called by the petitioner. The respondent contends that the values claimed by the petitioner are erroneous for the reason that the years 1919 and 1920, when the lots in question were sold, were boom years and a period of great expansion and business activity, resulting in greatly increased prices. He bases this contention upon the testimony of the petitioner’s witnesses on cross-examination, upon various statistics introduced in evidence as to the growth of population and industries in the City of Omaha at that period, and upon the fact that a great many buildings were erected in districts nearby from 1917 to 1920. He reasons that sale prices in 1919 and 1920 therefore represented a large percentage of increase over the values as of March 1, 1913. However, a careful reading of the testimony of the petitioner’s witnesses will disclose the fact that they have stated as their opinion that such advance in prices did not affect the district in question, due to its peculiar situation and physical disadvantages, and that this was not remedied until certain improvements were carried out in 1921.

The respondent further contends .that the years 1919 and 1920 represented the peak of a rise in values for the district. In support of this he points to the fact that almost all of the petitioner’s sales were made during those years and he seeks to show that the improvements about to be made in the district caused an increase in value before these improvements were in fact carried out. However, the fact that the majority of sales were made in the two years in question does not necessarily establish that period as one of higher prices without further testimony, and, standing alone, it merely raises an inference which we are not inclined to adopt. As to the effect of contemplated improvements, the testimony of the real estate dealers called by the petitioner shows that the proposed changes were not anticipated and caused no perceptible increase in values before they were actually undertaken.

Furthermore, it appears that the property owners themselves were opposed to the contemplated changes due to their fear that the cost of the improvements might outweigh any increase in values which would result. Where such uncertainty existed as to the effects of proposed improvements, it is reasonable to suppose that no great rise in values would occur until the improvements were more definite and their cost settled.

Thus, in arriving at the values in dispute, we must decide between positive testimony introduced by the petitioner and the contention *1003of the respondent that such values must have been considerably lower than the selling prices for the reasons above set forth. Under such circumstances we have based our determination upon the valuations as set forth in the testimony introduced by the petitioner, since we are of the opinion that the uncontradicted testimony of a number of real estate experts familiar with the properties and values as of March 1, 1913, furnishes a better basis than an arbitrary percentage of increase founded upon a general rise in prices which may or may not have affected the district in question. Consequently, we hold that the March 1, 1913, fair market value of the lots sold in 1919 amounted to $145,000 and that of the lots sold in 1920 amounted to $45,000.

Judgment will be entered upon notice of 15 days, under Rule 50.

Considered by Trammell, MoeRis, and Siefkin.