119 Misc. 12 | N.Y. Sur. Ct. | 1922
Cross-appeals have been taken by the executors and the state tax commission from the order fixing tax in this estate. The decedent was a non-resident of the state of New York. The state tax commission concedes the correctness of the executors’ first ground of appeal relating to the taxation of certain dividends declared prior to the death on shares of New York corporations. It likewise concedes the second ground of the executors’ appeal as to the overvaluation of the common stock of the Bronx Refrigerator Company. The third ground of appeal of the executors questions the right of this state to tax the value of two parcels of real estate which the decedent, before his death, had contracted to sell. These premises were subsequently conveyed by the executors in accordance
The state tax commission appeals from the order fixing tax upon the ground that the appraiser, in his report, depreciated the fair market value of six separate parcels of real estate by reason of the fact that each of said premises was subject to a lease at the time of decedent’s death, that said depreciation was erroneous, and that the appraiser reported an improper and inadequate value on each of the premises for the purpose of fixing the transfer tax.
The executors submitted to the appraiser an affidavit of a real estate expert covering each parcel which sets forth the alleged value of the property “ unincumbered by any leasehold.” The affidavit states the actual amount of rent reserved under the various leases. The actual net return varied from a sum in excess of three per cent to slightly less than six per cent of the value fixed by the expert. The expert then stated that, in his opinion, the rental value of each parcel was a certain sum, which he arbitrarily fixed at six per cent net upon his estimate of the fair market value of the property unincumbered by any lease. He then deducted from the latter estimate, in each case, the present value of the difference between the actual rent and this estimated six per cent net return for the unexpired term of each lease. In this manner he has eliminated over $700,000 from the total of $2,300,000, his estimate of the fair market value of the unincumbered properties, the assessed values of which were $2,100,000. The appeal of the state tax commission must be sustained. This method of valuation used by the expert and adopted by the transfer tax appraiser is unreasonable, arbitrary, theoretical and improper.
Section 220, subdivision 8, of the Tax Law requires that the transfer tax shall be imposed upon “ the clear market value of the property.” Section 230 of the Tax Law provides that the appraiser shall give notice of the time and place of the appraisal of the property and “ appraise the same at its fair market value.” In determining the fair or clear market value of real estate, the income produced by it and the terms of the lease are factors to be considered by the appraiser. Ordinarily the earning power of real estate is an important feature. People ex rel. W. U. T. Co. v. Dolan, 126 N. Y. 166, 178. But these elements must be considered in connection with its location, the value of other property in the
The report is, therefore, remitted to the appraiser for the purpose of taking proper and competent testimony of the fair market value of the real estate involved. For this purpose there should be received in evidence, in each case, the leases of each parcel which have been omitted from the record now before the court. The clerical errors in the report, which appear to be conceded, should likewise be corrected in the supplemental report.
Submit order accordingly.
Ordered accordingly.