Similarly, petitioner concedes that assuming the other elements of the tax benefit rule are here present, there was a βrecovery.β See First Wisconsin Bankshares Corp. v. United States, 369 F. Supp. 1034 (E.D. Wis. 1973).Indeed, the parties stipulated that βRespondent has not sought to disallow any part of the deduction so claimed and such deduction is not in controversy.β
We agree. Reproduction cost is a relevant measure of fair market value when the property to be valued is unique, its market limited, and when there is no evidence of sales of comparable properties. See, e.g., Krauskopf, 48 T.C.M. (CCH) at 628-29; First Wis. Bankshares Corp. v. United States, 369 F. Supp. 1034, 1039 (E.D.Wis. 1973). For the reproduction cost appropriately to have an impact on the value equation, the taxpayer must establish "a probative correlation between [it] and fair market value." Rainier Cos., Inc. v. Commissioner, 36 T.C.M. (CCH) 1404, 1406 (1977); see also Rev.Proc. 66-49 at 1258.
In any event, the loans there would clearly be representative of the bank's ordinary portfolio of outstanding customer loans. Similarly, First Wisconsin Bankshares Corp. v. United States, 369 F. Supp. 1034 (E.D.Wis. 1973), did not concern Section 9 of Revenue Ruling 68-630. Even if it had, the construction loans made to three non-profit corporations would seem to be typical customer loans and therefore within Section 9.
Petitioners offer no expert testimony in support of this proposition. Mr. Larkin did not so opine; petitioners merely borrow his estimate of reproduction cost and assert on brief, relying on Estate of Palmer v. Commissioner, 839 F.2d 420 (8th Cir.1988), revg. 86 T.C. 66, 1986 WL 22075 (1986), and First Wis. Bankshares Corp. v. United States, 369 F.Supp. 1034 (E.D.Wis.1973), that because the lake house was βuniqueβ and was βspecial useβ property in the hands of the donee, reproduction cost is the appropriate measure of its value. In their amended petition, petitioners characterize their position as a claim that they are entitled to a deduction equal to the βreproductionβ cost of the lake house.
Petitioners offer no expert testimony in support of this proposition. Mr. Larkin did not so opine; petitioners merely borrow his estimate of reproduction cost and assert on brief, relying on Estate of Palmer v. Commissioner, 839 F.2d 420 (8th Cir. 1988), revg. 86 T.C. 66 (1986), and First Wis. Bankshares Corp. v. United States, 369 F. Supp. 1034 (E.D. Wis. 1973), that because the lake house was "unique" and was "special use" property in the hands of the donee, reproduction cost is the appropriate measure of its value. In their amended petition, petitioners characterize their position as a claim that they are entitled to a deduction equal to the "reproduction" cost of the lake house.
Petitioners offer no expert testimony in support of this proposition. Mr. Larkin did not so opine; petitioners merely borrow his estimate of reproduction cost and assert on brief, relying on Estate of Palmer v. Commissioner, 839 F.2d 420 (8th Cir. 1988), revg. 86 T.C. 66 (1986), and First Wis. Bankshares Corp. v. United States, 369 F. Supp. 1034 (E.D. Wis. 1973), that because the lake house was "unique" and was "special use" property in the hands of the donee, reproduction cost is the appropriate measure of its value.[17] Petitioners' reliance on Estate of Palmer and First Wis. Bankshares Corp. is misplaced.
Generally, a correlation between cost and fair market value has been proved where property is unusual in nature and other methods of valuation, such as comparable sales or income capitalization, are not applicable due to the property's uniqueness and nonincome-producing use. See, e.g., Estate of Palmer v. Commissioner, 839 F.2d at 424 (reproduction cost, less depreciation, to be considered in valuing Victorian mansion donated to college where property was unique, had historical significance, and served as hub of college activities); First Wisconsin Bankshares Corp. v. United States [74-1 USTC ΒΆ 9164], 369 F. Supp. 1034 (E.D. Wis. 1973) (bank building donated to city valued at reproduction cost, less depreciation, because it was "special purpose" property and capitalization of income method was inapplicable, as property was not to be used for production of income); Adams v. Commissioner [Dec. 42,134(M)], T.C. Memo. 1985-268 (value of Norden bombsight prototype donated to museum determined under replacement cost method due to its uniqueness and historical significance). We note that appraisers also limit reliance on the reproduction cost method to cases where the unusual character and use of property render other valuation methods inapplicable.