Among other things, the experts disagreed on two threshold issues: which property should be valued; and the nature of its "highest and best use", which is, of course, a key factor in determining fair market value. See, e.g., Stanley Works Subsidiaries v. Comm'r, 87 T.C. 389, 400, 1986 WL 22172 (1986) ("The fair market value of property reflects the highest and best use of the property on the relevant valuation date."). Roddewig, for Whitehouse, determined the relevant property to consist of the Maison Blanche building (including annexes) and the contiguous Kress building, but not the Kress parking garage.

It is an inexact science at best, capable of resolution only by 'Solomon-like' pronouncements." Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 408 (1986) (alteration in original) (citations omitted). In deciding the property's fair market value before the encumbrance, we must take into account not only the property's then-current use, but also its highest and best use.

He also determined the building's highest and best use was as a mixed-room, non-luxury hotel. For a general discussion of this somewhat tax-specific term-of-art, see Stanley Works and Subsidiaries v. Comm'r, 87 T.C. 389, 400 (1986). Roddewig's appraisal considered three methods to evaluate the pre-and post-easement value of the Maison Blanche: replacement cost, income, and comparable sales.

The “realistic, objective potential uses for property control” its valuation. Symington, 87 T.C. at 896 (citing Stanley Works & Subsidiaries v. Comm'r, 87 T.C. 389, 400 (T.C.1986)). Valuation does not depend on “whether the owner actually has put the property to its highest and best use.”

See also Stanley Works &Subs. v. Commissioner, 87 T.C. 389, 400 (1986). A property's highest and best use is the "highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future."

We determine property value on the basis of the property's highest and best use. See Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 400 (1986); Treas. Reg. § 1.170A-14(h)(3)(i) and (ii). Accordingly, before we determine the before value, we must first determine the unencumbered property's highest and best use.

Whether the owner has put the property to such use or intends to do so is not determinative. Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 400 (1986). Highest and best use is a question of fact and requires an objective assessment of the likelihood that the donated property would be put to such use.

Olson v. United States, 292 U.S. 246, 255 (1934); Symington v. Commissioner, 87 T.C. 892, 897 (1986) (quoting Olson). It does not depend on whether the owner has actually put the property to such use or whether he ever intends to do so. Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 400 (1986). However, absent proof to the contrary the property's current use is presumed its highest and best use.

Id. at 275-276 (citing Olson v. United States, 292 U.S. 246, 255 (1934)). For example, in Stanley Works & Subs. v. Commissioner, 87 T.C. 389 (1986), we considered the value of a conservation easement placed on a piece of land. The taxpayer argued that the highest and best use of the donated property was as a hydroelectric power plant.

As an alternative, the "before-and-after" approach is often used instead. Stanley Works & Subs. v. Commissioner, 87 T.C. 389, 399 (1986). The fair market value of a conservation easement under this approach equals the difference between the fair market value of the easement-encumbered property before it is encumbered by the easement and after the easement is established.