Taking the Right Tax Course

Facts:

Mega National Bank (“Mega”), owned a shopping center in Seemingly Calm Valley, Ohio where one of its branches was located.  In 2001, Mega merged with Somwat Big National Bank and became the largest Bank in Ohio.  In the merger, Mega acquired a Somwat branch in the same shopping center where one of its branches was located.  Because of the merger, Mega had to close several branches, but wanted to keep one of the branches in the shopping center. 

Mega employed the Weselem Company to sell several of its other branches and to negotiate a favorable lease/back rate for its Seemingly Calm Valley branch.  Mega instructed Weselem’s agent, Mr. Tom Candoo  to obtain the highest possible selling price for the properties and a favorable lease/back option. 

The Buyall Brothers Real Estate Investors offered $350,000 and a leaseback of $30,000 in rent.  The Buyall Brothers knew that the true value of the property was more in the neighborhood of $700,000 so they were very happy to get this deal.  Mega was happy to get the property sold and a good leaseback option.  Mega agreed to sell the property to Buyall Brothers at what Mega believed was a terrific price. 

Upon the transfer of title, Buyall Brothers filed a complaint with the Seemingly Calm Valley Board of Revisions (SCVBOR) seeking to reduce the true value of the property for tax purposes for the 2001 tax year.  The state auditors placed the true value of the property at $750,000. 

The Seemingly Calm Valley School Board (“School Board”) was very concerned about Buyall Brothers request to reduce the property value because the schools benefited from the tax revenue.  The School Board asked the SCVBOR to increase the true value to $900,000.  The SCVBOR ruled in favor of Buyall Brothers and valued the property at $350,000.  The School Board was dissatisfied with this ruling and filed an appeal with the Board of Tax Appeals (“BTA”).  At the BTA, the School Board presented expert testimony from an appraiser who determined that the $350,000 sale price was not consistent with the market price.  The BTA agreed with the School Board’s expert and found that the appraiser had accurately valued the property at $900,000. 

On Appeal to the Ohio Supreme Court, Buyall Brothers sought review of the BTA decision that $900,000 was the true value.  Buyall Brothers wanted the Court to rule that the sales price is the best evidence of the property’s true value.

You Be The Judge!

Option A:  Affirm the BTA’s decision that the appraiser accurately valued the property by taking into consideration differences in the sales price and the Auditors value as well as other factors such as present and future use and other factors. The court should rule this way.

Option B :  Reverse the BTA and hold that the purchase price is always the true value of the property for tax purposes. The court should rule this way.

Option C :  Affirm in part the BTA’s decision that the appraiser accurately valued the property but that the purchase price can be used as the true value for tax purposes. The court should rule this way.