Appendix — Estate of Frieders v. Commissioner

vert ss US.

FILE

82-1081

DEC 22 1982

ALEXANDER L. STEVAS,

IN THE ae CLERK

SUPREME COURT OF THE UNITED STAT

October Term, 1982

NO.

ESTATE OF WILLIAM A. FRIEDERS,

DECEASED, ELMER FRIEDERS,

EXECUTOR,

Petitioner,

vs.

COMMISSIONER OF INTERNAL

REVENUE SERVICE,

Respondent.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE SEVENTH CIRCUIT

CHESTER A. LIZAK

ALBERT KORETZKY

DI MONTE & LIZAK

Attorneys for Petitioner

5201 N. Harlem Avenue

Chicago, Illinois

(312) 775-9339

60656

INDEX TO APPENDIX

Opinion of the United States

Court of Appeals

Memorandum Findings of Fact

and Opinion of United States

Tax Court

Motion to Vacate and/or Revise

Decision

Order Denying Motion

Internal Revenue Service -

Notice of Total Amount Due

44a

58a

60a

in the

Rnited States Court of Appeals

Bor the Seventh Cirrntt

No. 81-2742

EsTaTE OF WILLIAM A. FRIEDERS, DECEASED,

ELMER FRIEDERS, EXECUTOR,

Petitioner,

v.

CoMMISSIONER OF INTERNAL REVENUE SERVICE, :

Respondent.

Appeal from the United States Tax Court.

ARGUED JUNE 3, 1982—DecipepD AuGusT 30, 1982

Before PELL, Circuit Judge, GIBSON, Senior Circuit

Judge,* and ESCHBACH, Circuit Judge.

G1BsoNn, Senior Circuit Judge. This is an ap of a

decision of the Tax Court as to the valuation of real es-

tate for estate tax purposes. I.R.C. eee aes

the finding as to the Sateg Wr ane gee ee, Oe

erroneous because nearby properties which the Tax

Court considered in deucurinel tas: valan werk eat

comparable, and other evidence considered by the court

* H R. Gibson, Senior Circuit Judge, Eighth Cir-

cuit, sitting designation. io

la

2 No. 81-2742

was incompetent. The estate’s other ent is that the

Tax Court abused its discretion in refusing to consider

evidence the estate presented to the court after that

court had issued its decision.

I. Facts

William Frieders died on May 14, 1973, leaving an es-

tate which included a ninety-two acre family farm. His

estate valued the farm at $2,000 acre. The Com-

missioner assessed a value of over $5,000 per acre.

estate brought this action in Tax Court, seeking a

redetermination. At the trial, the Commissioner took the

position that the estate was worth $5,000 per acre.

The following facts were adduced at trial. The

Frieders farm located in DuP County, Illinois,

about thirty miles west of Chicago. farm is between

the city of Aurora, located two and a half miles to the

southwest, and the city of Naperville, six miles to the

east. There was one road leading to the Frieders farm.

The farm has gas, electricity, telephone service, but

did not have sewer and water service. There was dis-

cussion of construction of a freeway to be located ve

near the Frieders farm, but the plans have been v -

ly abandoned. A ee was proposed for a

location two miles from Frieders farm. That shop-

ping center was completed and has over 100 stores.

re was investment activity in the area at the time of

Frieders’ death, including activity by the Crown family

of Chicago. The Crowns, wesc ow trusts, bought

properties near the Frieders and made offers on

others. Shortly after Frieders’ death, the Crowns were

willing to buy the Frieders farm and two rties

aliens alge Me dk ae eal ’ per

acre as part an assem . er property

owners wanted more than qa ote and the sale was not

consummated.

The Government presented one expert witness, Donald

Neuses, who relied primarily on the selling prices of six

properties near the Frieders farm. Five of the ‘six

2a

No. 81-2742 3

properties were bought by the Crowns as part of an

assemblage, and the price per acre of the five properties

ranged from $5,693 to $7,653. The other yg Bone

for $5,090 per acre. Neuses testified that the Fr

farm was in the middle of a development corridor.

The estate presented three witnesses. The essence of

the testimony of two of them was that the activity by the

Crowns inflated the prices and made the properties

relied on by Neuses not comparable. Another witness

testified that the value of farmland throughout Illinois

increased by 341 percent between 1973 and 1979.

The Government also attempted to show value by in-

troducing assessment records which placed on the

Frieders farm a fair market value for real estate tax

purposes of $4,986 per acre for 1972.

The Tax Court found that the fair market value of the

Frieders farm was $5,000 per acre. The court relied

rincipally on the testimony and report of the

vernment’s witness, Donald Neuses. The court

with Neuses that the highest and best use the

Frieders farm was a speculative, that is, an investment

use,

The court filed its Memorandum Findings of Fact and

Opinion on May 27, 1980. On December 20, 1980, the

Frieders farm was sold for $5,000 per acre. The Tax

Court decision was not entered until July 23, 1981,

because of the time it took to compute the deficiency

pursuant to Tax Ct. R. 155. On October 13, 1981, almost

three months after the Tax Court decision was rendered,

the estate submitted a motion to vacate or revise the

decision based on the evidence of the actual sale price of

the Frieders farm. Under Tax Ct. R. 162, such a motion

must be filed within thirty days after the decision has

been entered, unless the court shall otherwise permit.

The court denied leave to file the motion.

3a

4 No. 81-2742

II. Analysis

A. The Finding as to Value

The estate argues that the Tax Court’s mg as to

the value of the Frieders farm was in error. The

Court’s determination as to fair market value is a ques-

tion of fact which we will uphold unless clearly

erroneous. Tripp v. Commissioner, 337 F.2d 432, 434

(7th Cir. 1964). The fair market value is the oft repeated

concept of “the price at which the property would

change hands between a willing buyer and a willing

seller, neither being under any compulsion to buy or to

sell and both having reasonable knowledge of relevant

facts.” Treas. Rey. '§ 20.2081- 1(b). See also a States

v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir.

1980); United States v. 344.85 Acres of Land, 384 F.2d

789, 791 (7th Cir. 1967).

The estate’s erences eeres be Oe eee

he rah gobs near the farm were not com-

le because they involved “unwilling sellers,” that

, sellers who only sold their pro at a premium

and who could hold out for that h price because of

the investor’s desire and need to eer part

of an assemb viha clas ta wellekis aaamagaee a

seller is “unw illing” if he is interested in selling only

because of a high offer. And it is common knowledge

that an assembler of large tracts of land will often have

to offer premium A ng to potential sellers who are in-

different about selling or not interested in selling at

current market prices.

The estate’s other objection to the Tax Court’s valua-

tion is that the court erred in considering evidence

which was incompetent. The estate relies on Mercer

County v. Wolff, Ill. 74, 86 N.E. 708, ie (1908),

which held that records of the assessed value of a piece

of property were incompetent and immaterial to show

the value of the property.

Although we are concerned with the effect of this

naga in light of the substantial org occurring

the past decade, after reviewing all the evidence

4a

No. 81-2742 5

presented at the trial we cannot call the Tax Court’s

decision clearly erroneous. First, the Tax Court found

that the highest and best use of the Frieders farm was a

speculative, that is, an investment use. There was sub-

stantial evidence to support this conclusion. There were

au vr eng a * Roomy, Barr sicom center two miles from the

ere were plans ng pent a freeway

“ay te near the Frieders farm. (Th according to

the estate, can now be doe Fe doned.) Even

without the Crowns, there would have been some invest-

ment activity in the area.

Second, the fact that there was investment activity

does not in itself make the nearby sales not comparable.

The lack of investment activity is not a prerequisite to

having “willing sellers.” The only guidance the

licable regulation gives in defining an unwilling

seller is this statement: The fair market value .. . is not

to be determined by a forced sale price.” Treas. Reg.

20.2031-2(b). The sales near the Frieders farm certain-

did not involve “unwilling sellers” in the sense that

re was a forced sale. Likewise, one cannot say that

the people involved in the sales near the Frieders farm

were ; literally “under any compulsion to buy or to sell.”

Id. There may be a question as to whether an “unwilling

seller” st eran only in « forced sale situation, See 429.59

Acres of Land, 612 F.2d at 462 (a willing seller is one

who “desires” to sell), but we would not call a property

owner an “unwilling seller” simply because his

has development potential due to its proximity to a

proposed freeway.

Third, the fact that the Crowns were buying property

as part of an assemblage, which could be a situation that

pr involve an “unwilling seller,” does not change our

suggesting We can assume that the estate is correct in

ting that the purchase of property in an as-

ren ry pendent ari Washer yeti Gaur et 0 poner

ont independent of other properties. In this case,

the five properties which the Tax Court used as com-

parables and which rbaiaf =p 33 of ti the Crown assemblage

sold for much more than ei

5a

6 No. 81-2742

ties sold for from $5,693 to $7,653 per acre. Also, the

Frieders farm apparently could have been sold in 1973

for $6,000 per acre as part of an assembiage if the other

owners were not holding out for a higher price. The Tax

Court, in adopting the lower figure of $6. 000 per acre,

appears to have assumed that assemblage purchases

bring higher prices.

Fourth, there was one comparable which was not part

sale ype e. It sold for $5,090 per acre. The estate

> had greater development

potential than the rieders farm because of its size, road

tage, and the possibility of getting sewer and water

arden ice The estate suggested at trial that the Frieders

farm could not get sewer service. However, we cannot

say as a matter of law its development potential—and

hence its value—was substantially greater than that of

the Frieders farm.

Fifth, the Tax Court did not err in considering the

assessment records. Mercer County held that an

assessor’s book, offered to prove the assessment value of

property, was incompetent. The court said the

value of the property was immaterial to the issue,

although the assessor could have testified as to his judg-

ment of the value of the property. 86 N.E. at 711

However, under Illinois law at the time of Frieders’

death, assessment records could be material. An Illinois

statute required Lough “gph perty be assecsed at its “fair

cash value.” Ill. Rev. Stat. ch. 120 § 501(1) (1971), and

defined “fair cash value” as fifty t of the actual

value. Jd. at § 482(24). In light of this statutory require-

ment, the assessed value would be material. The records

showed the azsessed value of the Frieders farm to be

$229,331, twice which is $458,662, or $4,986 per acre.

When we look at all the evidence presented to the Tax

Court, we conclude that its decision was not clearly

erroneous.

6a

No. 81-2742 7

B. Post-trial Evidence

The estate’s other argument is that the Tax Court

erred in refusing to considur evidence of value of the

Frieders property which came into being after the trial.

The trial was held on December 11, 1979, and the Tax

Court issued its findings on May 27, 1980. The Frieders

farm was sold for $5,000 per acre on December 20, 1980,

seven months after the Tax Court issued its findings and

seven months before the final decision was i . The

property was sold after it received sewer service and

plans were announced to increase the road frontage. The

' estate brought the sale to the attention of the Tax Court

by way of a motion on October 13, 1981, almost three

months after the Tax Court’s July 23, 1981, decision.

Because this motion was recei by the Tax Court

more than thirty days after its decision, the motion

could be considered only by leave of the court. Tax Ct.

R. 162. We must decide whether the Tax Court abused

its discretion in denying the estate leave to file its mo-

tion.

This issue is important because, if the property was

worth $5,000 per acre in 1980, one would consider it un-

likely that the was worth $5,900 per acre in

1973, in view of the substantial, continuing inflationary

status of the economy between 1973 and 1980. Never-

theless, we cannot say that the court abused its dis-

cretion. The estate had eight months after the sale to

file its motion without the need to gain the ission of

the court. There was no excuse given for the delay. The

court’s interest in terminating litigation allowed it to

refuse to consider evidence known to the estate well

before the court’s decision. See Koufman v. Com-

missioner, 69 T.C. 473, 476 (1977).

Furthermore, it is not clear that the additional

evidence would have changed the result. It is possible

that the value of the Frieders farm did not follow

general inflationary trends. At the time of Frieders’

Geath, there was a proposal for a new freeway near the

i " anticipation of the

freeway construction would inflate the price of the

8 No. 81-2742

Frieders farm. The later abandonment of the project

would have a deflationary effect. Perhaps it is only

because of inflation that the has reascended to

a value of $5,000 per acre. This po hart is ect

bey tied fast that the Sriadeke forte could have been sold

for $6,000 acre, although admittedly only as part of

an assemb Also, the provision of sewer service

could undichad ted coteta’s cicoeation ot trial that: ths

Frieders farm had a low value because it was almost

impossible to get this service.

The Tax Court’s valuation of the Frieders property

was not clearly erroneous, and the court did not abuse

its discretion in refusing to consider the post-trial

evidence. The judgment of the Tax Court is affirmed.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA 5730—Midwest Law Printing Co., Inc , Chicago—8-30-82—400

UNITED STATES TAX COURT

ESTATE OF WILLIAM A. FRIEDERS, DE-

CEASED, ELMER FRIEDERS, EXECUTOR, Peti-

tioner v. COMMISSIONER OF INTERNAL

REVENUE, Respondent

Docket No. 4253-77

Filed May 27, 1980.

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: Respondent deter-

mined a deficiency of $89,230.37 in

petitioner's Federal estate tax. The

only issue for decision is the fair

market value on May 14, 1973, of ap-

proximately 92 acres of real estate

located in Naperville Township, DuPage

County, Ill., which was included in the

gross estate of the decedent for Fede-

ral estate tax purposes.

FINDINGS OF FACT

Some of the fact:s have been sti-

pulated. The stipulation of facts and

9a

attached exhibits are incorporated

herein by this reference.

Elmer Frieders is the executor of

the Estate of William A. Frieders,

deceased, and resided in Aurora, Ill.,

when the petition was filed in this

case.

William A. Frieders died testate on

May 14, 1973, seized of ayproximately

92 acres of real estate (herein re-

ferred to as the Frieders property)

located in Naperville Township, DuPage

County, Ill.

For purposes of reporting decedent's

Federal gross estate, petitioner re-

turned the Frieders property at a fair

market value of $184,000, or $2,000 per

acre.

The Frieders property is not land-

locked; ingress and egress are by way

l0a

of Reckinger Road, a 60 foot wide

public right-of-way which deadends at

the western boundary of the property.

Reckinger Road proceeds westward to

Farnsworth Avenue. Farnsworth Avenue

provides access to the East-West Toll-

way (Highway 5) which proceeds eastward

to Chicago.

The downtown area of the city of

Aurora is about 2-1/2 miles to the

southwest of the Frieders property and

the city of Naperville is about six

miles to the east.

The topography of the Frieders

property is gently rolling terrain with

areas both slightly above and slightly

below road grade. There are no drain-

age problems.

As of the valuation date, i.e., May

14, 1973, the Frieders property was

lla

serviced by a private well and septic

system. Available utilities in the

area included gas, electricity, and

telephone.

The property was zoned R-3 for resi-

dential single family uses. It is

improved wath an older frame farm house

containing six rooms, one older frame

barn, and a machine shed.

The trend in the area surrounding

the Frieders property was toward the

development of vacant unimproved farm-

land for multi-family and single family

residential uses as of the valuation

date.

Donald P. Neuses prepared an ap-

praisal of the fair market value of the

Frieders property as of May 14, 1973.

He is a qualified expert real estate

appraiser and land use planner who

12a

personally inspected the property. It

was his opinion that the fair market

value of the property as of May 14,

1973, was $460,000, or $5,000 per acre.

Mr. Neuses used the market data

method in making his appraisal of the

Frieders property. He considered many

sales in formulating his appraisal, as

well as information obtained from

brokers, other appraisers, and others

knowledgeable about real estate prices

in that area. Among the sales which

Mr. Neuses considered in formulating

his appraisal of the Frieders property

were the sales of six parcels occurring

within the vicinity of the Frieders

property during 1972 and 1973, the

details of which sales are fully set

forth in his appraisal report. These

were all. bona fide sales between will-

l3a

ing sellers and willing buyers. The

location, date of sale, acreage,

zoning, utilities, price and price per

acre of the six parcels are set forth

below:

Parcel 1

Location: The west side of Eola Road,

north of North Aurora Road, in an un-

incorporated area of Naperville Town-

ship, DuPage County, Illinois.

Date of Sale: April 12, 1972.

Acreage: 99/2; acres.

Zoning: M-2 and R-3.

Utilities: Gas, electric and tele-

phone.

Sale Price: $502,260.

Price Per Acre: $5,693.

Parcel 2

Location: 111.924 acres located in

Section 7, 8, 17 and 18, Naperville

Township,DuPage County, Illinois.

Date of Sale: July 5, 1973.

Acreage: 111.924 acres.

l4a

Utilities: Gas, electric and tele-

phone.

Sale Price: $839,430.

Price Per Acre: $7,500.

Parcel 3

Location: North of North Aurora Road,

and east of Shore Road, in an unin-

corporated area of Naperville Township,

DuPage County, Illinois.

Acreage: 34 acres.

Zoning: R-3.

Utilities: Well and septic.

Sale Price: $173,088.

Price Per acre: $5,090

Parcel 4

Location: The west side of Eola Road,

approximately 1,200 feet south of Claim

Street, unincorporated Naperville Town-

ship, DuPage County, Illinois.

Date of Sale: March 29, 1972.

Acreage: 19.58 acres.

Zoning: R-3.

Utilities: Well and septic.

Sale Price: $149,850.

Price Per acre: $7,653.

15a

Parcel 5

Location: Along the south side of

Aurora Road, just east of the DuPage

County-Kane County Line, unincorporated

Naperville Township, DuPage County,

Illinois.

Date of Sale: March 17, 1972.

Acreage: 34.72 acres.

Zoning: R-3.

Utilities: Well and septic.

Sale Price: $224,690.

Price Per Acre: $6,472.

Parcel 6

Location: South of Molitor Road, just

east of the Kane County Line, unin-

corporated Naperville Township, DuPage

County, Illinois. (Lorenz's Farm)

Date of Sale: September 13, 1972.

Acreage: 104.81 acres.

Zoning: R-3.

Utilities: Well and septic.

Sale Price: $602,657.50.

Price Per Acre: $5,750.

léa

The Frieders property and the six

parcels used by Mr. Neuses as com-

parables are all located with.n about

two miles of one another, with Parcel 6

being contiguous to the Frieders Pro-

perty to the east and Parcel 2 being

contiguous to the south.

The Frieders property (as of May 14,

1973) and the six parcels (as of their

respective sale dates) were comparable

properties.

In formulating his appraisal of the

Frieders property, Mr. Neuses took into

account and adjusted for the various

differences affecting value, including

physical characteristics, zoning,

frontage, and location of the compar-

able properties.

17a

During the early 1970's, there was

discussion of a proposed freeway, the

Fox Valley Freeway, to be located in

the western part of Naperville Town-

ship. Real estate prices at that time

were rising in the Naperville Township.

In early 1973, real estate investors

and sellers were put on notice of a

Significant, contemplated land use

shift from agricultural to residential

uses, to be highlighted by the con-

struction of the Fox Valley Shopping

Center. It is a large shopping center

containing more than 100 stores, in-

cluding Sears, J. C. Penney, Lord &

Taylor, and Marshall Field. It is

located about two miles to the south-

east of the Frieders property.

During 1972 and 1973 there were at

least three major investors purchasing

18a

property in the vicinity of the Frieders

property, namely, the Crowns, a wealthy

Chicago family, Metropolitan Struc-

tures, Inc., a very substantial devel-

oper, and Urban Investment and Develop-

ment, Inc.

The Frieders property is in a cor-

ridor bounded by the Fox Valley to the

west, which is expanding eastward, and

western DuPage County, which is ex-

panding westward. The corridor has

experienged substantial growth.

The highest and best use of the

Frieders property as of the valuation

date was a speculative, i.e., an in-

vestment, use.

All of the properties which the

Crowns acquired in the vicinity of the

Frieders property were purchased

through nominees and held in land

19a

trusts. The purpose of using nominees

was to keep the identity of the Crowns,

as the real purchasers, secret; the

purpose of using land trusts, with the

trustees as legal title holders, was to

keep the identity of the Crowns, as the

real owners,secret.

Real estate sellers in the Naper-

ville Township did not know they were

dealing with the Crowns, nor did they

know what properties the Crowns owned.

Gerald Anderson, a real estate

broker, was employed by the real estate

firm of Bennett & Kahnweiler to assist

in purchasing properties on behalf of

the Crowns in the Naperville Township.

In 1973 Mr. Anderson attempted to as-

semble three properties, including the

Frieders property, for which the ave-~-

rage price to be paid was about $6,000

20a

per acre. However, the sale was not

consummated. One of the’ property

owners wanted $8,500 per acre for his

property. One wanted in excess of

$6,000 per acre.

The Frieders property (exclusive of

improvements) was determined in 1972 to

have a fair market value for DuPage

County real estate tax purposes of

$458,712 or $4,986 per acre.

ULTIMATE FINDING OF FACT

The fair market value of the

Frieders property on May 14, 1973, was

$460,000 or $5,000 per acre.

OPINION

We are confronted here with one

factual issue -- the fair market value

of the Frieders property on May 14,

1973.: Petitioner contends that the

property had a fair market value on

2la

that date of $184,000 or $2,000 per

acre. To the contrary, respondent now

maintains that its value was $460,000

or $5,000 per acre. 1

We agree with the respondent and, in

making our ultimate finding of fact, we

have relied principally upon the ap-

praisal report of and testimony of

Donald P. Neuses, who was respondent's

expert witness. Our reasons are set

forth below.

Section 2031 2 provides that the

value of the gross estate of a decedent

shall be determined by, including the

value at the time of his death, all

‘property wherever situated. Section

20.2031-1(b), Estate Tax Regs., pro-

vides that the value of every

22a

(1) In his notice of deficiency,

respondent determined that the fair

market value of the property was

$483,000 or $5,250 per acre.

(2) All section references are to

the Internal Revenue Code of 1954, as

amended and in effect at the time of

the decedent's death on May 14, 1973.

item includable in the decedent's gross

estate, with exceptions not applicable

here, shall be its fair market value at

the time of the decedent's death, and

that the fair market value is the price

at which the property would change

hands between a willing buyer and and a

willing seller, neither being under any

compulsion to buy or sell and both

having knowledge of relevant facts.

Respondent supported his determi-

nation in this case with the expert

opinion of an experienced local real

estate appraiser and with documentary

evidence buttressing the opinion. The

23a

evidence consisted of an appraisal

report by and the testimony of Donald

P. Neuses concerning the value of the

Frieders property as of May 14, 1973.

Mr. Neuses is an independent local

appraiser with 22 years of real estate

appraisal experience. He is a member

of the American Society of Appraisers

and of the American Institute of Ap-

praisers. He has taught courses about

appraising; he has written an article

about it; and he has acted as consul-

tant to various local agencies and

municipalities, including the State of

Illinois. He has appraised numerous

parcels of land in the Naperville

Township and is familiar with the mar-

ket trends in the area. In addition to

his appraisal experience, Mr. Neuses

has also had land use planning ex-

24a

perience; he was a member of the

American Society of Planning Offi-

cials; and he was former chairman of

the Lombard, Illinois, Planning Com-

mission.

It was the expert opinion of Donald

P. Neuses, based upon his personal

inspection of the Frieders property and

upon the results of his research, that

the fair market value of the Frieders

property, as of the valuation date, was

$460,000, or $5,000 per acre. His

appraisal report sets forth pertinent

city and neighborhood data concerning

the cities most proximate to the

Frieders property (viz., Aurora, less

than three miles to the west, and

Naperville, about six miles to the

east), information concerning the

physical characteristics, location,

25a

configuration of the property, its

accessibility to roads, and his obser-

vations that the trend in the surroun-

ding area has been toward the develop-

ment of vacant unimproved farmland for

multi-family and single family resi-

dential uses.

In his appraisal report, Mr. Neuses

set forth the three generally accepted

and used methods of appraisal -- the

income method, the replacement method,

and’ the market data (or comparable

Sales) method. He chose the market

data method in valuing the Frieders

property because, in his opinion, it

was the most appropriate method in this

case for valuing raw land. 3 The

market data method consists cf gather-

ing sales data respecting sales of

comparable sites, then analyzing the

26a

data and making adjustments for various

differences between the comparables and

the property being appraised which

affect value, such as size, location,

availability of utilities, and avail-

ability of access.

Mr. Neuses testified, and his ap-

praisal report states, that he con-

sidered many sales in formulating his

appraisal, as well as information ob-

tained from brokers, other appraisers,

and Others knowledgeable about real

estate prices in the area of the

Frieders property. His appraisal re-

port sets forth particulars concerning

the sales of six parcels within the

vicinity of the Frieders property. Mr.

Neuses stated that he considered the

six parcels to be comparable to the

Frieders property. He also stated

27a

that, in formulating his appraisal, he

took into account and adjusted for

various differences affecting value,

such as time, location, configuration,

availability of utilities, and road

frontage.

(3) Although various structures

exist on the Frieders property, Mr.

Neuses disregarded these in formulating

his appraisal, since, in his view, they

added little to the value of the land

because of their age.

We are persuaded that elements of

comparability existed between the

Frieders property as of the valuation

date and the six parcels selected by

Mr. Neuses as of their respective sales

dates. These eiements are:

(1) All the properties were zoned

similarly.

28a

(2) All were located in unincor-

porated areas of the Naperville Town-

ship.

(3) All had structural improve-

ments.

(4) All are within two miles of one

another (with Parcel 6 being contiguous

to the east and Parcel 2 being con-

tiguous to the south).

(5) All were without sewer and

water utilities.

(6) Parcels 1, 2, and 6 and the

Frieders property have about the same

acreage.

(7) Parcel 6 has only modest fron-

tage on Molitor Road, and Parcels 4 and

5 also have only modest frontage.

The time differential between dates

of sale of the six parcels and the

valuation date also points to compar-

29a

ability. Parcels 1 and 4 were sold

about one year prior to the valuation

date, and Parcel 6 was sold about eight

menths prior thereto, all during a

period of rising land prices in Naper-

ville Township. Sales of Parcels 2 and

3 occurred within two months after the

valuation date.

As to the highest and best use of

the Frieders property, it was the

Opinion of Mr. Neuses that, as of the

valuation date, it was a speculative,

i.e., investment, use.

Mr. Neuses further testified that he

was familiar with the market trends and

conditions in the general area of the

Frieders property around the valuation

date. According to him, the Fox Valley

(embracing the city of Aurora) was

expanding eastward. A corridor of

30a

land, including the Frieders property,

which Mr. Neuses denominated the "Fox

Valley corridor," bounded by the Fox

River to the west and western DuPage

County to the east, experienced tremen-

dous developmental growth. In support

of his determination of highest and

best use, Mr. Neuses pointed to several

socio-economic forces influencing the

Naperville Township market around the

valuation date, including the presence

of a prominent investor (the Crowns) in

the corridor, the proposal of the For

Valley Freeway, and the announcement of

the construction of a major regional

shopping center, viz., the Fox Valley

Shopping Center.

In addition to Mr. Neuses' opinion

of fair market value, respondent of-

fered in evidence certified copies of

3la

two DuPage County Property Record Cards

reflecting that the Frieders property

(exclusive of improvements) was de-

termined, for DuPage County real estate

tax purpose, to have a fair market

value in 1972 of $458,712, or $4,986

per acre. 4 This Court has approved

the use of such assessments as one

indicator of value when, as in this

case, the relation between assessed

value and fair market value is demon-

strated. See Kelly v. Commissioner, 18

B.T.A. 1049 (1930); Fisher v. Com-

missioner, 3 B.T.A. 679 (1920).

Respondent's position is further

supported by evidence showing that at

about the same time Gerald Anderson tried

to

(4) Ill. Rev. Stat., ch, 120, §499

(1971) provides that all real and per-

sonal property within the State of

32a

Illinois shall be assessed and taxed,

except as so much hereof as may be exempt

by statute. Ill. Rev. Stat., ch. 120,

§501 (1971) provides that each tract or

lot of real property shall be valued at

its fair cash value. Ill. Rev. State.,

ch. 120, §482 (24) (1971) provides that

the term “fair cash value" means 50 per-

cent of the actual value of real and

personal property, except in counties

with a population of more than 200,000

which classify real property for purposes

of taxation. DuPage County has never

classified and does not currently clas-

sify real property for purposes of tax-

ation. The 1972 assessment figures re-

lating to the Frieders property per the

property record cards total $229,331,

twice which is $458,662.

acquire the Frieders property on behalf

of the Crowns for about $6,000 per acre,

but Elmer Frieders would not accept it;

that there was discussion of the proposed

Pox Valley Freeway to be located near the

Frieders property; that there was the

public announcement of the construction

nearby of the Fox Valley Shopping Center;

that major developers and the Crown

family were acquiring land in the vicin-

33a

ity of the Frieders property; and that

the Frieders property lies in a corridor

of real estate which experienced tre-

mendous developmental growth.

Petitioner relies strongly on the

testimony of Gerald Anderson, a real

estate broker and builder, in contending

that the sales of five of the six parcels

used as comparables by Mr. Neuses in-

volved “unwilling sellers.” We reject

this contention for several reasons.

First, it is not supported by the evi-

dence. It is nothing but lay opinion.

Mr. Anderson provided no basis for his

opinion other than the fact that he had

to contact some of the sellers on more

than one occasion and, to the best of his

knowledge, when he contacted each of

them, only one had previously listed his

property for sale. This is certainly not

34a

probative of the seller's state of mind

and it fails to establish that each sel-

ler was “unwilling” at the time of sale,

at which point each seller had presumably

struck what he considered to be a satis-

factory and fair bargain. Second, it is

Significant that petitioner did not call

any of the sellers to testify at trial,

which permits the inference that the

sellers would not have testified favor-

ably to petitioner. Interstate Circuit

v. United States, 306 U.S. 208 (1939);

Wichita Terminal Elevator Co. v. Com-

missioner, 6 T.C. 1158, 1165 (1946),

affd. 162 F.2d 513 (10th Cir. 1947).

Third, the petitioner's interpretation of

the term “unwilling seller" is strained.

It implies that a person who does not

offer his property for sale or does not

immediately accept an offer when made is

35a

an “unwilling seller." This is incor-

rect. Moreover, an “unwilling seller”

has been traditionally viewed as a finan-

cially embarrassed person who is forced

to sell property for less--not more--than

its fair market value. In short, we give

no weight to Mr. Anderson's opinion as to

the fair market value of the Frieders

property on May 14, 1973.

Petitioner also offered the testimony of

Wilton Battles, a land use and zonin«

consultant, in support of his arguments

that (1) all of the parcels used by Mr.

Neuses are more desirable than the

Frieders property from the standpoint of

a land developer and (2) because of cer-

tain real estate assemblage activity

which occurred in the vicinity of the

Frieders property around the valuation

date, the prices paid for the six parcels

36a

are not reflective of the fair market

value of the Frieders property.

Mr. Battles identified an aerial

photograph showing the Naperville Town-

ship, an overlay showing the proposed

location for the Fox Valley Freeway and

interchanges, an overlay showing soil

conditions on the Frieders property and

surrounding parcels, an overlay showing

what Petitioner denominated “the Crown

assemblage” (a group of properties al-

legedly acquired by the Crowns), and a

map showing the public sewer system of

the Aurora Sanitary District. In sub-

stance, Mr. Battles expressed his opinion

"from a land use planner's point of view"

as follows:

(1) During the early 1970's, there

was discussion of a freeway, i.e., the

Fox Valley Freeway, which was proposed to

37a

be located in the western part of Naper-

ville Township, and some of the six

parcels used by Mr. Neuses would have

benefited from having frontage on or

proximity to the proposed freeway.

(2) The Frieders property suffered

from certain developmental handicaps,

i.e., lack of access to a public sewer

and water system, poor soil conditions

for septic system development, lack of

road frontage, poor access, and poor

configuration. The Frieders property was

not in the Aurora Sanitary District as of

the valuation date, and overcoming the

sewer problem would be costly.

(3) Some of the six parcels ac-

quired value as part of the Crown assem-

blage.

We do not find Mr. Battles' opinion

persuasive. First, even if the proposed

38a

location of the freeway would have had a

positive, rather than a negative, effect

on the value of the properties near it,

there is no reason to believe that the

value of the Frieders property would not

have also been enhanced by its proximity

to the freeway and interchanges. We note

that Parcels 3, 5 and 6 would not have

fronted on the freeway, yet all of them

sold for more than $5,000 per acre.

Second, Mr. Battles’ criticisms of the

physical characteristics of the Frieders

property were, for the most part, appli-

cable to the six parcels as of their

respective dates of sale. Third, we

think that Mr. Battles' testimony that

some of the six parcels acquired post-

assemblage suitability for development

and enhanced value adds nothing to the

Petitioner's case. Even if we assume that

39a

the Crown assemblage would have enhanced

the value of the six parcels by increa-

sing developmental possibilities, there

is no reason to assume that it would not

have similarly enhanced the value of the

Frieders property if it had been added to

an assemblage. We think the evidence in

this record shows that the six parcels

used by Mr. Neuses, as of their respec-

tive dates of sale, and the Frieders

property, as of its valuation date,

shared many of the same characteristics

which Mr. Battles criticized. Hence,

either all of these properties, viewed in

isolation from one another, are marginal

pieces of agricultural property or all

are suitabl for other uses. Further-

more, if Mr. Battles was suggesting that

the prices paid for the six parcels re-

flected their fair market value as seen

40a

against the backdrop of the Crown assem-

blage, then such suggestion assumes that

the sellers of these parcels were aware

of the Crowns and their acquisition

designs, an assumption which the record

does not support and which points to the

conceptual difficulty in Petitioner's

case.

Petitioner introduced into evidence

two United States Department of Agri-

culture tables which reflect average

price level changes in Illinois farm land

during the past decade and six newspaper

advertisements dated from July through

October, 1979, offering the Frieders

property for sale at $5,500 per acre.

Petitioner argues, in substance, that he

was unable to sell the Frieders property

for $5,500 in late 1979 and that since,

according to his interpretation of the

4la

Department of Agriculture tables, it

would be worth about three times more

than it was in 1973, it must have been

worth less than $2,C00 in 1973. We do

not agree. The Department of Agriculture

tables purport to reflect only statewide

price level changes and do not purport to

reflect price changes in any particular

locality, such as the Naperville Town-

ship. Petitioner made no effort to show

that the real estate market and socio-

economic climate in late 1979 in the

Naperville Township were the same as in

1973. Consequently, whether or not Peti-

tioner was unable to sell the Frieders

property in late 1979 is irrelevant to

the issue of its fair market value on May

14, 1973.

All in all, it is our judgment that

the most reliable evidence and the most

42a

accurate opinion of the fair market value

of the Frieders property on May 14, 1973,

is contained in the appraisal report of

Donald P. Neuses. Accordingly, we have

found and hold that its fair market value

on that date was $460,000 or $5,000 per

acre.

Decision will be entered

under Rule 155.

43a

UNITED STATES TAX COURT

ESTATE OF WILLIAM A.

FRIEDERS, DECEASED, ELMER

FRIEDERS, EXECUTOR,

Petitioner,

vs.

)

)

)

)

)

)

)Docket No.

)

COMMISSIONER OF INTERNAL _ ) 4299777

REVENUE, )

)

)

Respondent.

MOTION TO VACATE

AND/OR REVISE

DECISION

Petitioner, by his Attorneys,

DI MONTE & LIZAK, moves the Court to set

aside the finding returned in the above-

entitled action on May 27, 1980, and the

decision entered thereon pursuant to

Rule 155 computation entered on July 23,

1981, and to revise the decision or grant

a new trial on the ground of newly dis-

covered evidence of which Petitioner

was ignorant at the time of the trial

44a

herein, and in fact did not exist at the

time of the trial herein and which he

could not have sooner discovered in the

exercise of due diligence. The said

evidence is not merely cumulative or

impeaching in character, but is material

and of such character that if received

at trial, it would probably have resulted

in a different finding. The new evidence,

which is set forth in the Affidavits of

ELMER FRIEDERS and GERALD ANDERSON

attached hereto, would establish:

l. On May 27, 1980, this Court

entered a finding that the Frieders' farm

consisting of approximately 92 acres had

a value on May 14, 1973, of $460,000.00

or $5,000.00 per acre.

2. Thereafter, two changes in cir-

cumstances affecting the value of such

property took place:

45a

(a) The City of Aurora adopted a

plan to build the "Indian

Trail Extension", a road that

would connect the East Indian

Trail Road with the North Aurora

Road in the early 1980's. As

a consequence, the southern

portion of the Frieders pro-

perty will have over 1,000 feet

of road frontage on Indian Trail

Extension. At the present time,

the property is landlocked with

no road frontage, except for 33

feet of Reckinger Road which

deac-ends at the property's

western boundary; and,

(b) The Aurora Sanitary District

revised its plans to service

the upper Waubonsia service

area by the installation of

a new pump station at Farns-

46a

worth Avenue and Dearborn. As

a result thereof, the Frieders'

property will be serviced by

the Farnsworth Water District.

The foregoing revision allows

the Frieders property to hook

up in the summer of 1981 to a

readily available outlet for

sanitary sewers that presently

run to the western boundary

of the Frieders' property. The

above revision to the sewer

service did not take place

until after July 10, 1980.

On such date, the Circuit

Court for the Sixteenth Judi-

cial Circuit, Kane County,

Illinois, in case number

90 MR 48 entered a Declaratory

Judgment mandating such revi-

sion. Elmer Frieders was not

47a

a party to such litigation.

3. The publication of the proposed

road extension and the change in the

area to be serviced by the Farnsworth

Sewer District greatly increased the

value of the Frieders' property.

4. Petitioner learned of the fore-

going changes in early fall of 1980.

5. As a result of the increase in

value caused by such changes, Petitioner

was able to sell his property pursuant to

an agreement dated December 20, 1980, for

$5,000.00 per acre. The sale closed on

March 24, 1981.

6. That the actual acreage of the

subject property is 91.7 acres. Only

90.644 acres are marketable. The remain-

ing 1.056 acres are landlocked. There is

no easement ensurable by a title company

allowing access to the small parcel.

48a

7. The fair market value of the

property on May 14, 1973 was no more than

$2,000.00 per acre as established by the

recent change in circumstances and sale

of the property.

WHEREFORE, Petitioner prays that

this Court enter an Order:

(a) Vacating the finding of this

Court that the property had a market

value of $5,000.00 per acre, and the

decision of this Court entered pursuant

to such finding, and enter a new finding

that based upon the newly discovered

evidence and all of the other evidence

presented at trial, the market value ot

the Frieders' property on May 14, 1973,

was $2,000.00 per acre, and enter a

decision on such finding; or,

(b) Grant Petitioner a new trial.

Respectfully submitted,

One of the Attorneys for

Petitioner

49a

UNITED STATES TAX COURT

ESTATE OF WILLIAM A. )

FRIEDERS, DECEASED, ELMER )

FRIEDERS, EXECUTOR, )

)

Petitioner, )

)

Vs. ) Docket

) No.

COMMISSIONER OF INTERNAL ) 4253-77

REVENUE, )

)

Respondent. )

AFFIDAVIT OF ELMER FRIEDERS

ELMER FRIEDERS, being first duly

sworn on oath, deposes and says:

1. He is the Executor of the Estate

of William A. Frieders and the sole bene-

ficiary of such estate.

2. That on December 20, 1980, he

entered into an agreement to sell the

Frieders' property. A copy of such

agreement is attached as Exhibit "A".

3. On February 26, 1981, he and the

buyers of such property executed escrow

instructions amending such agreement,

50a

whereby Frieders sold 90.644 acres of the

Frieders' property at $5,000.00 per

acre. A parcel equal to 1.056 acres was

excluded from the sale because the title

company, Chicago Title & Trust Company,

would not insure title to such property.

The small parcel is landlocked with no

easement allowing access to such parcel.

Copies of the escrow instructions dated

February 10, 1981, but actually executed

on February 26, 1981, the Closing State-

ment deposited with the Escrowee on

such date, and that part of a Survey

dated February 4, 1981, setting forth

the legal description and acreage, are

attached hereto as Group Exhibit "B".

4. The Frieders' property has been

for sale by me for a number of years,

including all of 1980 up until the time

Exhibit "A" was executed on December 20,

1980.

5la

5. During the two-month period

immediately prior to December 20, 1980,

two potential buyers with knowledge of

the proposed road extension and sewer

availability entered into negotiations

with me for the sale of the Frieders

property. Prior to the negotiations

set forth in the above sentence, I

received no written offers from any pro-

spective purchaser in 1980 and received

only one oral offer to purchase the

property for the sum of $300,000.00

($3,271 per acre). No further negotia-

tions resulted when I indicated that I

would require at least $5,000 per acre

before I sold the property.

FRIEDE

SUBSCRIBED & SWORN to before me this

8th day of July, 1981.

52a

UNITED STATES TAX COURT

ESTATE OF WILLIAM A.

FRIEDERS, DECEASED, ELMER

FRIEDERS, EXECUTOR,

Petitioner,

Docket No.

4253-77

vs.

COMMISSIONER OF INTERNAL

REVENUE,

ee ee ee ee ee ee ee ee ee

Respondent.

AFFIDAVIT OF GERALD ANDERSON

GERALD ANDERSON, being first duly

sworn on oath, deposes and says:

1. I am a real estate broker and

developer. I am familiar with the

Frieders' property and its history of

road frontage and availability of sewer

and water.

2. I introduced the Frieders' pro-

perty to Shakeab Alshabkhoun in early

1980. Mr. Alshabkhoun evinced no interest

in such property when he was advised that

53a

Elmer Frieders was asking $5,000.00 per

acre.

3. In early fall of 1980, I ascer-

tained that the City of Aurora had adopted

a plan to build the "Indian Trail Exten-

sion", a road that would connect the East

Indian Trail Road with the North Aurora

Road in the early 1980's. As a conse-

quence, the southern portion of the

Frieders' property will have at least

1,000 feet of road frontage on Indian

Trail extension.

A letter dated October 9, 1980 from

the Commissioner of Public Works of the

City of Aurora, confirming such advice,

was received by me a few days after the

date of such letter. A copy of such

letter is attached as Exhibit "A". A

copy of an arterial road schedule showing

such proposed road in blue is attached

as Exhibit "B". The Frieders' property

54a

is outlined in red.

4. In early fall of 1980, I also

ascertained that the Aurora Sanitary

District revise its plan to service the

upper Waubonsia service area by the

installation of a new pump station at

Farnsworth Avenue and Dearborn. This

change came about as a consequence of a

Declaratory Judgment mandating such re-

visions of service. Elmer Frieders was

not a party to such litigation. Asa

result thereof, the Frieders' property

will be serviced by the Farnsworth Water

District. The foregoing revision allows

the Frieders property to hook up in the

summer of 1981 to a readily available

outlet for sanitary sewers that present-

ly run to the western boundary of the

Frieders' property. A copy of a letter

from the consulting engineers for such

project dated December 15, 1980,

together with the Exhibits referred to

in such letter, and the decree in

declaratory judgment, are attached

hereto as Exhibit "C".

5. I advised Elmer Frieders and

Shakeab Alshabkhoun of such proposed

road extension and change in water and

sanitary sewer service shortly there-

after.

6. Shakeab Alshabkhoun, after he

learned of such proposed changes, agreed

to pay $5,000.00 per acre for the Frieders'

property.

7. The publication of the proposed

road extension and the availability in

the near future of sewer and water from

the Farnsworth Water District caused the

Frieders' property to rise in value

appreciably. As a consequence, Shakeab

Alshabkhoun agreed to purchase such

property at the price of $5,000.00 per

56a

acre.

SUBSCRIBED & SWORN to before me this

3rd day of June, 1981.

~~ NOTARY PUBLIC

57a

UNITED STATES TAX COURT

WASHINGTON, D.C. 20217

ESTATE OF WILLIAM A.

FRIEDERS, DECEASED, ELMER

)

)

FRIEDERS, )

EXECUTOR, )

)

Petitioner, )

)

va. ) Docket No.

) 4253-77

COMMISSIONER OF INTERNAL )

REVENUE, )

)

Respondent. )

ORDER

On October 13, 1981, the Court

received a Motion to Vacate and/or Revise

Decision submitted by petitioner in this

case. The Memorandum Findings of Fact

and Opinion (T.C. Memo. 1980-184) was

filed herein on May 27, 1980, and a

Decision and Memorandum Sur Decision

were entered herein on July 23, 1981.

Rule 162, Tax Court Rules of Practice

and Procedure, provides that a motion

to vacate or revise a decision shall

be filed within 30 days after the de-

cision is entered unless the Court shall

otherwise permit. In the circumstances

of this case and in the exercise of the

Court's discretion, leave to file the

motion to vacate the decision will not

a eae. teay or granted. Accordingly,

t iss

58a

ORDERED : That the Clerk of the

Court is hereby directed not to file

the Motion to Vacate and/or Revise

Decision and the affidavits of Elmer

Frieders and Gerald Anderson and he is

further directed to return the motion

and affidavits to petitioner's counsel.

HOWARD A. DAWSON, JR.

JUDGE

Dated: Washington, D.C.

October 15, 1981

59a

Internal Revenue Service Department of the Treasury

District Director internal Revonue Service

1919 S, taehtone Avenue

Lomberd, I. 60148

Social Security os

Linp: ver enteAceuen Nummer

344. 18- 83saV

Person to Contact

‘ Perr

w A. FAIA oon Bene?

r enianw a, FA $ : Jc

So ELA FRA DIRS BxecvTeR 3. 9 Z2- 7zZ

ATED Bex 413

Avacka ae basoy

Coe O<T, , (182

We have previously written you requesting paysent of the Federal taxes shown

below, but we have no record of receiving your payment. If you have recently sade

& payeent that has not been credited to your account, please let us know.

If you have not yet sent us your paysent. you should pay the total asount due

within 10 days from the date of thie letter to avoid additional interest and

penalties. Please sake your check or soney order payable to the Internal Revenue

Service and write your identification nusber, shown above, on it. An addressed

envelope is enclosed for your convenience.

If you are unable to pay the amount due in full. or if you want to discuss

installeent paysents, please contact the person whose nase and telephone nuaber

are shown above. This should be done within 10 days from the date of this letter.

Sincerely yours,

fai OFFICEA

Enclosure:

Envelope

Accumulated Accumulated Total

Form Number Tax Period Tax Balance Penalty Interest Amount Ove

706 S473 MH 8i8od — 350704 §=— so 131,451.67

Letter 726{00) (7-77)

60a