Despite Market Value USPAP Appraisal and $0 Acquisition Price, Owner of Special Purpose Property Failed to Prove Assessment of Property Should be Reduced

Despite Market Value USPAP Appraisal and $0 Acquisition Price, Owner of Special Purpose Property Failed to Prove Assessment of Property Should be Reduced

Owner of a special purpose property, a former school and gymnasium, failed to show its $2.1 Million assessment was excessive.

Name: Wigwam Holdings LLC v. Madison County Assessor

Date Issued: May 8, 2019

Property Type: 220,000 SF building, including a natatorium, auditorium and 8,996 seat basketball facility

Assessment Date: March 1, 2015

Point of Interest: Wigwam Holdings LLC (“Holdings”) claimed that an appraisal and purchase price of $0 supported a reduction below a $2.1 assessed value for the property, a former school property with an iconic basketball arena.

Synopsis: A previous post explained that the Indiana Tax Court denied Holdings’ petition to enjoin collection of property tax, because the Court found that Holdings did not establish that it had a reasonable opportunity to prevail on the merits of the issues raised.

Holdings claimed that the Property, based on a USPAP appraisal, should be valued at $68,500. That appraisal claimed the Property’s highest and best use was as vacant land. Holdings further explained the Property was acquired for $0, further supporting a value lower than its approximate $2.1 Million assessment. And Holdings claimed the assessment failed to account for abnormal obsolescence impacting the Property’s value.

Assessor argued that the appraisal measured the Property’s market value, not its market value-in-use – the two not being equivalent in this case. In addition, Assessor claimed the seller, which was a government entity, was atypically motivated because it wanted to restore the iconic Property for the community’s use.

The Court rejected each of Holdings’ claims.

USPAP appraisals do not automatically win the day, and the appraisal must measure market value-in-use. The Court found Holdings to be “misguided” in arguing that presentation of a USPAP appraisal automatically met its prima facie case for an assessment reduction. The Board weighs the probative value (if any) of the parties’ evidence, including appraisals. Here, the “unique, undisputed facts” of the case indicated that Holdings’ appraisal failed to reflect the Property’s market value-in-use.  The two value standards often are the same.  But that was not established here.  “Without something more,” the appraisal’s market value indication for the admittedly special purpose property “did not constitute probative evidence of the property’s market value-in-use.”

Evidence supported conclusion that Property was not acquired in a market transaction. Holdings argued that seller’s status as a governmental entity, standing alone, did not mean the transaction was atypically motivated. Assessor, in turn, argued the documentation showed the acquisition was not a market transaction. (For example, after restoration the school corporation would have the “irrevocable right” to use the Property’s gymnasium for up to twelve days annually for ten years.) The parties thus offered contradictory evidence. The Indiana Board of Tax Review weighed that evidence, concluding the $0 sale was not indicative of the Property’s market value-in-use. Reviewing the evidence, the Court held that a reasonable mind could find that substantial evidence supported the Board’s treatment of the sale.

Taxpayer did not establish that abnormal obsolescence impacted Property’s value. Taxpayers must identify the causes of obsolescence and quantify the impact of those causes on a property’s value. Holdings identified alleged causes of obsolescence in the administrative hearing, but it offered no evidence to quantify the obsolescence.

The Tax Court upheld the Board’s final determination affirming the assessment (as revised by the County Board).

These materials are intended for general information purposes only and are not to be considered legal or tax advice. The information herein should not be acted upon without appropriate professional advice.

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