Kem v. Department of Revenue
| Decision Date | 25 October 1973 |
| Citation | 267 Or. 111,514 P.2d 1335 |
| Parties | Diane C. KEM, Appellant, v. DEPARTMENT OF REVENUE, Respondent. |
| Court | Oregon Supreme Court |
Barton C. Bobbitt, Portland, argued the cause for appellant. With him on the briefs were Richard V. Bayless, and Bauer Murphy, Bayless & Fundingsland, Portland.
Alfred B. Thomas, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Lee Johnson, Atty. Gen., and Theodore W. deLooze, Chief Tax Counsel, Salem.
Before O'CONNELL, C.J., and McALLISTER, HOLMAN, TONGUE, HOWELL and BRYSON, JJ.
This appeal, from a decree of the Oregon Tax Court, involves a determination of the true cash value of real property owned by plaintiff in Washington County. The Department of Revenue found the true cash value of the land and improvements to be $1,247,500 as of January 1, 1970. The Tax Court affirmed the Department of Revenue, and plaintiff appeals.
The subject real property consists of a shopping center known as the Cedar Hills Shopping Center and a gasoline service station. The various stores and offices in the shopping center are being operated by lessees of the owner.
Plaintiff purchased the property on April 1, 1969, from a subsidiary of Commonwealth, Inc., the original developer and operator of the property. The purchase price paid by plaintiff, $775,000 included a parcel of land which was subject to an option to purchase by the lessee of the property. The lessee exercised the option at a sale price of $125,000, leaving plaintiff with a net cost of $650,000 for the subject property.
At the trial, the appraiser for Washington County testified that the value of the land was $546,700 and, using the income approach, the value of the improvements was $700,800, for a total of $1,247,500.
The plaintiff contends that the market value of the property is $650,000 which is the sales price paid by plaintiff in April, 1969. We agree.
In 1966, Commonwealth, Inc., the owner of the property as well as other commercial property in western Oregon, employed an experienced real estate appraiser to determine the market value of the property. Later, in 1968, Commonwealth decided to sell the property, and the same appraiser again appraised the property for sale purposes. Using the income approach, he arrived at a market value of between $600,000 and $650,000, excluding the property which was sold under the option to the lessee. The appraiser testified that the rentals under the leases were economical and found no change in the market value of the property between the date of his appraisal and the assessment date of January 1, 1970. 1
After the appraisal, the property was offered for sale and was examined by numerous prospective purchasers, including realtors and investors. The property was eventually sold to plaintiff in April, 1969.
Real property is assessed at its true cash value. True cash value means market value as of the assessment date. ORS 308.205. Market value is defined in the Department of Revenue's Regulations as:
'Market value as a basis for true cash value shall be taken to mean the amount of money or money's worth for which property may be exchanged within a reasonable period of time under conditions where both parties to the exchange are able, willing and reasonably well-informed.' Regulation R308.205--(A)1.a.
The various approaches to valuation, market data, cost, or income, are only the vehicles used to determine the ultimate fact--market value. If a market exists, the property should be valued by using the market data approach. Portland Canning Co. v. Commission, 1 OTR 600 (1964), aff'd 241 Or. 109, 404 P.2d 236 (1965).
A recent sale of the property in question is important in determining its market value. If the sale is a recent, voluntary, arm's length transaction between a buyer and seller, both of...
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