Opinion
No. 80-1296
Decided June 17, 1981.
Taxation — Real property — Fair market value — Determined, when — Non-allocation of purchase price to subject property — Reasonable, when — Non-acceptance of conflicting appraisers' valuations — Reasonable, when.
APPEAL from the Board of Tax Appeals.
This marks the third occasion this matter has been before the court. The basic subject matter of the case was an appeal to the Board of Tax Appeals filed on September 26, 1975, by the appellant, Consolidated Aluminum Corporation, formerly named Conalco, Inc., from a decision of the appellee, Monroe County Board of Revision, which had determined the fair market value for the tax year 1974 of the real estate of the appellant in Monroe County known as the Hannibal aluminum rolling and finishing mill.
The complained of assessment here was made by the appellee after a mass appraisal of real estate in Monroe County conducted by Allied Appraisal Co., Inc., as engaged by the appellee. Allied appraised the "true value" of appellant's property at $15,160,670. The "assessed value," which is 35 percent of the "true value," was established at $505,148 for the land, and $4,801,097 for the buildings, for a total of $5,306,245.
In its appeal, appellant claimed that its appraisers had established that the assessed value of its land was $74,786, and its buildings, $1,821,010, for a total of $1,895,796.
The property in question was acquired by the appellant as part of the purchase of the entire aluminum division of Olin Corporation in January 1974. Such purchase of these assets was for a lump-sum price and involved property in other states as well as in Ohio. The values of the Monroe County property as advanced by the appellant were arrived at by way of its appraisers having made an allocation from the lump-sum purchase price of all the assets to those at the Hannibal plant in Monroe County.
In a decision issued July 6, 1976, the Board of Tax Appeals accepted the mass appraisal of the true value of appellant's property of $15,160,670. In the appeal of that decision to this court, we held in Conalco v. Bd. of Revision (1977), 50 Ohio St.2d 129, as follows:
"1. The best evidence of the `true value in money' of real property is an actual, recent sale of the property in an arm's-length transaction. ( State, ex rel. Park Investment Co., v. Bd. of Tax Appeals, 175 Ohio St. 410, approved and followed.)
"2. In valuing real property sold within three days of the tax lien date in an arm's-length transaction, the best evidence of `true value in money' is the proper allocation of the lump-sum purchase price and not an appraisal ignoring the contemporaneous sale."
The court stated, at page 131, in the opinion, that the "board should have determined, under the specific facts of this case, whether appellant's allocation resulted in a distorted valuation of the real property."
On remand, the board found that the allocated purchase price did not represent the true value in money of the property. No additional evidence was taken by the board, and, the only evidence before it being what had previously been presented, the board again determined that the true market value of the subject property was that as appraised by Allied.
That decision of the board was appealed to this court. In Conalco v. Bd. of Revision (1978), 54 Ohio St.2d 330, this court determined that it was improper for the board, after a finding that the appellant's evaluation based upon the allocation of the purchase price resulted in a distortion, to accept the Allied mass appraisal valuation without any further evidence being considered and findings of true value made upon the totality of the evidence adduced. The matter was again remanded to the Board of Tax Appeals.
Following the second reversal and remand of the case, the Board of Tax Appeals ordered a second hearing for the purpose of supplementing the record of the first hearing and to receive additional evidence as to the fair market value of the subject real property. An additional hearing of the matter was held on January 15, January 16 and January 29, 1980. We briefly set forth the evidence presented.
Appellant presented additional evidence tending to support its original allocation of purchase price which had been arrived at basically through the application of the accounting principle known as Accounting Principles Board Opinion No. 16 (APB 16). In the appellant's original appraisal by the Manufacturers' Appraisal Company, the total appraised value of all of the real property acquired by appellant from Olin was $27,581,000. As noted, the allocated lump-sum purchase price resulted in the sum of $5,416,560. The reason given that the amount of the purchase price allocated to the Hannibal property was substantially less than the Manufacturers' appraisal was that the total value of the assets acquired by the appellant was substantially greater than the cash purchase price. Applying APB 16, the non-current assets acquired are to be reduced in value in order to equalize or balance the value of the assets acquired with the purchase price. Accordingly, appellant reduced the value of the real and personal property to complete its allocation of the cash purchase price.
The appellant offered additional evidence by way of James E. Brands, C.P.A., to show that through the application of another accounting principle known as Accounting Research Study No. 10, Accounting for Goodwill (ARS 10), the excess of the value of the assets acquired over cash paid, termed "negative goodwill," should be credited to retained earnings or capital surplus. Here, the witness testified that the purchase price could be accurately allocated among the assets and that the fair market value of the property acquired at the Hannibal plant was approximately $7,816,000.
The appellant also offered evidence showing an agreed allocation of the lump-sum purchase price as entered into by Olin and appellant some four years after the sale in order to resolve the discrepancies in their respective reports of the sale for Internal Revenue Service purposes. The evidence shows that there was only an allocation between fixed and current assets of the total purchase, and that there was no breakdown showing the specific value of the Hannibal plant land and improvements.
The appellant also offered as evidence of true value of this property a second appraisal conducted by the Manufacturers' Appraisal Company. The new appraisal was conducted upon the basis of including the element of economic obsolescence into the appraisal calculations, which included the condition of the aluminum industry in general, Olin's economic condition, access to raw materials and to the market, as well as other factors. As a result of this comparison and input into the appraisal process, Manufacturers' determined that the fair market value of the property was $7,816,000, a figure less than one-half of Manufacturers' first appraisal of the property.
Upon the second hearing hereof, the appellee resubmitted the evidence of the first appraisal conducted by Allied. Also, an additional appraisal was conducted on behalf of appellee by Charles P. Braman Co., Inc. The evidence shows that Braman arrived at its appraisal after viewing all factors involved within the sale of the property, such as the somewhat forced nature of the sale and the fact that some large corporate interests which may otherwise have been bidding for such property could not do so because of anti-trust laws prohibiting them from so doing.
Braman determined that when all factors of the sale and the nature of the subject property are considered, the allocable purchase price of the Hannibal property would have been in the range between $14,921,400 and $20,047,500. However, in that a range of value would not satisfy the requirement for a more specific value determination, Braman conducted a traditional fair market value appraisal, and determined that the fair market value for the property was $15,100,000.
Following the hearing, the board, in reviewing all of the evidence that was before it, determined that it was not possible in this case to make an absolute allocation of the lump-sum purchase price to the subject property. Further, based upon the record before it, the board determined that the fair market value of the property on January 1, 1974, was $11,950,000.
This cause is now before the court on an appeal as of right.
Messrs. Glander, Brant, Ledman Newman, Mr. Charles F. Glander and Mr. James H. Ledman, for appellant.
Ennis Roberts Co., L.P.A., Mr. William J. Ennis and Mr. J. Michael Fischer, for appellees.
First, we point out the obvious law that "the fair market value of property for tax purposes is a question of fact, the determination of which is primarily within the province of the taxing authorities, and this court will not disturb a decision of the Board of Tax Appeals with respect to such valuation unless it affirmatively appears from the record that such decision is unreasonable or unlawful." Bd. of Revision v. Fodor (1968), 15 Ohio St.2d 52.
Also, to make it clear at the outset that we adhere to the principle previously set forth in Conalco v. Bd. of Revision (1977), 50 Ohio St.2d 129, we restate that, "the best evidence of the `true value in money' of real property is an actual, recent sale of the property in an arm's-length transaction."
For a complete understanding of the posture of this cause, it should be pointed out that this court, upon the second review in Conalco v. Bd. of Revision (1978), 54 Ohio St.2d 330, held in effect that the board, after finding that appellant's allocation resulted in a distorted valuation, and therefore unusable, should have determined the true value in money of the property, and in so doing should not have relied exclusively on the appraisal value as determined by the Allied mass appraisal for the county. Also, it is important to note that this court did not instruct that the board must use the value as allocated by the appellant. The court, in its opinion, stated that the board must receive all competent evidence in order to determine the true value of the property. Id. at 332.
Here, upon second remand, the board held complete hearings, and received evidence by way of testimony and exhibits, all of which went to the issues of whether the appellant's allocations were acceptable in the determination of the fair market value, and, if not so acceptable, to utilize the other acceptable evidence in so establishing the fair market value of the subject property. The board determined that because of the complexities of the sale involved in this case, it was not possible to make an allocation of a portion of a lump-sum purchase price paid for Olin's entire aluminum division to the Hannibal property. Under the circumstances, this was a reasonable determination by the board. The Board of Tax Appeals is not required, in every instance, and in all events, to accept as the true value in money of real property, an allocation of a portion of a lump-sum purchase price paid for a group of assets which included the property in question, and where it finds a proper allocation of the lump-sum purchase price to the property in question is not possible it may consider all of the evidence which is before it in determining the true value in money of the property.
The sales transaction which is the subject of this case involved the sale of an entire aluminum division of one of the country's largest companies. It involved eight plants in five states, all of the machinery and equipment in each of these plants, all of the inventory and raw materials, and all other assets. A large lump-sum price was negotiated and paid. There was no separating out or allocation of the purchase price of the various assets at the time of the sale. The board, upon all of the evidence adduced, could reasonably find that there was no readily and reasonably identifiable purchase price paid for the Hannibal property which could be utilized in determining the fair market value for taxation purposes.
As previously stated, after the board made its determination that there could be no proper allocation of the purchase price to the subject property in this case, it had the further duty of taking additional evidence on the issue of fair market value. This it did. The question remains as to whether, based upon such evidence, the conclusion of the board is a lawful and reasonable one.
The board, in making its determination of fair market value here, had four real estate appraisals, and the same number of allocations projected from the lump-sum purchase price of all the assets of Olin's aluminum division. The appraisers' opinions of the value of this property ranged from a low of approximately $6,000,000 to a high of approximately $20,000,000. Upon such evidence, the board concluded that the fair market value of the property was $11,950,000. In this regard, the board accepted neither the values as advanced by the appellant nor the appellee, but instead reviewed the evidence which was in conflict and made a factual determination as to the value of the property involved. We hold that there is evidence upon which the board might reasonably have made such a determination.
Accordingly, we hold that, based upon all of the circumstances and evidence adduced here, the determination of the Board of Tax Appeals that the fair market value of the Hannibal property of the appellant taxpayer, as of the tax lien date in 1974, was $11,950,000, is reasonable, lawful, and supported by the evidence.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
CELEBREZZE, C.J., W. BROWN, POTTER, PALMER, HOLMES and C. BROWN, JJ., concur.
LOCHER, J., dissents.
POTTER, J., of the Sixth Appellate District, sitting for P. BROWN, J.
PALMER, J., of the First Appellate District, sitting for SWEENEY, J.
After two reversals and two remands in this case, the majority of this court has finally yielded to BTA's free-wheeling decision-making. This is so, in spite of the fact that BTA has refused to conform to this court's directives. BTA continues to ignore our holding in Conalco v. Bd. of Revision (1977), 50 Ohio St.2d 129, paragraph two of the syllabus, the first case in this trilogy, which reads as follows:
"In valuing real property sold within three days of the tax lien date in an arm's-length transaction, the best evidence of `true value in money' is the proper allocation of the lump-sum purchase price and not an appraisal ignoring the contemporaneous sale."
Having authored the opinion in the first decision ( 50 Ohio St.2d 129) and concurred in the per curiam opinion in the second ( 54 Ohio St.2d 330), BTA's intransigence is reason enough for me to dissent. My dissenting opinion in Youngstown Sheet Tube Co. v. Bd. of Revision (1981), 66 Ohio St.2d 398, however, raises another objection.
Here, as in Youngstown Sheet Tube, BTA received two competing appraisals. Conalco asserted a value of $7,816,000. The Monroe County Board of Revision asserted a value of $15,100,000. By assigning the $11,950,000 value, BTA once again splits the difference between the competing values. This amount is approximately 52 percent of the sum of the appraisals submitted by the taxpayer and the board of revision. In Youngstown Sheet Tube, supra, the amount was 48 percent. The proximity of these figures is a "startling coincidence."
Reading this case together with Youngstown Sheet Tube, I can only conclude that BTA has redefined its function. Rather than performing administrative review of the evidence, BTA has become a mediator.
Accordingly, I would reverse and remand for further proceedings consistent with this opinion.