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Using Real Estate Tax Assessments for Valuation
(Provided by National Legal Research Group, Inc.)

Trial and appellate courts are fully aware that tax assessments are weak evidence on the value of real property. One recent example is In re Marriage of Decker, 666 N.W.2d 175 (Iowa Ct. App. 2003):

Vincent first contends the district court should have valued the personal residence of the parties at $94,400 rather than $115,000. The home was valued at the higher figure when the parties refinanced it in 2001. The lower figure represents an appraisal that Vincent secured from a Certified General Real Property Appraiser on March 13, 2002. The first appraisal had been completed eighteen months before trial, which was on September 11, 2001. The property was assessed for tax purposes by the county assessor at $79,000. Vincent contends the house should have been valued by the district court at $94,500.

We defer to the trial court when valuations are accompanied with supporting credibility findings or corroborating evidence. In re Marriage of Vieth, 591 N.W.2d 639, 640 (Iowa Ct. App. 1999). We find the valuations assigned by the trial court to the personal residence to be within the permissible range of evidence.

Id. at 180-81. It is apparent from this discussion that no one seriously credited the $79,000 assessment; indeed, the husband apparently did not even attempt to argue it.

While tax assessments are weak, they are not entirely without use. For example, in Harrower v. Harrower, 71 P.3d 854 (Alaska 2003), both parties essentially accepted the accuracy of the tax assessment, and the trial court accepted it. But the husband argued that the tax assessment needed to be discounted because the lots could only be sold slowly over a period of years, so that the expected proceeds should be discounted to present value at divorce. The Alaska Supreme Court expressly recognized the limitations of tax assessments, but nevertheless affirmed:

In other procedural contexts, we have made it clear that "[t]ax appraisals do not reliably measure true value." [Footnote omitted.] But here, the parties did not dispute the accuracy of the tax appraisals as a starting point for valuation; the only real dispute was whether the assessed value needed to be discounted. In her trial brief, Dolores offered the tax assessments as her evidence establishing the value of the Kenai lots. James did not object to the admissibility of the assessments and did not offer alternative values for the lots or any values, for that matter, in his trial brief. And at trial, James’s expert, Richter, adopted similar values as his starting point for calculating the lots’ discounted values. If any appreciable error occurred, then, it arose not from the court’s acceptance of the lots’ assessed values but from its rejection of Richter’s cash discount analysis.

. . . Because neither party objected to the admission of the tax assessments to establish value, because the court’s credibility determination is supported by the record, and because the value assigned to the lots is within the range of evidence presented at trial, we conclude that the trial court’s valuation of the Kenai lots is not clearly erroneous.

Id. at 861-62 (quoting Bennett v. Artus, 20 P.3d 560, 565 (Alaska 2001)). It is important that the parties be permitted to rely upon tax assessments, because the great advantage of a tax assessment is that it costs nothing. Where an appraisal or other better evidence of value is presented, the tax assessment should be and usually is given little or no weight. But in many divorce cases between parties of modest means, neither party wishes to spend the money to obtain an appraisal. In these cases, the tax assessment can be a useful reality check on the parties’ contending opinions on the value of the property.

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National Legal Research Group, Inc.

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