The Supreme Tax Court has accepted the sale of a building three years after the event as an appropriate indication of the then market value where other factors point to lack of change in the interim.

Under the relevant provisions of the Valuation Act, the market value of commercial property is to be determined by reference to a formula wherever necessary as a basis for taxation, unless the taxpayer can furnish objective evidence of a lower value. Generally, the proceeds from the sale of the site are accepted as objective evidence if the sale took place within a year of the event in respect of which the valuation is required. If the sale falls outside this period, it is not seen by the official Guidelines as being sufficiently "recent" to serve as a reliable indication of the current value. The tax offices then automatically revert to the official formula. The Supreme Tax Court has now held, however, that strict adherence to the time limit of one year before or after the event was too rigid an approach and that earlier or later sales could still be accepted as evidence for a lower valuation if supported by other objective factors. In the case concerned these were a confirmation from the valuation service run by the land registry that local land values had not changed during the intervening period, and that rent received from the tenant had not changed either. The sale supporting the taxpayer's contention of a lower value took place three years later and was to the tenant of the building. The Supreme Tax Court did not comment on any possible influence of the tenancy on the sales price.

This case concerned an inheritance. However, it is directly relevant to real estate transfer tax levied on indirect transfers of property through the acquisition of 95% of the shares in the company owning it, as well as to events under the Reconstructions Tax Act or under other rules requiring transactions or their individual parts to be taken up at market value despite lack of formal consideration. In most such cases recourse is ultimately had to the Valuation Act, as was the case here.

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