Commentary

I8.205 The property to be valued

IHT, trusts and estates

I8.205 The property to be valued

I8.205 The property to be valued

It is assumed for valuation purposes that the hypothetical vendor took the course of action which would result in the highest price, provided that this would not have required undue expenditure of time and effort1.

Selling in lots

The 'highest price' rule may involve, for example, treating property as having been divided up into lots, or assuming that separate items were sold together.

In Earl of Ellesmere2 the estate, comprising farms, houses, shops, business premises and woodlands, was sold for £68,000 in one lot after being well advertised. The purchaser immediately resold most of the estate in separate lots for about £65,000 and retained items worth £16,000 making a total of £81,000. The court held that the open market value at the date of death was approximately £76,000.

A similar problem was considered in Duke of Buccleuch3, where HMRC divided the estate in 532 separate lots for valuation purposes. The trustees contended that, after extracting 46 readily saleable units, the rest of the estate should be valued as on a sale of the whole lot to a speculator who would expect a 20% profit. Both the House of Lords and the Court of Appeal supported the Lands Tribunal, which had found for HMRC on the point of law. Lord Reid said:

'“Generally the estate will consist of what one may call natural units—units or parcels of property which can be easily identified without there being any substantial difficulty or expense in carving them out of the whole

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