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hearing 14 days before the hearing. This request prohibits the appraisal district from using anyinformation that was not provided to the property owner 14 days before the ARB hearing.
Market Value, Book Value & Comptroller Schedule
Three popular options for describing value for BPP are: market value, book value, and theComptroller's schedule. Market value is defined in section 1.04(7) of the Texas Property TaxCode that reads as follows:"Market value" means the price at which a property would transfer for cash or its equivalentunder prevailing market conditions if:
exposed for sale in the open market with a reasonable time for the seller to find apurchaser,
Both the seller and the purchaser know of all the uses and purposes to which the propertyis adapted and for which it is capable of being used and of the enforceable restrictions on itsuse, and
Both the seller and the purchaser seek to maximize their gains and neither is in a positionto take advantage of the exigencies of the other.Let's compare the differences in value resulting from using market value, book value and theComptroller's schedule. The BPP for a typical motel room includes items such as bedding,linens, window air-conditioning unit, towels and a television. Based on market value, after oneyear, these types of items could probably only be sold for 10% to 30% of the original cost.Book value, based on federal depreciation schedules, indicates a value of 80% of thepurchase price after one year. The Texas Comptroller's schedule for BPP for motels has aneight-year life with 10% depreciation for the first seven years. Hence, the Comptroller scheduleindicates one-year old hotel furnishings are worth 90% of their original purchase price. This isclearly inconsistent with market value for these items.
There are a number of controversial issues related to how inventory is assessed. Theseinclude shrinkage, damage, functional obsolescence and economic obsolescence. For example, what is the market value of merchandise returned during the week after Christmason January 1st (the effective date for valuation)? Since returned merchandise has usuallybeen opened, damaged, missing parts or may be an unpopular item, it is worth less than costin many cases. Market value is relevant in determining the assessed value for inventory for Texas BPP taxes.
Preparing A Summary For Your Hearing
The appraisal district would prefer to see a fixed asset listing, which includes the original costand date of acquisition for every asset purchased. However, a fixed asset listing is notrequired. This is good news for small businesses that do not maintain a fixed asset listing.
Assessed values for BPP accounts often range from ten-times to fifty-times on a per square
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