MEMORANDUM FINDINGS OF FACT AND OPINION
FAY, Judge: Respondent determined deficiencies in Federal income tax for tax years 1984, 1985, and 1986 of $ 35,296.20, $ 2,258.74, and $ 41,448.50, respectively. After concessions, the sole issue for decision concerns the donation of animal mounts and related items by petitioners to certain charities for which petitioners claimed deductions pursuant to section 170. 1 The parties do not dispute that charitable contributions were made. Nor do the parties dispute that the donees qualify as charitable organizations. The only dispute involves the proper method of valuation and the ultimate value of the items donated.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioners resided in Salem, Oregon, at the time of the filing of their petition.
During the years in issue, Lawrence T. Epping (hereafter petitioner) was a land developer, and Jeanette T. Epping was not employed. In addition to his primary occupation, petitioner was an accomplished hunter and, as such, he had acquired numerous animal mounts and related items over the course of many years of hunting. Prior to the years in issue, petitioner displayed these animal mounts and related items in his trophy room.
Beginning in 1984, petitioner began donating an assortment of animal mounts, horns, rugs, and antlers to Mt. Angel Abbey, Western Oregon State College (Jensen Arctic Museum), and Oregon State School for the Blind. 2 Over the course of the 3 years in issue, petitioner donated a total of 59 such items. However, regarding 23 of the items donated to Mt. Angel Abbey, petitioner donated only an undivided half interest. Petitioner retained possession of 20 of these 23 items because Mt. Angel Abbey did not have sufficient space for them. As of the date of trial, petitioner displayed these 20 items in his office.
Of the 59 items donated, 27 made The SCI Record Book of Trophy Animals, 4 made the Records of Big Game, and 2 made the North American Big Game record book. While The SCI Record Book of Trophy Animals covers North American species as well as the other continents, it has only been in existence approximately 10 years. By contrast, Records of Big Game and North American Big Game have been in existence since the late 1800's and, until recently, only covered species from certain continents.
For the purpose of appraising the items donated, petitioner contacted Mr. R. Bruce Duncan (Duncan). Based on replacement costs and consistent with the Duncan appraisals, petitioners claimed deductions for charitable contributions, in the amount of $ 105,800, $ 5,000, and $ 54,500 for tax years 1984, 1985, and 1986, respectively. At trial, however, petitioners informed the Court that they were no longer relying on Duncan's appraisal for any purpose. Rather, petitioners now rely on Mr. Jack Perry (Mr. Perry) as their expert witness for purposes of valuation and appraisal.
OPINION
The regulations provide that, if a charitable contribution is made in property other than money, the amount of the contribution is the fair market value of the property at the time of contribution. Sec. 1.170A-1(c)(1), Income Tax Regs. Generally, the fair market value of the property is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Sec. 1.170A-1(c)(2), Income Tax Regs.Respondent's determination in her notice of deficiency as to fair market value is presumptively correct, and petitioners bear the burden of proving that the fair market value is higher. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). As discussed in more detail below, we find that an active market exists with substantial comparable sale items and that the fair market value of the 59 donated items is $ 95,000. 3
In deciding this issue, we find the testimony of respondent's expert, Alan Zanotti (hereafter Mr. Zanotti) both credible and informative. Mr. Zanotti founded African Import Company in 1986 and is the president of the company. As part of his business, Mr. Zanotti maintains an inventory of over 100 animal mounts for sale to the general public. Further, in the course of business since 1986, Mr. Zanotti has purchased and sold as many as 3,000 animal mounts and related items, including many record book animals and several dozen full body mounts. Mr. Zanotti has purchased a number of these animal mounts directly from museums and hunters. Moreover, Mr. Zanotti inspected the items donated by petitioner and testified that the items donated were very similar to the items he has bought and sold and the items held in his inventory. 4 Furthermore, Mr. Zanotti testified that he could replace the items donated by petitioner with items of similar quality through his current inventory or by going into the existing marketplace. We accept Mr. Zanotti's testimony and conclude an active market exists with substantial comparable sale items. 5
Petitioners argue no ordinary market for such items could possibly exist because the State of Oregon and Federal Government have imposed restrictions that prohibit, or at least severely limit, such transactions. We disagree. Mr. Zanotti, as part of his business activities and prior to his involvement in this case, contacted most of the 50 states to ascertain whether his business activities would violate any State laws. Mr. Zanotti concluded that many states, but not all states, permit the buying and selling of animal mounts. While Oregon's rules are more restricting than most states, the evidence indicates no restrictions under Oregon law exist regarding the purchase by an Oregon resident from a non-Oregon resident. Likewise, the evidence indicates no restrictions under Oregon law exist regarding a sale by an Oregon resident to a non-Oregon resident. Furthermore, while restrictions do exist pursuant to Federal law, petitioners have failed to present to the Court specific Federal laws restricting the purchase and sale of the items donated in this case. To the contrary, Mr. Zanotti testified that he is very familiar with the Federal laws and that he has purchased and sold items comparable to the items donated in this case without violating any such laws. Finally, petitioners have failed to prove that Oregon law restricts the purchase or sale of African species in any way.
Petitioners also claim that, unlike the items bought and sold by Mr. Zanotti, the items donated in this case are authentic. Petitioners further claim that authenticity in an animal mount is paramount to museums. Therefore, petitioners conclude, Mr. Zanotti's alleged comparable sales are not comparable. We disagree. First, none of petitioners' witnesses who represented the donee museums in this case were concerned with authenticity in that none were even aware of where, when, or how the animals were taken. Similarly, none of these witnesses requested or required record class trophies, and none of them knew which of the donated items were in the record books. Second, we find that petitioners have failed to prove that many of the items purchased and sold by Mr. Zanotti were any less authentic than the items donated in this case. In fact, a majority of Mr. Zanotti's purchases were made directly from hunters.
For reasons stated above, we conclude that an active market exists with substantial comparable sale items. While we agree with petitioners that all factors including replacement cost 6 may be relevant in determining value, petitioners have not carried their burden of proving that replacement cost has a probative correlation to fair market value in this case. Estate of Miller v. Commissioner, T.C. Memo. 1991-515, is distinguishable. In Estate of Miller, the taxpayer donated numerous animal trophies to the State of Louisiana and claimed deductions for charitable contributions. The Court concluded that replacement costs were probative in that case. However, the Government in Estate of Miller, among other things, did not present sufficient credible evidence of comparable sales. In fact, the Government's expert witness in Estate of Miller admitted he was unaware of comparable sales for a majority of the items in the collection. Estate of Miller v. Commissioner. That is simply not the situation in this case. As stated above, we find Mr. Zanotti's testimony concerning comparable sales convincing. Accordingly, we find that the fair market value of the donated items can be determined by comparable sales. Petitioners did not present any evidence of comparable sales, relying solely on a replacement cost method. Thus, we conclude that, based on the evidence presented in this case, the fair market value for these donated items is $ 95,000, 7 which represents the full retail price of the donated items less a volume discount. The volume discount represents the difficulty involved in selling the complete collection in one transaction or, alternatively, the increased costs involved in selling the items individually.
Decision will be entered under Rule 155.