Both appraisers relied primarily on the income
capitalization method, valuing the property as a going concern, as likely purchasers of a nursing home would evaluate it.
The lower court concluded that the 2005 sale was not of "any probative value" in determining the fair market value of the fee-simple interest in the property and that it was proper to disregard the actual rent in arriving at a value using the income
capitalization method.
In addition, taxpayers can annually elect a "book
capitalization method," which may result in capitalization of otherwise deductible repairs if those amounts are capitalized in their books and records [Reg.
Our intention is to assess the TransNet sites--as intangible assets, by means of the income
capitalization method. The "income" element used is the net residual income.
The new methodology would determine the index by calculating weightage of companies on the basis of their free float market capitalization instead on the basis of existing total market
capitalization method. KSE's board has also decided to commence the new free float based 100 - index parallel with the existing KSE - 100 index for 90 days for comparison of the two while allowing investors/funds to make adjustments in their portfolios within the specified duration.
A valuation analyst will use the yield
capitalization method when a private company's income (however defined) is expected to change at a non-consistent rate in the future.
Another, more direct, method of capitalizing earnings is sometimes referred to as the "straight
capitalization method" and is best demonstrated by the following question: "If a buyer expects to make 12 percent on his investment, and the business is producing earnings of $220,000 per year, what would the buyer be willing to pay for the business?" The calculation required to answer this question produces a substantially higher valuation than the ARM 34 formula shown in the chart:
The selective
capitalization method requires prerequisite conditions that are based on such factors as technological feasibility, marketability and usefulness.
Chartered life underwriters (CLUs) know the method as the Human Life Value Concept or the Human
Capitalization Method. A variation of this method is used in wrongful death litigation to compute the present value of the insured's future income, minus personal expenses, to indemnify the survivors for lost net earnings.
This method is used in a direct
capitalization method.
Two methods are commonly used: the direct
capitalization method and the yield
capitalization method.
Announcement 89-98 delayed the due dates for filing Form 3115 in order to change to a
capitalization method of accounting until the transition procedures in Rev.
