Jan 1 2014, 12:05pm CST | by Forbes
Not everybody can be Tom Cruise, but even without taking up Scientology, there are ways of participating in the Tom Cruise experience. For example, it was reported that Tom Cruise was paying $400 in property tax on an $18 million getaway ranch in Colorado. The great property tax deal was courtesy of Colorado’s generous agricultural exemptions and a few sheep who kept the grass short. Here is a story on Farmer Tom by my blogging buddy, Kay Bell. Storm Mountain Ranch was designed to share the gentleman gentlelady ranching experience with those a bit down the economic ladder from Tom Cruise.
Storm Mountain Ranch describes itself as “ a fully established, private, gated ranch community, located less than 10 minutes east of Steamboat Springs, Colorado. The ranch is a conservation development on approximately 1100 acres with only 14 Homeowners.” Storm Mountain took the agricultural exemption a little further, asserting that the residences were integral to agricultural operations much like the ranch house on the Ponderaso where Ben Cartwright issued orders to Hoss and Little Joe.
The county assessors for Routt County saw it differently which brought the matter before the Colorado Board of Assessment Appeals (Sorry have not found a free link.) The property had previously been considered agricultural, but the assessors thought that House Bill 11-146 which calls for carving up to two acres of land on which a “residential improvement” is located out of the agriculturally exempt land unless the improvement is “integral to an agricultural operation”.
The argument about whether the residences were integral to the operation of the ranch was all about what the residents were doing, since apparently nobody was keeping a horse or a tractor in their garage. The discussion reminded me a lot of the type of discussion you will see in passive activity and hobby loss cases. Storm Mountain’s argument was, in part, that since the agricultural operation was not leased out, but rather run by the Homeowners Association, each of the homeowners, by virtue of membership and dues paying was participating in agricultural operations. There was more to it than that.
Petitioners serve on HOA committees and participate in quarterly HOA meetings where decisions regarding the agriculture program, budgeting, capital improvements, equipment, and water rights are discussed. The HOA Board oversees the SMR employees. Petitioners also participate in informal meetings at the ranch addressing agriculture program issues. These informal meetings can occur as owners encounter each other or the ranch manager on the road and stop to talk; as they meet each other elsewhere on the ranch property, and at social gatherings. All Petitioners who appeared testified that they spray weeds and are involved in creek and ditch maintenance on their individual lots that support the SMR agriculture program.
The assessor saw it differently.
The attendance charts show that some Petitioners are regular participants, some are occasional participants, and some rarely participate. The witness concluded that Petitioners are several steps removed from the agriculture operation on their lots because of the HOA, the full-time SMR staff, and the agricultural program leases. The witness also concluded that the activities of the individual Petitioners do not meet the statutory requirements to qualify them as integral to the agriculture operation on their lots.
The Board went with the assessor further noting that some of the activity like weed killing was being done more in their capacity as homeowners than in support of the agricultural operation.
Even though, the assessor won on the primary issue, that the residential portion of the lots were not integral to the agricultural operation, the overall decision was for the most part in favor of the homeowners. The “residential envelope” for each homeowner was one acre. The rest of their acreage (either 34 or 69 acres) maintains its agricultural classification. The assessor argued that most of the value of the entire parcel should go to the residential acres, which gave them each a valuation of $1,430,000. The Board ruled that an acre is an acre and the acre with the house on it was no different than any of the others which ended up with a valuation of $60,000 per lot.
So it would seem that a condominium style version of the Tom Cruise getaway experience, complete with bargain real estate taxes, is still available to the not quite 1% among us.
You can follow me on twitter @peterreillycpa.
Source: Forbes Business
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