Property Tax Alert: Nevada

October 2008

Value Adjustments for Apartment Buildings with Defects Proper

The income capitalization method was the appropriate methodology to use in assessing income-generating apartment buildings with constructional defects for Nevada property tax purposes because the income approach took into account the effect of the property improvement conditions through adjustments to the capitalization rate. The owner of the apartment buildings argued that the defects represented obsolescence that should have been subtracted from the apartments' full cash value. However, the owner failed to make any specific connections between its properties' constructional defects and the income that its properties generated, or were likely to generate. The assessor correctly compared the properties' full cash value with their cost based taxable value by utilizing the income capitalization approach because the properties at issue were income-producing properties and the approach took into account the defects. Additionally, the state board's decision to raise the capitalization rates on all 16 properties was not fundamentally incorrect, and properly accounted for the constructional defects in the apartment buildings.

Please contact Rash & Associates for more information.