An assignment expressly defines its requested measure as the contribution a particular property makes to a specified ongoing use, rather than the amount it would exchange for in an open-market sale. Which value premise is being described?
Correct Answer
B) Value in use for the expressly specified use
Value in use focuses on the property’s contribution to the specified use under the stated assignment premise. It is distinct from a market-exchange premise and is not automatically historical price or assessed value. An appraiser must identify and define the actual value requested; a use-based measure does not by itself establish what the property would sell for.
Why This Is the Correct Answer
Option B is correct because use value is the value a specific property has for a specific use. The assignment focuses on the property's contribution to the specified ongoing use rather than its open-market exchange price. A use-based measure does not by itself establish what the property would sell for, so the appraiser must identify and define the value actually requested.
Why the Other Options Are Wrong
Option A: Open-market exchange value from a hypothetical sale
Option A, open-market exchange value from a hypothetical sale, is the market-exchange premise the assignment expressly sets aside in favor of contribution to a specified use.
Option C: Assessed value under an unspecified tax formula
Option C, assessed value under an unspecified tax formula, is a value for property tax purposes; nothing in the assignment refers to taxation or an assessment formula.
Option D: The historical acquisition price without analysis
Option D, the historical acquisition price without analysis, is simply what was once paid; it is not an analysis of the property's contribution to a specified ongoing use.
Use value asks what it does
Value in use asks what the property does for a specific use; market value asks what it would sell for.
How to use: Use this when an assignment defines value as contribution to a particular operation rather than an exchange price.
Exam Tip
Look for words like 'contribution' and 'specified use' versus 'exchange' and 'open market' to decide the value premise.
Common Mistakes to Avoid
- -Reporting market value when the assignment requests value in use
- -Treating historical purchase price as current value
- -Assuming value in use equals assessed value
Concept Deep Dive
Analysis
This question tests identifying the value premise from how the assignment defines what is being measured. The assignment asks for the contribution a property makes to a specified ongoing use, not what it would sell for. That is the definition of value in use (use value), which differs from a market-exchange premise.
Background Knowledge
Value in use measures what a property contributes to a particular use or enterprise, while market value measures what it would bring in a typical open-market exchange. The two can differ substantially, especially for specialized properties. Appraisers must clearly identify the type and definition of value in the assignment.
Real-World Application
A manufacturer asks an appraiser to estimate what its specialized plant contributes to its continuing production operation for internal planning. The appraiser defines the assignment as value in use and explains in the report that it is not an opinion of what the plant would sell for on the open market.
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