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UBC Theses and Dissertations

A basis for the tax assessment of orchards in the Okanagan valley of British Columbia Stewart, Earl Walker


The methods of valuation that are available for real property in general have not been fully adapted to the particular problem of farm land assessment for taxation purposes. The main method upon which the assessment of farms is based is an analysis of the prices received for comparable properties in the market. Although this method is widely used for property other than farm land, because of several inherent weaknesses in the method it is usually supplemented by, if not subordinate to, the income capitalization method which bases value on the income producing ability of the property. This method, however, has found limited use in farm valuations. The present study is concerned with the adaptation of the income capitalization method to farm lands as a basis for tax assessment with a detailed analysis of the specific problem of orchard assessment. A review is made of the basic concepts of value and the underlying principles of property valuation which have been influential in the development of the present valuation methods. The application of these methods as they are found in various countries is also reviewed. The analysis involves the construction of yield, price and cost schedules for two main apple varieties, Red Delicious and McIntosh. Prom these schedules the annual net incomes of a tree are calculated; these in turn are capitalized to obtain the present value of a tree at different ages in its life cycle. The present level of prices for McIntosh apples is found to be too low to realize a positive net income from these trees. Under these circumstances the only value of such an orchard lies in its basic site value for alternative uses. For the Red Delicious variety positive net incomes are obtained after the trees reach fourteen years of age. The annual net incomes are discounted back from forty years of age to the various age groups within which the trees are commonly placed. This procedure provides a level of values based upon the earning power of the trees. In order to apply these values it is necessary to adjust them for variations in the physical characteristics of the orchards such as soil types, topography, erosion and frost. The use of this method of valuation as a basis for tax assessment would provide a more sensitive reflection of the real differences in value between varieties and kinds of fruit as well as those attributable to the variations in the physical characteristics of the orchard. This would result in a more equitable distribution of the property tax.

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