Property Tax Post: Montana Estate Owner Seeks Reduced Property Value Because Property is 'Overbuilt'

A California real estate investor who owns the priciest home in the state of Montana is seeking to have his assessed value reduced to $9.8 million, despite the property’s hefty $59 million listing, according to the Associated Press. The property, which is adjacent to Glacier National Park, is currently valued for property tax purposes at just under $42 million, which would carry a $367,000 annual tax assessment, or about $30,000 per month.

While that may seem like a shocking tax bill to the average homeowner, it’s mere pennies compared to the estimated monthly mortgage payment of $240,000, using a 4.5 percent interest rate.  The home has a fitness room, sunroom, atrium, indoor shooting range, steam bath, horse stable, wine cellar, guest house, and views of both mountains and Flathead Lake, the third-cleanest lake in the world, according to the listing.

The listing also boasts a kitchen that includes trash compactors, food warming drawers, and other amenities “to assist the finest gourmet chef and staff.” And the guest house alone has 2 bedrooms and 4 baths! Have we passed $9.8 million in value yet?

This appeal contributes to a trend of owners of opulent estates challenging their property values.  Although Robert De Niro contested the value of his Hudson Valley property, he recently decided to drop his appeal. 

Here, the owner seeks the lower, $9.8 million appraisal based on the argument that the house was “overbuilt,” essentially arguing that all the above amenities would not add to the property’s market value, according to the AP report. While this may seem far-fetched, it may be less so than one might think. A 2013 New York Times article noted the inherent difficulties in appraising luxury properties, specifically because of the lack of comparable properties. 

Here, the owner is also contesting the appraisal based on the Montana appraiser’s use of comparables from other states, rather than comparables in Montana.  But a $32 million rift may be difficult to explain away simply because of the lack of in-state comparables.  

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should out-of-state comparables be used in the case of unique, luxury properties?

Sign up for a free trialof the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes. 

Follow us on Twitter: @BBNAtax

Follow me on Twitter: @MikeKerman