Section 4 Capitalization-of-Income Approach

• Library: Damages 2012

The income yield of the property may be admissible to establish fair market value. Generally, evidence of lost future profits from a business is not admissible to establish the fair market value of the underlying land because it is too remote, speculative, and uncertain, as well as dependent on changing circumstances, to warrant recovery. See:

· Clay v. Mo. Highway & Transp. Comm’n, 951 S.W.2d 617, 629 (Mo. App. W.D. 1997)

· Shelby Cnty. R‑IV Sch. Dist. v. Herman, 392 S.W.2d 609, 613 (Mo. 1965)

· St. Louis Hous. Auth. v. Bainter, 297 S.W.2d 529, 534 (Mo. 1957)

· City of St. Louis v. Paramount Shoe Mfg. Co., 168 S.W.2d 149, 154 (Mo. App. E.D. 1943)

Capitalization of profits is generally not admissible because it is subject to influence by the particular business skill and acumen of the business owner. Land Clearance Redevelopment Auth. v. Kan. Univ. & Endowment Ass’n, 797 S.W.2d 495, 501 (Mo. App. W.D. 1990). In condemnation cases, the profit derived from business on the land taken for public use is normally inadmissible because condemnation statutes ordinarily require no more than just compensation for the property taken. Bainter, 297 S.W.2d at 534 (evidence of gallons of gasoline sold at gas station showed rental value rather than profits of the business).

The cases allowing evidence of other income distinguish income derived out of the property from income derived by the skill of management. City of St. Louis v. Union Quarry & Constr. Co., 394 S.W.2d 300, 305–06 (Mo. 1965). For example, in citing Bainter, 297 S.W.2d 529...