Karsten is the sole shareholder of XYZ Corporation. XYZ Corporation owned a parcel of vacant land that Karsten thought would be an ideal location to build a personal residence. Consequently, XYZ distributed the land to Karsten. Karsten had the land appraised to determine the income both Karsten and XYZ would recognize on the distribution. Because the first appraisal came in higher than expected, Karsten paid for a second appraisal from a different appraiser. The second appraisal was quite a bit lower so Karsten used the second appraisal to determine the income Karsten and XYZ recognized on the distribution.

Questions to consider include the following:

1. What do you think of Karsten's approach to determining the value of the land? Invoke the appropriate tax rules in discussing.
2. What should a taxpayer do when different property appraisals come in at different values?
3. Is it unethical to use the appraisal that most benefits the taxpayer?
4. Were both appraisals in the "reasonable" range? Why do you think it is or is not reasonable?