Tax value of Shelter Island upheld

Don Abbey will not get a reduction in taxes on his luxury island property on Flathead Lake.

Abbey, a California real estate developer, appealed to the Montana Tax Appeal Board last fall to have the taxable value on his mansion on Shelter Island in Lake County reduced by $32 million. The Montana Department of Revenue had valued the house and other buildings at $41.8 million. Abbey had sought to have the value for the home and improvements valued at $9.8 million, based on an independent appraisal. For the 2012 tax year the Department of Revenue appraised the property at $55.3 million and the land at $3.7 million. 

The 2014 Lake County property taxes owed on the property are $367,696. 

Last Wednesday the Montana Tax Appeal Board ruled in favor of the Montana Department of Revenue’s appraisal. The assessment of the mansion and other improvements was disputed, but not the valuation of the land. The land is valued at $3,715,785, according to the Department of Revenue. 

According to court documents filed in a lawsuit against his own construction firm, Abbey had spent about $35 million developing the property, which was completed in 2012.

The appraisal on the improvements was based on a cost-approach method, which finds market value by accounting for the actual cost of construction of improvements.

Appraiser Don Leuty determined that were no sales of comparable properties anywhere else in the world, including other prime Montana real estate markets. 

After inspecting the site and trying to quantify the costs of construction, Leuty said the state’s cost tables used to estimate value were inaccurate. Adjustments would have to be made for architecture, quality of materials, design, artisanship and construction of the property.

Shelter Island is a 24-acre private island on the west side of Flathead Lake. The property sits on about 13.5 acres of the island. The main house was built over a decade ago, the tax board decision said, and “It is one of the finest houses ever built in Montana.”

The walls are made of custom two-feet-thick stone blocks, features custom windows, and light fixtures, African mahogany paneling and cabinets, Italian plaster ceilings, floors of imported Vietnamese marble, a roof of blue Virginia slate with copper trim and floors made of limestone tile.

Its stone and copper exterior spans 19,452 square feet and has five bedrooms and eight bathrooms. According to the Tax Appeal Board report, each room has its own unique architectural touches. The fireplace in the great room is made of limestone and there is a copper and glass conservatory. Outside there is a portico and 10,000 square feet of heated terrace.

Luxury amenities include a wine cellar, gym, sporting clay course, dive shop, computer control heating systems, generator buildings, docks and seawalls and an underground shooting range.

The guesthouse spans 2,564 square feet and has two bedrooms and four bathrooms. The guesthouse also doubles as a boathouse with a two boat-docking system.

The Department of Revenue had looked worldwide for comparable properties, the decision said, and used those as a starting point for determining values for the kinds of high-end improvements that had happened.

From that research a range of $1,500 to $2,000 per square foot was used as a benchmark, the Tax Appeal Board report said.

Abbey had filed for an informal review of the appraisal in October 2012 contesting that his costs were high because various construction and engineering mistakes had substantially increased building costs. In the review the appraiser agreed that Abbey was entitled to a $9.8 million deduction. The Department of Revenue decided it was fair and reasonable to adjust the cost derived market value accordingly.

Abbey had filed an appeal with the Lake County Tax Appeal board in February 2013, requesting a land value of $2.1 million and an improvement value of $10.4 million.

The Lake County tax appeal board heard the appeal in August of 2013 and affirmed the Department of Revenue’s appraised values.

The Shelter Island property is currently listed for sale at $44.8 million

The Montana Tax Appeal board’s decision is subject to appeal in Lake County district court.