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Trunk Formula Method & replanting costs
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I would greatly appreciate any responses regarding whether it is common for a party to recover the value of trees under the Trunk Formula Method and the cost of replanting new trees in the area. Thank you in advance for your assistance.
 
Posts: 1 | Registered: Tuesday April 27, 2004Report This Post
<Scott Cullen>
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Brooke, the Trunk Formula Method (TFM) is widely used to estimate the value of trees larger than those "commonly transplanted." TFM is a Depreciated Replacement Cost approach to value. It starts with an estimate of the replacement cost. That is inherent. The initial cost indication is the depreciate or reduced to reflect the species, condition and location of the tree(s). If in perfect condition and perfectly located there would be zero deduction. If the tree was near dead or located where nobody even knew it was there there would be a big deduction. So TFM gives a value estimate. You can use that value to replant... by definition the tree is larger than commonly transplanted so you might plant a number of smaller trees... or use it to pay your electricity bill or put your kids through college or whatever. Or if there was a lot of depreciation, go to McDonalds for dinner.

You would not get value PLUS replanting cost.

The threshhold issue is whether TFM is an acceptable or admissable measure of damages in your jurisdiction. The IRS will not accept TFM for casualty loss deductions. Period. Some states do not allow TFM. Some states do not recognize replacment cost approaches as a measure of damages so TFM would be a waste of time.

You need to get a legal read in your jurisdiction. Your appraiser should have this information before selecting a method or starting an appraisal.

Scott Cullen
 
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