575 P.2d 1146 (1978)
POLICE PROTECTIVE ASSOCIATION OF CASPER, Wyoming, Appellant (Plaintiff below),
v.
The CITY OF CASPER, Appellee (Defendant below).
No. 4789.
Supreme Court of Wyoming.
March 9, 1978.
W.W. Reeves, Cardine, Vlastos & Reeves, Casper, for appellant.
H.B. Harden, Jr., Casper, for appellee.
Wyoming Education Association, by its attorneys, Graves & Hacker, Cheyenne, filed amicus curiae brief.
Before GUTHRIE, C.J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.
*1147 ROSE, Justice.
This appeal from a declaratory judgment concerns the construction and validity of a collective-bargaining agreement voluntarily entered into by the City of Casper and the Police Protective Association of Casper (hereinafter the Association). We will affirm the decision of the district court, which declares the contract between the parties null and void and of no force and effect.
The City had, for a number of years, voluntarily entered into agreements with the Association regarding the terms of employment for the City's police officers. The last of such agreements became effective on July 1, 1975, and was to continue
"until June 30, 1976, and thereafter from year to year until altered or modified by collective bargaining, or by mediation, conciliation or fact-finding."
Pursuant to renewal provisions, the Association notified the City of its desire to enter into collective bargaining for the purpose of amending the agreement in several particulars. The City's response was to the effect that it lacked authority to enter into such a collective-bargaining agreement and refused to discuss amending the existing agreement.
*1148 On May 19, 1976, the Association filed a declaratory-judgment action, seeking a declaration that the agreement was binding and enforceable. The City answered, restating its lack of authority to enter into a collective-bargaining agreement with the Association, and further asserting its lack of authority
"to continue an agreement from year to year to be modified only by collective bargaining, mediation, conciliation or fact-finding."
In declaring the agreement to be null and void and of no force and effect, the judgment of the district court stated in relevant part:
"... the parties have heretofore voluntarily engaged in collective bargaining which has resulted in contracts such as that stipulated into evidence in this case; that the parties would now engage in collective bargaining if permitted to do so; that it is unlawful for The City of Casper and the Police Protective Association to voluntarily engage in collective bargaining and to make a Contract such as that in evidence in this case, and that such Contract therefore is null and void and of no force and effect."
The record and arguments on appeal disclose that we are asked to resolve
(1) whether, under the agreement, the City had the right to terminate its contractual relationship with the Association; and
(2) whether the City had authority to voluntarily enter into the collective-bargaining agreement in the first instance.
Our response to the first question makes it unnecessary to decide the second.
The Association sought a declaratory judgment that the agreement was binding and enforceable, but the district court held
"that it is unlawful for The City of Casper and the Police Protective Association to ... make a Contract such as that in evidence in this case, . .."
If there is any legal ground in the record to sustain that judgment, it will be affirmed. In re Romer, Wyo., 436 P.2d 956, 958. In this respect, we are reminded that the declaratory-judgment vehicle cannot be utilized for the purpose of obtaining an advisory opinion, and thus the issue concerning which judgment is sought must be justiciable. Mountain West Farm Bureau Mutual Insurance Co. v. Hallmark Insurance Co., Wyo., 561 P.2d 706, 709. Under the facts here, the right of the City to refuse to negotiate a new or amended collective-bargaining agreement clearly structures a justiciable controversy. If we are to determine that the City has this right of refusal because of applicable law and the contract provisions  or lack of them  then it becomes unnecessary to go on and decide whether or not the City also had the authority to enter into such an agreement in the first instance. This last-mentioned inquiry may be addressed through declaratory judgment as a justiciable issue only in circumstances in which there is a controversy over the operation of the substantive aspects of an existing contract.[1] Since this type of dispute is not now before the court, we will, therefore, render no opinion as to whether the City is empowered to voluntarily enter into a collective-bargaining agreement with the Association.
Turning to the issue which is properly here for decision, we observe that several of *1149 the contract provisions are relevant. First, as noted previously, the document in question provides in Article XIX that
"This Agreement shall become effective the 1st day of July, 1975, and shall remain in force and effect until June 30, 1976, and thereafter from year to year until altered or modified by collective bargaining, or by mediation, conciliation or factfinding."
With respect to renewal and amendments to the agreement, Article XVII provides that:
"Either party desiring to amend this Agreement shall notify the other in writing, no sooner than one hundred thirty (130) days, and no less than one hundred twenty (120) days prior to the first of July of each year. Whenever notice is given, the nature of the amendments must be specified in such notice, and until satisfactory conclusion is reached in the matter of such amendments, the original provisions shall remain in full force and effect."
On its face, then, the agreement provides only for alteration or modification of its terms. It does not give either party the right to terminate upon reasonable notice, as do most collective-bargaining agreements. In consequence, the contract contains no limitations upon the duration of its underlying provisions. This condition of things calls into question the ability of a municipal corporation to contractually bind itself in perpetuity. It is said in 63 C.J.S. Municipal Corporations § 979b, p. 534:
"Contracts to continue for an unlimited time, if construed to continue in perpetuo, are generally considered invalid, although some courts have held such contracts valid in the absence of any constitutional limitations. Contracts for an indefinite time are sustained where construed as continuing in force only at the will of the parties or for a reasonable time only, and in some jurisdictions the reasonable time for which such contracts are allowed to run is determined by analogy to constitutional provisions limiting the terms of franchises." [Footnotes omitted and emphasis supplied]
In light of these rules, two conclusions are available to the court with respect to the instant agreement. First, it may be regarded as being invalid because it could properly be construed to continue in perpetuo. Second, if we were to regard the agreement as not being perpetual by its terms and were to further find that it is not susceptible to the implication of a specific period of duration, then, in such case, the agreement would be terminated at will upon the giving of reasonable notice. 17A C.J.S. Contracts § 398, pp. 478-480. According to either alternative, the agreement before the court must be held to be unenforceable.
The contract indicates that the parties intended it to continue "until altered or modified." Those words do not conceive of termination. "Alter" means "to change some of the elements or ingredients or details without substituting an entirely new thing or destroying the identity of the thing affected;" and "modification" similarly means "an alteration which introduces new elements into the details, or cancels some of them, but leaves the general purpose and effect of the subject-matter intact." Black's Law Dictionary (4th ed. 1968), pp. 103 and 1155. Since neither party had a right to terminate this agreement, we hold that the district court was correct in declaring the agreement null and void.
Perhaps we should add that, notwithstanding any language of the district court judgment which might appear to enlarge upon what is said here, and notwithstanding the charge contained in Justice Raper's specially concurring opinion  and in disagreement with Justice Thomas' specially concurring opinion  we restrict the majority opinion to the proposition that the contract is null and void because, by its terms, the parties did not provide for its termination and, therefore, substantive contractual issues cannot be reached.
We have heretofore said that a declaratory-judgment action will not lie unless there is an enforceable contract right  that is  the contract must be a valid agreement *1150 before a justiciable issue concerning its provisions may be framed for declaratory-judgment purposes. Footnote 1, supra. Having held that the contract itself is null and void, we cannot then go inside its four corners to decide substantive issues therein contained. In this case, one such issue is whether or not the City may voluntarily enter into a collective-bargaining agreement with its employees. Contrary to the accusation made by Justice Raper in his specially concurring opinion, the Justices constituting the majority are not "ducking the only real issue in this case."
Our only reason for not considering the collective-bargaining question is because we find and hold that there is no contractual justiciable collective-bargaining issue for this court's decision, in view of the fact that we are confronted with a void contract. There being no enforceable contract rights where a contract is null and void, a justiciable issue does not, in such case, present itself.
We reject, out of hand, the implication of Justice Raper's charges that we are in any way avoiding an issue properly before this court for decision. On the other hand, we find Justice Raper's specially concurring opinion to be guilty of reaching outside the issues properly framed and necessary to orderly disposition in order to decide a proposition that is not here for decision.
Our refusal to decide the collective-bargaining question cannot be taken by anyone as an indication of how we of the majority, collectively or individually, might ultimately stand should the issue properly come before the court.
For the reasons set out herein, the judgment of the district court is affirmed.
Affirmed.
RAPER, Justice, with whom THOMAS, Justice, joins, specially concurring.
I join in the special concurrence of Justice Thomas for the reasons he has stated. The opinion of the majority, with only a glance, raises a suspicion of infirmity. The opinion of Justice Thomas lays bare its flaws.
I can concur only in the result for other reasons as well. It appears to me that the majority is ducking the only real issue in this case. The impression with which I am left is that such contracts as the one with which we are concerned in this case might be allowable and the only problem is that the particular one for consideration might only be invalid because it continues for an unlimited time. If that is the only defect, and I do not agree it is, it can be readily corrected by a new agreement with an agreed-upon definite termination date but the problem of authority to do so would still remain a mystery. The court literally leaves the parties where it found them for a de minimus reason, even if valid, and thus avoids a confrontation with the larger, only important cause for the action.
The parties want and are entitled to know whether a city is authorized to voluntarily enter into a collective-bargaining agreement with its policemen and have an explanation of the reasons. The question is one of universal interest throughout the State of Wyoming; other political subdivisions and their employees, besides cities, and their employees, are concerned. The Wyoming Education Association has filed an amicus curiae brief in this case in support of the Police Protective Association, indicating the interest of that substantial segment of government employees.
It is true that this court will not generally discuss or pass upon questions not necessary to the disposition of the case before it. That is particularly true in cases of reversal. 5 C.J.S. Appeal and Error § 1455, pp. 593-627; 5 Am.Jur.2d., Appeal and Error § 760, pp. 201-202. It is not so true where the court affirms, as here. The questions presented for issue before this court fall squarely within the exact terms of the Uniform Declaratory Judgments Act, § 1-1052, W.S. 1957, thereof, providing:
"Any person interested under a deed, will, written contract or other writings constituting a contract, or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract *1151 or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder." (Emphasis added.)
It is the design of the Uniform Declaratory Judgments Act (§§ 1-1049, et seq., W.S. 1957) to erase uncertainties and fully settle cases, such as the one before us. Section 1-1062 is implicit in that regard:
"This act [§§ 1-1049 to 1-1064] is declared to be remedial; its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations; and is to be liberally construed and administered."
The parties are being sent away empty-handed, contrary to policy.
Begrudging availability of the Declaratory Judgments Act is inconsistent with the remedial tenor expressed in the Act, directed to the elimination of uncertainty and insecurity and settlement of controversy. Brimmer v. Thomson, Wyo. 1974, 521 P.2d 574, quoting favorably from Planned Parenthood Center of Tucson, Inc. v. Marks, 1972, 17 Ariz. App. 308, 497 P.2d 534, 538. When this court fails to grant the real relief requested, it is ignoring the thrust of the Declaratory Judgments Act. The parties will be just as uncertain about the contract as when, in good faith, they approached the court. I would respond to the only significant issue presented. The trial court found in its declaratory judgment that the parties would engage in collective bargaining, if authorized to do so. In my consideration of the issue of the authority of the City to enter into a collective-bargaining agreement, I would also hold, as the trial judge did, that it has no such authority to enter into the type agreement before us. Then, upon that basis, I would affirm. While this opinion could be and would be considerably more comprehensive, if it controlled the disposition made of this case, under the circumstances, I only touch the high points.
I have no argument with the right of public employees to organize into an association for their mutual benefit. Nor do I have, nor is there any objection to that organization, through its spokespeople, presenting its views and pressing its positions to whatever governing body is concerned and required to fix conditions of employment. That is one of the political ways in which our democratic form of representative government functions. I would further not argue that the City, or other government body, may not fix conditions of employment, responsive to discussions with the representatives of its employees. Regardless of what it is called or how it is done, employees are constantly working toward improved conditions for themselves and governing bodies are constantly working toward providing those conditions, leading to employee satisfaction and efficient government as well, but within limited financial means and powers.
The contract received into evidence by stipulation of the parties appears to be a complete collective-bargaining agreement and it so states. A summary of the agreement, article by article, is as follows:
Article 1. Recognition. The Police Protective Association is recognized as the "sole and exclusive representative for purposes of collective bargaining with respect to wages and fringe benefits for employees of the Casper Police Department who are sworn police officers". The chief of police is not included within the collective-bargaining agreement because "[t]he Association recognizes that the Chief of Police is a part of management." The Association recognized that when appointed by the city council, "the City Manager and/or his authorized representatives are the sole and exclusive bargaining agents for the City Council of the City." The article closes with the following statement, "The Association shall share equally with Management, the responsibility for applying this provision of the Agreement."
Article 2. Strikes, grievances and liaison. There shall be no strikes or lockouts. Establishes grievance procedure, with a grievance *1152 committee made up of members of the Association. A grievance, alleging violation of the contract by the City by any patrol officer, a member of the Association, governed by the "Collective Labor Agreement" may be submitted to the committee. A formal procedure is provided, "If the decision of the City Manager is not considered satisfactory, the Association may inform the City of its desire to exercise its right to arbitration, in accordance with the provisions of the Uniform Arbitration Act." Reciprocal provisions are available for grievances by the City before the same committee with a right to the same arbitration. The procedures are conditions precedent to court action. At the discretion of the Association, the grievance and liaison committee may be, in whole or in part, of joint membership.
Article 3. Board of review. Establishes review procedures for disciplinary action. Made up of the chief of police, the city manager and various officers of the police department. It is empowered to call the alleged offender and material witnesses. The recommendation of the board is advisory.
Article 4. Fixes monthly base rate, longevity pay rate, education pay rate and additional pay for a corporal and investigator.
Article 5. Requires the City to budget $240.00 annually for a maximum of four police officers for combat pistol matches.
Article 6. Clothing allowance. Provides for an annual clothing allowance of $200.00 for each uniformed officer and a $500.00 fund for uniform damage.
Article 7. Legal protection. Legal defense to be at City cost for civil suits against police officers as a result of actions taken in the course of their employment.
Article 8. Annual leaves. Provides for annual leave accrual, based on years of service.
Article 9. Sick leave. Provides for sick leave at the rate of one and one-half days per month, with pay.
Article 10. Life insurance and dependent health insurance. The City is to maintain $13,000.00 per individual, with double indemnity benefits, in the event of accidental death. The City pays one-fourth of monthly dependent health insurance premium in the sum of $4.86 per month.
Article 11. Training. Each officer is required to take 20 hours per year in uncompensated off-duty training.
Article 12. Overtime. Establishes when overtime shall be paid at time and one-half.
Article 13. Court appearances. Provides for compensation for court appearances on officers' days off.
Article 14. Dues checkoff and indemnification. Requires City to make a dues payroll deduction for payment to the Association treasurer, upon request of the officer.
Article 15. Civil Service. The police department is required to adopt Civil Service regulations filed with the secretary of state. No officer may be suspended for over 30 days.
Article 16. Personnel ordinance. The police department shall adopt the personnel ordinance not in conflict with the agreement.
Article 17. Renewal clause. Provides for notification if either party desires to amend the agreement and until satisfactory conclusion is reached in the matter of such amendments, the original provisions shall remain in full force and effect.
Article 18. Embodiment of agreement. Constitutes sole and complete agreement between the parties "governing Management and the Association", arrived at pursuant to collective bargaining.
Article 19. Duration of agreement. This agreement shall become effective on the 1st day of July, 1975, and shall remain in full force and effect until June 30, 1976, and thereafter from year to year until altered or modified by collective bargaining, or by mediation, conciliation or fact finding.
The agreement is signed and acknowledged by the mayor and the city manager, for the City, and by four of its members, *1153 for the police association. It has all the language and characteristics of a collective-bargaining agreement in a private industry. Section 27-239, W.S. 1957, C. 1967, sets out as a matter of state policy a recognition of the right of labor to bargain collectively. It was made clear in Retail Clerks Local 187 AFL-CIO v. University of Wyoming, Wyo. 1975, 531 P.2d 884, that statutes governing labor relations between employers and employees apply only to private industry.
Only one segment of municipal employees have been authorized to engage in collective bargaining. Sections 27-265 through 27-273, W.S. 1957, C. 1967, authorize paid firefighters of a city, town or county fire department to bargain collectively. In State ex rel. Fire Fighters Local Number 946, I.A.F.F. v. City of Laramie, Wyo. 1968, 437 P.2d 295, the constitutionality was upheld by a judgment decision of this court. Of the four-member court, only one concurred in the published opinion; the other two concurred in the result. While the precedential value of the opinion is questionable, the opinion author did note that in the absence of the special legislation for firefighters just mentioned:
"* * * [W]e might nevertheless find it necessary to join what the city calls the weight of authority, which in essence is simply a rule of statutory construction, and hold public employees do not have a right to bargain collectively. Indeed, that may even now be the situation for all public employees, except city firemen. * * *"
Justice McIntyre specifically stated that the opinion should not be construed to reach that point but the prevailing rule was recognized.
The most cited authority is the comprehensive annotation, "Union organization and activities of public employees," 31 A.L.R.2d 1142, 1170, which states, in summary, that:
"Public employers cannot abdicate or bargain away their continuing legislative discretion and are therefore not authorized to enter into collective bargaining agreements with public employee labor unions. Constitutional and statutory provisions granting the right of private industry to bargain collectively do not confer such right on public employers and employees."
In Board of Education of Scottsdale High School District No. 212 v. Scottsdale Education Association, 1973, 109 Ariz. 342, 509 P.2d 612, it was held that in the absence of a public law requiring the school district to enter into a collective-bargaining agreement, such an agreement is unenforceable. The supreme court of Arizona thus set aside and vacated the opinion of the court of appeals of Arizona, under review, 1974, 17 Ariz. App. 504, 498 P.2d 578, which held that the school board had authority to enter into collective bargaining; but rather inconsistently concluded such a bargaining agreement was not binding.
The cases, with few exceptions, consistently hold that in the absence of legislative authority, a governmental body may not enter into a collective-bargaining agreement with its employees. Examples of such cases are: State Board of Regents v. United Packing House Food and Allied Workers, Local No. 1258, Iowa 1970, 175 N.W.2d 110; International Union of Operating Engineers, Local Union No. 321 (AFL-CIO) v. Water Works Board of City of Birmingham, 1964, 276 Ala. 462, 163 So.2d 619; International Longshoremen's Association, AFL-CIO v. Georgia Ports Authority, 1962, 217 Ga. 712, 124 S.E.2d 733, cert. den. 370 U.S. 922, 82 S.Ct. 1561, 8 L.Ed.2d 503. A grant to public employees of full collective-bargaining rights must be deliberately expressed and is not to be implied. State Board of Regents v. United Packing House Food and Allied Workers, Local No. 1258, supra; Delaware River and Bay Authority v. International Organization of Masters, Mates & Pilots, 1965, 45 N.J. 138, 211 A.2d 789. See also the multitude of cases cited within the above cases, used to support the conclusions there reached.
Within those cases, we see the reason frequently referred to for such a holding to be that the employer-employee relationship in government is a legislative matter, which *1154 may not be delegated. Such contracts, if permitted to stand, would take away from the municipality its legislative control and exert it in an unelected and uncontrolled private organization. The whole matter of qualifications, tenure and working conditions for public service involves the exercise of legislative powers, delegated to the governing body and none of those responsibilities may be bargained away. Such bargaining would usurp those legislative powers, which cannot be contracted away. By way of example is the provision of the agreement here, requiring submission to arbitration, which would take from the city council its right to completely control its employees by permitting others to settle differences.
Quite a number of states have specific legislation permitting collective bargaining between governing bodies and employees. Such legislation must carefully spell out the rules and limitations of the bargaining obligations. See the scope of legislation enacted in other states with respect to collective bargaining, State and Local Employees, 181 Business Organizations, Kheel, Labor Law, Chapter 54, p. 54-1, where all legislation throughout the United States is carefully cataloged. Uniformity of treatment of all employees, not only those represented by a union, budget considerations and their timeliness, limits on the extent to which an agreement may go, retention of the political prerogatives of elected officials, assurances of continued government operation and many other factors must be covered in the government-employee relationship. Such authority must also be squared with Wyoming's right-to-work law, §§ 27-245.1 through 27-245.8, W.S. 1957, C. 1967. For us to approve collective bargaining would be to legislate.
The last statement becomes particularly pertinent when we see that the legislature has already spoken with respect to the bargaining rights of firemen. Municipalities and other political subdivisions are creatures of the State and they only have such powers as are bestowed by the State. Schoeller v. Board of County Commissioners of County of Park, Wyo. 1977, 568 P.2d 869. The simple application of well-known principles of statutory construction points to this being a legislative, not a judicial problem.
By the legislature's authorizing collective bargaining for firemen, it has excluded collective bargaining by other classifications of municipal and county employees. The rule is that the expression of one thing is the exclusion of another. Town of Pine Bluffs v. State Board of Equalization, 1958, 79 Wyo. 262, 333 P.2d 700. That rule serves to discover the intent of the legislature. Ramsay Motor Company v. Wilson, 1934, 47 Wyo. 54, 30 P.2d 482, 91 A.L.R. 908. Its intent is, therefore, not to allow collective bargaining except as specifically authorized.
I would face up to the genuine issue in this case and hold that the City has no authority to enter into collective bargaining with any employees except firemen. Such a contract is void ab initio and there is no need to examine its term or any other particular provision.
THOMAS, Justice, specially concurring, with whom RAPER, Justice, joins.
I concur in the result in this case, but I cannot agree with the grounds for disposition reflected in the majority opinion.
The opinion of the Court treats this agreement as void because the term of the agreement is construed as being perpetual. There is no express language in the agreement stating that it was to be in force in perpetuity. Relying upon the general presumption that the parties intend the contract to be legal and binding, and the rule that if susceptible to alternative constructions it should be afforded the one that will result in its being valid and enforceable,[1] I *1155 would construe this agreement as being one for a reasonable period. This is one of the possible constructions indicated in the following language which is quoted in the Court's opinion with only the emphasis being changed:
"Contracts to continue for an unlimited time, if construed to continue in perpetuo, are generally considered invalid, although courts have held such contracts valid in the absence of any constitutional limitations. Contracts for an indefinite time are sustained where construed as continuing in force only at the will of the parties or for a reasonable time only, and in some jurisdictions the reasonable time for which such contracts are allowed to run is determined by analogy to constitutional provisions limiting the terms of franchises." [Footnotes omitted and emphasis supplied] 63 C.J.S. Municipal Corporations § 979b, p. 534 (1950).
I would conclude that this contract is not void for the reason assigned in the majority opinion, but instead was intended to be in existence for a reasonable period of time. Bullock County v. Sherlock, 242 Ala. 262, 5 So.2d 800 (1942); and West Caldwell v. Caldwell, 26 N.J. 9, 138 A.2d 402 (1958).[2] I would hold further that a reasonable time had not yet run, and would be forced to dispose of the issue relating to the collective bargaining nature of this agreement. I would dispose of that issue by holding that the City of Casper, in the absence of legislative authority to do so, had no power to enter into a collective bargaining agreement with the Police Protective Association of Casper, substantially in accordance with the rules in Justice Raper's concurring opinion in which I join.
NOTES
[1]  It is said in 26 C.J.S. Declaratory Judgments § 54, p. 151:

"An action for declaratory relief to construe or apply a contract will not lie in the absence of an enforceable contract right, ..."
In Greer v. Kentucky Health and Geriatric Authority, C.A.Ky. 1971, 467 S.W.2d 340, 343, where an agreement between the parties was not meant to be final or legally enforceable, it was said:
"... It would be futile for the court to make pronouncements purporting to interpret an admittedly nonfinal, nonenforceable `agreement.' Neither should the court render a declaratory judgment in the absence of an actual controversy. KRS 418.040. The provisions of KRS 418.045, respecting the right of any person interested in a contract to have a declaratory judgment, relate to a binding contract, not a mere `plan of action.' . ."
[1]  City of Orlando v. Murphy, 84 F.2d 531 (5th Cir.1936), cert. den. 229 U.S. 580, 57 S.Ct. 45, 81 L.Ed. 427 (1936); Bullock County v. Sherlock, 242 Ala. 262, 5 So.2d 800 (1942); City of Los Angeles v. Superior Court, 51 Cal.2d 423, 333 P.2d 745 (1959); Mt. Lebanon Tp. v. Metropolitan Casualty Ins. Co., 106 Pa.Super. 209, 161 A. 632 (1932); City of El Campo v. South Texas Nat. Bank, 200 S.W.2d 252 (Tex.Civ.App. 1946). See Walton Water Co. v. Village of Walton, 238 N.Y. 46, 143 N.E. 786 (1924), reargument denied, 238 N.Y. 555, 144 N.E. 889 (1924); Suburban Club of Larkfield, Inc., v. Town of Huntington, 56 Misc.2d 715, 289 N.Y.S.2d 813 (S.Ct. 1968), modified on other grounds, 30 A.D.2d 541, 291 N.Y.S.2d 1013 (1968); Massasoit Housing Corporation v. Town of North Kingston, 75 R.I. 211, 65 A.2d 38 (1949). See also 17 C.J.S. Contracts § 918, pp. 181 et seq., and § 586, p. 1136 (1963).
[2]  I can find no inherent barrier in the cases which would prevent the City of Casper from entering into this agreement for a reasonable time beyond the terms of office of the governing officials. I think this particularly is true in view of the contractual language which contemplates an annual review of the terms of the agreement. See Town of Lovell v. Menhall, Wyo., 386 P.2d 109 (1963); and Hyde v. Board of Commissioners of Converse County, 47 Wyo. 101, 31 P.2d 75 (1934).


96 Ariz. 346 (1964)
395 P.2d 706
STATE of Arizona, Appellee,
v.
Archie CRAVIN, Appellant.
No. 1317.
Supreme Court of Arizona. In Division.
October 14, 1964.
*347 H.B. Daniels and Vincent D. Maggiore, Phoenix, for appellant.
Robert W. Pickrell, Atty. Gen., and Samuel J. Macaluso, Asst. Atty. Gen., for appellee State of Arizona.
SCRUGGS, Justice.
The parties will be referred to as plaintiff and defendant as they appeared in the lower court.
Archie Cravin, the defendant, has appealed from a judgment imposed upon a conviction of assault with intent to murder.
The defendant was charged by an Information with three crimes: Count I, assault with intent to murder; Count II, resisting arrest; and Count III, grand theft. The jury found defendant guilty on Count I. Count II was dismissed at the close of the State's case. The jury found the defendant not guilty on Count III. The defendant was sentenced to serve an indeterminate term of 15-20 years in prison.
Reviewing the evidence in the light most favorable to sustain the conviction, the pertinent facts are as follows:
About four o'clock p.m. on December 12, 1961, Eugene C. Naegle, a deputy sheriff of Maricopa County, arrested the defendant and attempted to take him into custody. The arrest was at a point off the canal road near the Consolidated Canal near Chandler, Arizona. The defendant resisted *348 and a scuffle followed. The defendant and the officer fell to the ground. The defendant finally was on top of the officer and took the officer's gun from its holster. The defendant then pointed the gun towards the officer's stomach and stated, in effect, that he had the officer's gun and was going to kill him. With this comment, the defendant fired the gun. The bullet went under the officer's ribs on the left and lodged under his right hip. It was later removed from the body of the officer in a splintered condition. Defendant then left the scene, taking the gun with him. The officer reached his patrol car and called the sheriff's office relative to his location and his need for an ambulance. The defendant was later arrested hiding under a floor at the home of his mother-in-law in Mesa, Arizona, at which time the officer's gun was found in his possession.
On January 9, 1962, a preliminary hearing was commenced before Justice of the Peace Coy Beasley in his chambers in Chandler, Arizona. As Officer Naegle was not present at the preliminary hearing due to his injuries, the case was transferred to his hospital room. Officer Naegle became ill while being questioned on direct examination, and the Justice of the Peace deemed it advisable not to continue with the examination at that time and adjourned the hearing to his courtroom. The hearing was concluded and the defendant held to answer. At no time did the defendant ask for a recess or a continued hearing. Defendant was arraigned before the Superior Court on January 23, 1962, at which time he pleaded "Not Guilty" to all three counts of the Information.
At the outset of the trial on September 28, 1962, defendant moved to quash the Information on the ground that there was no probable cause shown at the preliminary hearing and that he did not have an opportunity to cross examine Officer Naegle during the hearing, whereby he was denied due process of law. The motion was denied.
The defendant's first and second assignments of error contend that the denial of the motion to quash was error for the reasons (1) there was no probable cause shown in the preliminary examination, and (2) the defendant was denied due process of law in that he was not permitted to cross examine a material witness, Officer Naegle.
The first assignment of error is without merit. The question of sufficiency of evidence at the preliminary examination before the magistrate may not be raised by a motion to quash the Information as it is not one of the enumerated grounds set forth in Rule 169, Rules of Criminal Procedure, 17 A.R.S. State v. Woolery, 93 Ariz. 76, 378 P.2d 751.
The second assignment of error is without merit. Defendant is contending *349 that he was denied due process of law on the theory that by not being permitted to cross examine Officer Naegle he was in effect denied a preliminary hearing. Assuming his contention to be correct (which contention need not now be decided), such a contention must be raised at the arraignment or within such time as the trial court may fix. Rule 79 and Rule 166 of the Rules of Criminal Procedure. This objection was not timely made and was therefore waived, since defendant's motion to quash was not made until the day of the trial, approximately eight months after the arraignment. In addition, it should be noted that the Justice of the Peace, at the time of the hearing in the hospital room, advised defense counsel that a continuance could be granted for the purpose of further examining Officer Naegle, but at no time did defendant or his counsel request a continuance.
The defendant's contention set forth in his third assignment of error that there was insufficient evidence to establish a specific intent to murder by the defendant, and in his fifth assignment of error that the evidence does not support the verdict, we also find to be without merit. The essential elements of the crime of assault with intent to murder are the assault and the intent or purpose. Hann v. State, 30 Ariz. 366, 247 P. 129. The specific intent to kill is an essential ingredient of the offense of assault with intent to murder. People v. Stephens, 29 Cal. App. 616, 157 P. 572. The testimony at the trial of Officer Naegle and that of the defendant are in conflict. On an appeal from a conviction in a criminal case, we take the evidence in the light most favorable to the State and resolve all conflicts in evidence to uphold the jury's verdict. State v. Perez, 94 Ariz. 290, 383 P.2d 745. Under this rule, the evidence clearly supports the verdict. The assault, the remarks of the defendant, and the firing of the gun by the defendant constituted sufficient evidence of intent to murder.
There is no merit to the fourth assignment of error predicated upon the refusal of the court to direct a verdict of acquittal on Count III. Defendant contends the required felonious intent was not present in the evidence. Intent to permanently deprive the owner of his possession is an essential ingredient of grand theft. State v. Marsin, 82 Ariz. 1, 307 P.2d 607. A motion for a directed verdict questions the sufficiency, not the competency, of the evidence. It is well established that evidence is sufficient to go to the jury where it discloses facts from which the jury may legitimately deduce either of two conclusions. The evidence shows defendant took the gun from the officer, carried it with him when he fled, and that it was found in his possession when he was arrested. This is substantial evidence that the defendant *350 committed the crime of which he is accused. State v. Holliday, 92 Ariz. 168, 375 P.2d 370. The jury could have reasonably inferred the requisite intent from these facts. We cannot see how the defendant could have been prejudiced by submitting Count III to the jury. The jury favored him and acquitted him on this count.
Judgment of the Superior Court is affirmed.
LOCKWOOD, V.C.J., and STRUCKMEYER, J., concurring.


204 Cal.App.2d 44 (1962)
MAX BELGRADE et al., Plaintiffs and Appellants,
v.
NATIONAL AMERICAN INSURANCE COMPANY, Defendant and Respondent.
California Court of Appeals.
May 23, 1962.
 Paul K. Duffy for Plaintiffs and Appellants.
 Bolton, Groff & Dunne and Gene E. Groff for Defendant and Respondent.
 FORD, J.
 As a result of vandalism, the plaintiffs suffered damages in an amount in excess of $9,000 to a residence and the carpets and drapes therein. They sought recovery for their loss from the defendant insurance company under the terms of a policy of insurance. The amount of loss was not in dispute but the defendant denied liability because of a provision of the policy as to the effect of a vacancy of the property. The trial court rendered judgment for the defendant and the plaintiffs have appealed therefrom.  [fn. 1]
 [1a] In the policy it was provided that, with respect to the property covered, the appellants were insured against all loss caused by vandalism and malicious mischief. However, it was further provided that there should be no liability with respect to that peril "if the described property has been vacant beyond a period of thirty (30) consecutive days immediately preceding the loss." Vacancy and unoccupancy were defined in the policy as follows: "A building intended for residence by human beings shall be deemed to be vacant within the meaning of this policy unless such building contains the furnishings ordinarily contained therein to enable the use of said building for the purpose for which it is adapted; and shall be deemed to be unoccupied (but not vacant) if such building contains the furnishings ordinarily contained therein to enable the use of said building for the *46 purpose for which it is adapted, but no lawful occupant is residing therein."
 The only testimony offered was that of Jules Belgrade, one of the plaintiffs. He and his brother, the other plaintiff, acquired the property, which was residential in nature, as the result of a foreclosure of an encumbrance thereon. The house was a large two-story structure containing about 10 rooms. The former owner moved out about June 27, 1958. Thereafter the plaintiffs were there every day prior to the vandalism which occurred on August 24, their purpose being to "keep it available for prospective customers" who might buy or rent it. The initial price asked for the property was $79,500. A "For Sale" sign was placed in front of the house. When the Belgrades took possession, there were expensive drapes and carpeting in the house. The items of personal property which they had in the house between June 29, 1958, and August 24, 1958, were described by Mr. Belgrade as follows: "... [an aluminum] chaise lounge with a mattress [which was sometimes placed in the living room and sometimes taken upstairs] ... two inner spring mattresses [which rested on the floor] used as beds ... sheets, pillow cases and pillows ... six blankets ... two suits, shirts, underwear, bath towels, hand towels ... toiletries ... toothbrushes and dental floss and soap and everything that pertains to washing ... breakfast room table and four chairs ... a kitchen stool ... a captain's chair ... a folding chair ... pots, pans and an electric hot plate ... a freezer unit in the soda fountain, the built-in soda fountain [in the playroom on the second floor] ... silverware and plates and cups and glasses and dishes [which were used several times a day]." Additional items of property on the premises were a statue, a radio, a vacuum cleaner, dust mops, brooms, brushes and garden implements. All utilities, including telephones, were connected.
 The plaintiffs would come to the premises as early as 8 o'clock in the morning and leave as late as midnight. Milk was kept in the freezer unit. Canned foodstuffs were brought in. There was no stove; the hot-plate was used for cooking. The two brothers ate "breakfast, lunch and dinner there." Jules Belgrade, because of his physical condition, took daily naps in an upper bedroom. On one night in July and on three nights in August prior to the vandalism, he slept on the premises. During this period, he and his brother had another residence. *47
 The trial court found that "from June 27, 1958 to, until and including August 24, 1958, and up to the time of the occurrence of the acts of vandalism, the dwelling ... did not contain furnishings ordinarily contained in such a building to enable the use of said building for the purpose for which it was adapted," which was for use as a place of "residence by human beings." In view of the evidence, heretofore related, of how sparsely the house was furnished, it is obvious that the record amply supports such determination of the trial court.
 [2] The propriety of a provision in a policy that the insurance shall not be effective with respect to a particular peril if the property is permitted to be vacant for a specified period of time has been recognized. (29A Am.Jur., Insurance,  903; see Foley v. Sonoma County etc. Ins. Co., 18 Cal.2d 232, 234-235 [115 P.2d 1].)  [fn. 2] Such a provision has a reasonable purpose with respect to the peril of vandalism and malicious mischief since it serves to guard against a substantial increase of the risk. (See Mauck v. Northwestern National Ins. Co., 102 Cal.App. 510, 514 [283 P. 338].) [1b] The policy in the present case clearly provided that it should not cover the peril of vandalism and malicious mischief under the factual situation herein disclosed. [3] As stated in New York Life Ins. Co. v. Hollender, 38 Cal.2d 73 [237 P.2d 510], at page 81: "While it is settled law that in case of doubt the provisions of the insurance contract will be construed most strongly against the insurer [citations], the rule is equally well established that where the terms of the policy are plain and explicit, the court will indulge in no forced construction so as to cast a liability upon the insurance company which it has not assumed [citations]." (See also Jensen v. Traders & General Ins. Co., 52 Cal.2d 786, 790-791 [345 P.2d 1]; S & M Lamp Co. v. Lumbermens Mutual Casualty Co., 199 Cal.App.2d 446, 453 [18 Cal.Rptr. 633].)
 The contention is made by the appellants that certain items were covered by the policy regardless of the vacancy of the premises. They argue that under "Item 1 No. 4" their "loss from damage to the drapes and rugs should be covered absolutely regardless of the exclusionary portion of the insurance *48 policy relative to loss from vandalism or malicious mischief." Such contention is without merit because the portion of the policy to which specific reference is made, namely, "Item 1 No. 4," was limited to a description of the items of property which were included in the coverage of the building. The determinative provisions of the policy under the facts before the court were those which set forth the "perils insured against," including that of vandalism and malicious mischief, and the various limitations and exclusions with respect to liability for losses due to designated perils. For reasons heretofore stated, there was no liability in the present case under the provisions of the policy relative to the peril of vandalism and malicious mischief.
 The attempted appeal from the order denying the plaintiffs' motion for a new trial is dismissed. The judgment is affirmed.
 Shinn, P. J., and Files, J., concurred.
NOTES
[fn. 1]  1. While in the notice of appeal it is stated that the appeal is also from the denial of the plaintiffs' motion for a new trial, there is no appeal from such an order. (Rodriguez v. Barnett, 52 Cal.2d 154, 156 [338 P.2d 907].)
[fn. 2]  2. It was stated in Foley v. Sonoma County etc. Ins. Co., 18 Cal.2d 232 [115 P.2d 1], at pages 234-235: "The term 'vacant' is associated with removal of inanimate objects from a dwelling; the term 'unoccupied' is associated with the abandonment of that dwelling as a customary abode by its former occupants. (See cases collected in 43 Words and Phrases (Perm. Ed.) 344-355; 26 Corpus Juris 213; 14 R.C.L. 1103.)"


Court of Appeals
of the State of Georgia

                                                            ATLANTA, July 11, 2018

The Court of Appeals hereby passes the following order

A18A1848. D.L BROWN, AS TRUSTEE FOR 6457 BERRYSIDE DEKALB TRUST v.
    MOHAMMAD S. YAQOOB et al..

     Upon consideration of the APPELLANT'S motion FOR PERMISSION TO WITHDRAW

THE APPEAL in the above styled case, it is ordered that the motion is hereby GRANTED.

                                    Court of Appeals of the State of Georgia
                                         Clerk's Office, Atlanta, July 11, 2018.

                                         I certify that the above is a true extract from the minutes
                                    of the Court of Appeals of Georgia.

                                         Witness my signature and the seal of said court hereto
                                    affixed the day and year last above written.

                                                                       , Clerk.


                         T.C. Memo. 2009-55

                       UNITED STATES TAX COURT

         STEPHEN G. AND SUZANNE Q. CHANEY, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 4532-07.                  Filed March 12, 2009.

     Kathryn Barnhill, for petitioners.

     Catherine S. Tyson, for respondent.

             MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined a $19,108 deficiency

in and a $3,821.60 section 6662(a)1 penalty on petitioners’ 2003

Federal income tax.

     1
        All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                               - 2 -

     Respondent concedes that petitioners conducted an active

trade or business as distributors of Shaklee products.

Respondent concedes that petitioners substantiated $1,245 of the

$1,526 of charitable contribution deductions claimed on their

return.

     Petitioners concede the disallowance of $281 of charitable

contribution deductions (i.e., they only claim they substantiated

only $1,245 of the $1,526 of charitable contribution deductions).

Accordingly, this issue is resolved.   Petitioners concede the

disallowance of their reported advertising expenses.

Accordingly, this issue is resolved.   Petitioners concede

receiving income of $288 from Prudential Insurance Company of

America for 2003 and $600 from the National Institutes of Health

for 2003.   These amounts were omitted from their 2003 Federal

income tax return. Accordingly, these issues are resolved.

     At trial and on brief respondent failed to address the $500

deduction for the preparation of income taxes.   Accordingly, we

find that respondent abandoned (waived) this issue.    See Petzoldt

v. Commissioner, 92 T.C. 661, 683 (1989); Levert v. Commissioner,

T.C. Memo. 1989-333, affd. without published opinion 956 F.2d 264

(5th Cir. 1992).
                                 - 3 -

     The following issues remain to be decided:

     1.    Rental Expenses

     No concessions have been made.      Accordingly, the entire

amount of rental expenses claimed remains at issue.

     2.    Utilities Expenses

     Petitioners concede they did not substantiate $57 of the

$706 claimed on their return as utilities expenses.

Accordingly, $649 of utilities expenses remain at issue.

     3.   Repairs and Maintenance Expenses

     Petitioners concede they did not substantiate $393 of the

$4,234 claimed on their return as repairs and maintenance

expenses.    Accordingly, $3,841 of repairs and maintenance

expenses remain at issue.

     4.    Depreciation

     Respondent allowed $3,540 in depreciation.      Petitioners

concede they did not substantiate $637 of the $13,381 claimed on

their return as depreciation.    Accordingly, $9,204 of

depreciation remains at issue.

     5.   Meetings and Convention Expenses

     Respondent allowed $918 for meetings and convention

expenses.    At trial petitioners conceded they did not

substantiate $1,183 of the $6,959 claimed on their return as

meetings and convention expenses--i.e., only $4,858 remained at

issue.    On brief petitioners concede they did not substantiate
                                - 4 -

$2,101 of the $6,959 claimed on their return as meetings and

convention expenses.   Accordingly, $3,940 of meetings and

convention expenses remains at issue.

     6.   Cost of Goods Sold (COGS)

     Petitioners concede they did not substantiate $4,943 of the

$70,018 claimed on their return as COGS and claim the correct

COGS was $65,075.   Respondent concedes that petitioners’ COGS

totaled at least $58,045.    Accordingly, $7,030 of COGS remains at

issue.

     7.   Meals and Entertainment Expenses

     Petitioners concede they did not substantiate $961 of the

$2,280 claimed on their return as meals and entertainment

expenses.   Accordingly, $1,319 of meals and entertainment

expenses remains at issue.

     8.   Car and Truck Expenses

     Respondent allowed $2,023 as car and truck expenses.

Petitioners concede they did not substantiate $815 of the $6,922

claimed on their return as car and truck expenses.   Accordingly,

$4,048 of car and truck expenses remains at issue.

     9.   Travel Expenses

     Respondent allowed $594 as travel expenses.   At trial,

petitioners conceded they did not substantiate $1,228 of the

$7,009 claimed on their return as travel expenses--i.e., only

$5,187 remained at issue.    On brief petitioners concede they did
                                  - 5 -

not substantiate $1,822 of the $7,009 claimed on their return as

travel expenses.    Accordingly, $4,593 of travel expenses remains

at issue.

     10.    Mortgage Interest Expense

     No concessions have been made.       Accordingly, the entire

amount claimed as mortgage interest expense remains at issue.2

     11.    Residential Property Tax Expense

     No concessions have been made.       Accordingly, the entire

amount claimed as residential property tax expense remains at

issue.3

     12.    Office Depreciation

     No concessions have been made.       Accordingly, the entire

amount claimed as office depreciation expense remains at issue.

     13.    Royalty Income Expenses

     No concessions have been made.       Accordingly, the entire

amount claimed as royalty income expenses remains at issue.

     14.    Section 6662(a) Penalty

     Petitioners’ liability for the penalty remains at issue.

     2
        If not deductible as a rental expense, this amount
normally would be allowable as itemized deductions on Schedule A,
Itemized Deductions.
     3
        If not deductible as a rental expense, this amount
normally would be allowable as itemized deductions on Schedule A.
                               - 6 -

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time they filed

the petition, petitioners resided in North Carolina.

     Petitioners are the only partners of Becker & Chaney

Associates (BCA).4   During 2003 BCA sold, and trained others to

sell, nutritional and cleaning products from Shaklee Corporation

(Shaklee).

     On its 2003 Form 1065, U.S. Return of Partnership Income,

BCA deducted (as detailed above) rental expenses, utilities

expenses, repairs and maintenance expenses, depreciation,

meetings and convention expenses, COGS, meals and entertainment

expenses, car and truck expenses, travel expenses, mortgage

interest expense, residential property tax expense, and office

depreciation.5   On their individual income tax return for 2003

petitioners also deducted royalty income expenses.    As detailed

above, respondent disallowed varying amounts of the

aforementioned deductions.

     4
        BCA is not subject to the TEFRA partnership audit rules.
Sec. 6231(a)(1)(B) (the partnership BCA had 10 or fewer partners
and all partners were natural persons who were U.S. citizens).
     5
        The partnership claimed all of these expenses on its Form
1065. These deductions flowed through to petitioners, who
claimed the deductions on their joint return as their
distributive shares of the partnership’s items of income and
expense.
                                - 7 -

                               OPINION

Deficiency

     Generally, deductions are a matter of legislative grace, and

taxpayers have the burden of showing that they are entitled to

any deduction claimed.   Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).

     This is a substantiation case.      Our resolution of this

dispute turns on the applicable law and our determination of the

credibility of the evidence presented.      We determine the

credibility of each witness, weigh each piece of evidence, draw

appropriate inferences, and choose between conflicting

inferences.    See Neonatology Associates, P.A. v. Commissioner,

115 T.C. 43, 84 (2000), affd. 299 F.3d 221 (3d Cir. 2002); see

also Gallick v. Balt. & Ohio R.R. Co., 372 U.S. 108, 114-115

(1963); Boehm v. Commissioner, 326 U.S. 287, 293 (1945);

Wilmington Trust Co. v. Helvering, 316 U.S. 164, 167-168 (1942).

We decide whether evidence is credible on the basis of objective

facts, the reasonableness of the testimony, and the demeanor of

the witness.    Quock Ting v. United States, 140 U.S. 417, 420-421

(1891); Wood v. Commissioner, 338 F.2d 602, 605 (9th Cir. 1964),

affg. 41 T.C. 593 (1964); Pinder v. United States, 330 F.2d 119,

124-125 (5th Cir. 1964); Concord Consumers Hous. Coop. v.

Commissioner, 89 T.C. 105, 124 n.21 (1987).
                                 - 8 -

     If the taxpayer fails to substantiate an item, the burden of

proof does not shift to the Commissioner.    Sec. 7491(a)(2)(A);

Gagliardi v. Commissioner, T.C. Memo. 2008-10.    If the taxpayer

substantiates the deductions claimed, this satisfies the

taxpayer’s burden of proof under Rule 142.    Gagliardi v.

Commissioner, supra.

     We begin our analysis by noting that Mr. Chaney’s testimony

was consistent and forthright.    His testimony was not one sided:

he admitted to facts that were not in petitioners’ interest.    For

example, Mr. Chaney noted that the original business records for

BCA contained some minor errors that needed to be corrected

before submission to the return preparer, that Mrs. Chaney

occasionally puts items in the wrong categories of the business

records, that petitioners did not have receipts for the alleged

rent payments or a written lease agreement with BCA for renting

the office space, that petitioners deducted care for their dogs

as business (travel and meetings) expenses, and that petitioners

confined one of their dogs in the office space because the dog

sheds and Mrs. Chaney prefers that the dog not be in the other

part of the house, and petitioners’ two other dogs sleep in the

office space.   Accordingly, having had the opportunity to observe

Mr. Chaney and evaluate his candor, we rely on his testimony to

resolve the amounts that remain at issue.
                                 - 9 -

     Taxpayers are allowed a deduction for ordinary and necessary

expenses paid or incurred in carrying on a trade or business.

Sec. 162(a).     Whether an expenditure is ordinary and necessary is

generally a question of fact.     Commissioner v. Heininger, 320

U.S. 467, 475 (1943).     Generally, for an expenditure to be an

ordinary and necessary business expense the taxpayer must show a

bona fide business purpose for the expenditure; there must be a

proximate relationship between the expenditure and the business

of the taxpayer.     Challenge Manufacturing Co. v. Commissioner, 37

T.C. 650 (1962); Henry v. Commissioner, 36 T.C. 879 (1961).

        To be “necessary” within the meaning of section 162, an

expense need be “appropriate and helpful” to the taxpayer’s

business.     Welch v. Helvering, 290 U.S. 111, 113 (1933).   The

requirement that an expense be “ordinary” connotes that “the

transaction which gives rise to it must be of common or frequent

occurrence in the type of business involved.”     Deputy v. du Pont,

308 U.S. 488, 495 (1940) (citing Welch v. Helvering, supra at

114).

     In addition to satisfying the criteria for deductibility

under section 162, certain categories of expenses must also

satisfy the strict substantiation requirements of section 274(d)

in order for a deduction to be allowed.     The expenses to which

section 274(d) applies include, among other things, listed

property (e.g., automobile expenses and cellular telephones) and
                                - 10 -

travel expenses (including meals and lodging while away from

home).    Secs. 274(d)(4), 280F(d)(4)(A)(i), (ii), (v).    We may not

use the Cohan doctrine to estimate expenses covered by section

274(d).    See Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930);

Sanford v. Commissioner, 50 T.C. 823, 827 (1968), affd. 412 F.2d

201 (2d Cir. 1969); sec. 1.274-5T(a), Temporary Income Tax Regs.,

50 Fed. Reg. 46014 (Nov. 6, 1985).       To substantiate a deduction

attributable to listed property, a taxpayer must maintain

adequate records or present corroborative evidence to show the

following:    (1) The amount of the expense; (2) the time and place

of use of the listed property; and (3) the business purpose of

the use.    Sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50

Fed. Reg. 46016 (Nov. 6, 1985).

     Section 280A(a) generally does not allow a deduction with

respect to the use of a residence by a taxpayer who is an

individual or an S corporation.    A pass-through entity such as a

partnership is considered to have made personal use of a dwelling

unit on any day which a partner would be considered to have made

personal use of the dwelling.     Holmes v. United States, 85 F.3d

956 (2d Cir. 1996), on remand 79 AFTR 2d 97-1292, 9701 USTC par.

50,265 (W.D.N.Y. 1997); sec. 1.280A-1(e)(5)(ii), Proposed Income

Tax Regs., 48 Fed. Reg. 33323 (July 21, 1983).

     Ultimately, the Court believes Mr. Chaney’s testimony and

accepts petitioners’ documentation, which satisfied applicable
                                  - 11 -

law.       We hold that petitioners are entitled to deduct the amounts

that remained at issue for depreciation (other than depreciation

for the portion of the dwelling unit used for Shaklee business),

meetings and convention expenses, COGS, meals and entertainment

expenses, car and truck expenses, travel expenses, and royalty

income expenses.       However, petitioners are not entitled to deduct

the costs of dog care, clothes for a meeting, personal birthday

gifts, and a wedding gift.      See sec. 262 (no deduction allowed

for personal, living, or family expenses).

       There is a lack of proof of a bona fide rental.     There was

no written rental agreement.      The purported rental agreement has

little reality beyond tax planning.        The purported rental was not

at arm’s length, and we disregard it for a lack of economic

substance.6      Accordingly, pursuant to section 280A, petitioners

are not entitled to deduct rental expenses, utilities expenses,

repairs and maintenance expenses, mortgage interest expense, a

residential property tax expense, and office depreciation.7

       6
        Additionally, Mr. and Mrs. Chaney made personal use of
the alleged rental space. One of petitioners’ dogs is confined
all day to the Shaklee office space. Mrs. Chaney prefers this
dog “not be in the other part of the house” to prevent it from
shedding in other parts of the house. Two other dogs stay in the
other parts of petitioners’ house during the day, but the Shaklee
office space is where the two other dogs sleep at night.
       7
        Pursuant to sec. 1402(a), “net earnings from self-
employment” include gross income derived by an individual from
any trade or business carried on by a partnership of which the
individual is a member. Disallowance of these expenses and
                                                   (continued...)
                                - 12 -

Section 6662(a) Penalty

     Section 7491(c) provides that the Commissioner bears the

burden of production with respect to the liability of any

individual for additions to tax and penalties.    “The

Commissioner’s burden of production under section 7491(c) is to

produce evidence that it is appropriate to impose the relevant

penalty, addition to tax, or additional amount”.    Swain v.

Commissioner, 118 T.C. 358, 363 (2002); see also Higbee v.

Commissioner, 116 T.C. 438, 446 (2001).    The Commissioner,

however, does not have an obligation to introduce evidence

regarding reasonable cause or substantial authority.     Higbee v.

Commissioner, supra at 446-447.

     Respondent determined that petitioners are liable for the

section 6662(a) penalty for 2003.    Pursuant to section 6662(a)

and (b)(1) and (2), a taxpayer may be liable for a penalty of 20

percent on the portion of an underpayment of tax due to

negligence or disregard of rules or regulations or a substantial

understatement of income tax.    An “understatement” is the

difference between the amount of tax required to be shown on the

return and the amount of tax actually shown on the return.     Sec.

6662(d)(2)(A).   A “substantial understatement” exists if the

     7
      (...continued)
concessions of other expenses by petitioners will result in
increased income flowing from BCA to petitioners. Pursuant to
sec. 1402(a), this income is self-employment income.
                               - 13 -

understatement exceeds the greater of (1) 10 percent of the tax

required to be shown on the return for a taxable year or (2)

$5,000.   See sec. 6662(d)(1)(A).   Respondent has met his burden

of production as he determined a substantial understatement of

income tax in the notice of deficiency.

     The accuracy-related penalty is not imposed with respect to

any portion of the underpayment as to which the taxpayer acted

with reasonable cause and in good faith.    Sec. 6664(c)(1).   The

decision as to whether the taxpayer acted with reasonable cause

and in good faith depends upon all the pertinent facts and

circumstances.   Sec. 1.6664-4(b)(1), Income Tax Regs.

     Among other things, petitioners failed to report income from

Prudential Insurance Company of America and the National

Institutes of Health for 2003.    Additionally, they deducted the

costs of dog care, clothes for a meeting, personal birthday

gifts, and a wedding gift.    These facts establish that

petitioners did not act with reasonable cause and in good faith.

     We note that petitioners’ tax return preparer was not called

as a witness.    We infer that his testimony would not have been

favorable to petitioners.    See Wichita Terminal Elevator Co. v.

Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th

Cir. 1947).
                             - 14 -

     Accordingly, we sustain the section 6662(a) penalty.

     In reaching our holdings herein, we have considered all

arguments made by the parties, and to the extent not mentioned

above, we find them to be irrelevant or without merit.

     To reflect the foregoing,

                                        Decision will be entered

                                   under Rule 155.


576 S.E.2d 316 (2003)
356 N.C. 642
In the Matter of APPEAL OF the GREENS OF PINE GLEN LTD. Partnership from the Decision of the Durham County Board of Equalization and Review Regarding the Valuation of Certain Real Property for Tax Year 1997.
No. 681PA01.
Supreme Court of North Carolina.
February 28, 2003.
*317 S.C. Kitchen, Durham County Attorney, by Curtis Massey, Assistant County Attorney, for appellant Durham County.
Parker, Poe, Adams & Bernstein L.L.P., by Charles C. Meeker and William H. McCullough, Raleigh, for taxpayer-appellee The Greens of Pine Glen.
North Carolina Association of County Commissioners, by James B. Blackburn, III, General Counsel, amicus curiae.
Moore & Van Allen PLLC, by Susan Ellinger, Charles H. Mercer, Jr., and Marc C. Tucker, Raleigh, on behalf of the North Carolina Low Income Housing Coalition, amicus curiae.
EDMUNDS, Justice.
Respondent The Greens of Pine Glen, Limited Partnership (taxpayer), instituted this action against petitioner Durham County to review petitioner's ad valorem tax valuation of taxpayer's property, The Greens of Pine Glen, which is located in Durham, North Carolina. The North Carolina Property Tax Commission, sitting as the State Board of Equalization and Review, confirmed the valuation assigned by Durham County, but the Court of Appeals reversed and remanded the matter to the Commission for further proceedings. We hold that the Commission properly confirmed Durham County's appraisal of The Greens of Pine Glen. Accordingly, we reverse the Court of Appeals. In addition, we remand to the Court of Appeals for further remand to the North Carolina Property Tax Commission for the limited purpose of substituting in its final decision the correct square footage value for The Greens of Pine Glen.
The Greens of Pine Glen is a 168-unit apartment complex constructed in southwest Durham in 1996 pursuant to 26 U.S.C. § 42. This statute, which is part of the Internal Revenue Code and is commonly referred to as "section 42," provides substantial federal income tax credits as an incentive for developers to construct and operate housing for low-income families and individuals. 26 U.S.C. § 42 (2000). A potential tenant is eligible to rent a section 42 unit only if that tenant's income does not exceed sixty percent of the area's median income. Id. In exchange for the tax credits, developers agree to limit rents for a section 42 unit to no more than thirty percent of the sixty percent median income level. Id. In addition to the *318 federal tax credit, North Carolina also provides state income tax credits to reward participation in the section 42 program (the program). N.C.G.S. § 105-129.16B (2001). Thus, section 42 tax credits fill the gap between the cost of developing the property and the reduced rents received from tenants, making section 42 construction projects attractive to developers.
Public agencies within each state administer the program and allocate the available federal and state tax credits. The North Carolina Housing Finance Agency, which is the responsible agency in this state, awards tax credits on the basis of several criteria, including the number of units built with rent restrictions and the overall cost of construction. Taxpayer presented evidence that, in practice, section 42 developments are sufficiently desirable that interested developers compete for them. In fact, taxpayer's witness testified before the Commission that the number of applicants typically equals five times the available resources. Moreover, the high demand for such housing often results in a low vacancy rate. As a result, developers desiring the credits frequently agree to terms that exceed the minimum requirements of the program. In the case at bar, in order to maximize the credits available to it, taxpayer chose to construct one hundred percent of The Greens of Pine Glen as a section 42 program. In addition, taxpayer offered to extend the period of the restrictions beyond the mandatory fifteen years up to a total of thirty years. The rents taxpayer charges for its apartments are twenty-five to thirty percent below market rents for apartments of similar size, construction, and location, but are the maximum allowed for continued participation in the program.
Taxpayer's witness testified that developers of section 42 properties who receive an allocation from the North Carolina Housing Finance Agency almost always form a limited partnership with one or more limited or investor partners. The developer/general partner allocates the tax credits to the limited partners, which are typically Fortune 500 companies. Taxpayer's witness explained that the limited partners' interests lie solely in the tax credits for subsequent resale. In other words, the limited partners purchase a financial product.
The Greens of Pine Glen was developed through the creation of such a limited partnership. W.O. Brisben Companies, a for-profit company in the affordable housing field, became a one percent general partner with a ninety-nine percent limited partner, SunAmerica Housing Fund 213, a subsidiary of AIG Insurance. The partnership agreement allocated the tax credits allowed under section 42 to each partner commensurate with its ownership interest. The federal income tax credits allocated to the project were $822,006 per year for ten years, and the limited partner paid approximately $4,700,000 for its share of these credits. These funds were used to develop The Greens of Pine Glen, whose construction cost $10,800,000.
After construction was completed, Durham County in April 1997 sent taxpayer a tax appraisal that valued the property at $5,941,692. Durham County arrived at this value by using the income approach method of appraisal, which took into account the market impact of section 42 use and rent restrictions on the property. However, at that time, Durham County used the cost approach method of appraisal to value restricted-rent properties and newly developed properties that did not have a rental history. The cost approach method of appraisal considers market rents and does not take into account rent restrictions. Consequently, owners of other restricted-rent properties suggested to Durham County tax officials that an error had been made when the income method was used to value The Greens of Pine Glen.
On 9 May 1997, Durham County delivered to taxpayer a revised appraisal of $7,488,350, based on the cost approach. Durham County later discovered that it had erred in calculating the property's square footage in its May 1997 appraisal and accordingly sent a corrected third appraisal to taxpayer in 1998, decreasing the appraised value to $7,250,050 for tax year 1998.
Taxpayer appealed Durham County's May 1997 appraisal to the Durham County Board of Equalization and Review, which affirmed *319 the $7,488,350 value. Taxpayer then appealed to the Commission, which conducted a hearing on 13 and 14 April 2000. On 19 June 2000, in a split decision, the Commission confirmed Durham County's May 1997 appraisal.
Taxpayer appealed the Commission's decision to the North Carolina Court of Appeals. On 20 November 2001, the Court of Appeals issued a unanimous opinion reversing the Commission. After determining that Durham County overvalued The Greens of Pine Glen by using market rents to determine its value under the cost approach, In re Appeal of Greens of Pine Glen Ltd. Part., 147 N.C.App. 221, 555 S.E.2d 612 (2001), the Court of Appeals held that The Greens of Pine Glen must be valued "using the income method or a combination of methods which account for the market effect of the section 42 [rent] restrictions," id. at 229-30, 555 S.E.2d at 618. Accordingly, the Court of Appeals remanded the matter for receipt of additional evidence on the property's value. Id. at 230, 555 S.E.2d at 618. On 6 March 2002, this Court allowed Durham County's petition for discretionary review.
Petitioner Durham County contends that the Court of Appeals erred when it reversed and remanded the Commission's decision. Durham County argues that the Commission properly concluded that taxpayer failed to meet its burden to rebut the presumption that the county's appraisal was correct. We review decisions of the Commission pursuant to N.C.G.S. § 105-345.2. N.C.G.S. § 105-345.2 (2001). Questions of law receive de novo review, while issues such as sufficiency of the evidence to support the Commission's decision are reviewed under the whole-record test. N.C.G.S. § 105-345.2(b). Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the Commission. Mann Media, Inc. v. Randolph Cty. Planning Bd., 356 N.C. 1,13, 565 S.E.2d 9, 17 (2002). Under the whole-record test, however, the reviewing court merely determines "`whether an administrative decision has a rational basis in the evidence.'" In re Appeal of McElwee, 304 N.C. 68, 87, 283 S.E.2d 115, 127 (1981) (quoting In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979)). Because the controlling issue in this case is whether the Commission properly accepted Durham County's method of valuing The Greens of Pine Glen rather than the method offered by taxpayer, we use the whole-record test to evaluate the conflicting evidence.
Ad valorem tax assessments are presumed to be correct. Id. at 75, 283 S.E.2d at 120. However, a taxpayer may rebut this presumption if it produces "competent, material and substantial" evidence establishing that: "(1) Either the county tax supervisor used an arbitrary method of valuation; or (2) the county tax supervisor used an illegal method of valuation; AND (3) the assessment substantially exceeded the true value in money of the property." In re Appeal of AMP, Inc., 287 N.C. 547, 563, 215 S.E.2d 752, 762 (1975). Thus, a taxpayer who is challenging an ad valorem tax assessment must satisfy a two-prong test by demonstrating that the means adopted by the tax supervisor was illegal or arbitrary and also that the valuation was unreasonably high. Id. If a taxpayer fails to present evidence sufficient to meet its burden as to either prong, the appeal fails. Id.
The Commission concluded Durham County adequately established that it appraised The Greens of Pine Glen in accordance with its duly adopted schedules of values, standards, and rules, and in a manner consistent with the county's appraisal of comparable properties. In addition, the Commission found that taxpayer failed to show by competent, material, and substantial evidence that the assessed value of The Greens of Pine Glen exceeded its fair market value. After reviewing the whole record and considering taxpayer's contentions, we agree with the Commission. Therefore, we reverse the Court of Appeals.
Durham County argues that taxpayer failed to satisfy its burden of establishing that the method of appraisal used was illegal or arbitrary.[1] The North Carolina General *320 Assembly requires that all property, real and personal, be assessed for taxation at its true value or use value as determined under section 105-283. N.C.G.S. § 105-284(a) (2001). The words "true value" are interpreted as meaning market value, "that is, the price estimated in terms of money at which the property would change hands between a willing and financially able buyer and a willing seller." N.C.G.S. § 105-283 (2001). In determining the "true value" of real property, an appraiser must consider, among other things, its "replacement cost; cost; adaptability for residence, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value." N.C.G.S. § 105-317(a)(2) (2001). However, the general statutes nowhere mandate that any particular method of valuation be used at all times and in all places. In light of the innumerable possible situations that may arise, authorities that have the obligation of assigning a value to land sensibly are given discretion to apply the method that most accurately captures the "true value" of the property in question.
Section 105-317 has been interpreted as authorizing three methods of valuing real property: the cost approach, the comparable sales approach, and the income approach. In re Appeal of Owens, 144 N.C.App. 349, 353, 547 S.E.2d 827, 829, appeal dismissed and disc. rev. denied, 354 N.C. 361, 556 S.E.2d 575 (2001); In re Appeal of Stroh Brewery Co., 116 N.C.App. 178, 186, 447 S.E.2d 803, 807 (1994) (citing Patrick K. Hetrick, Larry A. Outlaw & James A. Webster, Jr., North Carolina Real Estate for Brokers and Salesmen, ch. 16, at 604 (3d ed.1986)); City of Statesville v. Cloaninger, 106 N.C.App. 10, 16, 415 S.E.2d 111, 115, appeal dismissed and disc. rev. denied, 331 N.C. 553, 418 S.E.2d 664 (1992). Although the income approach is generally considered the most reliable method for determining the market value of investment property, the cost approach is better suited for valuing specialty property or newly developed property and is often used when no other method will yield a realistic result. In re Appeal of Belk-Broome Co., 119 N.C.App. 470, 474, 458 S.E.2d 921, 924 (1995), aff'd per curiam, 342 N.C. 890, 467 S.E.2d 242 (1996). The statute contemplates that the assessors and the Commission will consider which factors apply to each specific piece of property in appraising its true value. See In re Ad Valorem Valuation of Prop. at 411-417 W. Fourth St., 282 N.C. 71, 81, 191 S.E.2d 692, 698 (1972).
Although both the income and the cost approaches are legal methods of valuation, the Court of Appeals held that the use of the cost approach was illegal under the circumstances of this case because that method does not consider income restrictions required by taxpayer's participation in the section 42 program. In re Appeal of Greens of Pine Glen Ltd. Part., 147 N.C.App. at 229-30, 555 S.E.2d at 617-18. Accordingly, the Court of Appeals mandated that an appraiser of section 42 property must use the income approach or a combination of methods, including the income approach, that account for section 42 rent restrictions. Id. We begin by addressing this requirement.
This Court has consistently held that where the income approach is used, the valuation must be based on market rents, not contractually restricted rents. In re Appeals of Southern Ry. Co., 313 N.C. 177, 190, 328 S.E.2d 235, 244 (1985); In re Ad Valorem Valuation of Prop. at 411-417 W. Fourth St., 282 N.C. at 79-80, 191 S.E.2d at 698; In re Prop. of Pine Raleigh Corp., 258 N.C. 398, 403, 128 S.E.2d 855, 859 (1963). In Property of Pine Raleigh, this Court considered the effect on tax valuation of a long-term lease that fixed the rental income the taxpayer could receive. The taxpayer argued that he had improvidently entered a lease under which the tenant payed a low rent, and as a result, the taxpayer was not receiving full value for his property. In Prop. of Pine Raleigh Corp., 258 N.C. at 400-01, 128 S.E.2d at 856-57. We held that when valuing real property in accordance with N.C.G.S. § 105-295 (now N.C.G.S. § 105-317), *321 "the income referred to is not necessarily actual income. The language is sufficient to include the income which could be obtained by the proper and efficient use of the property." Id. at 403, 128 S.E.2d at 859. Accordingly, we held that taxpayers cannot adjust the value of their property by engaging in contractual agreements that reduce the income potential of their property below the fair market value. Id. at 404-05, 128 S.E.2d at 859-60.
We acknowledge that where two properties are taxed the same, the owner of the property that yields less income bears a proportionately higher tax burden than the owner of the property that produces a greater income. However, any such inequality is attributable to the differences in the nature, use, and other characteristics of the properties, not to the taxing statute. Id. at 404, 128 S.E.2d at 860; see also In re Ad Valorem Valuation of Prop. at 411-417 W. Fourth St., 282 N.C. at 78-80, 191 S.E.2d at 697-98 (holding that where contract rents produced a higher-than-market value, the appraiser could properly consider both the actual rental income and the market rental income). Therefore, this Court has held that "[i]f it appears that the income actually received is less than the fair earning capacity of the property, the earning capacity should be substituted as a factor rather than the actual earnings. The fact-finding board can properly consider both." In Prop. of Pine Raleigh Corp., 258 N.C. at 403, 128 S.E.2d at 859.
Like the long-term lease in Property of Pine Raleigh, which locked the property owner into a less-than-optimal rent, taxpayer's contractual agreement to section 42 rent restrictions meant The Greens of Pine Glen no longer earned the market rate in rents. Taxpayer voluntarily entered into such an agreement because of the substantial tax credits it received in return. Taxpayer could have built these apartments for rental on the open market, but it chose to be in the business of affordable housing in order to take advantage of the various federal and state incentives. Its participation in the section 42 program created another way to finance taxpayer's building project because the sale of the tax credits generated funds that taxpayer used to construct The Greens of Pine Glen. Therefore, taxpayer's participation in section 42 housing represented a business and economic decision, not unlike the long-term lease in Property of Pine Raleigh.
Moreover, even if Durham County valued The Greens of Pine Glen under the income approach as mandated by the Court of Appeals' holding, the "income" considered would not necessarily be actual income. Under Property of Pine Raleigh, if taxpayer received less than the fair earning capacity of The Greens of Pine Glen in rents, the fair earning capacity could control over or be considered along with the actual earnings. Therefore, even under the income approach of appraisal, Durham County and the Commission were not required as a matter of law to consider section 42 restrictions. Accordingly, taxpayer's contention that Durham County's method of appraisal was not legal because it did not consider the section 42 restrictions is insufficient to rebut the presumption that the appraisal was properly administered.
Taxpayer's arguments to the contrary are not persuasive. The Court of Appeals agreed with taxpayer's contention that section 42 restrictions are more analogous to governmental regulation than to freely entered contractual covenants. Taxpayer argued that the rent restrictions at bar resembled zoning provisions, which are routinely considered in appraising real property. However, this Court rejected such an equivalency when we held that "[a] zoning ordinance is not a contract between the municipality and its citizens.... It is subject to amendment or repeal at the will of the governing agency which created it." McKinney v. City of High Point, 239 N.C. 232, 237, 79 S.E.2d 730, 734 (1954). By contrast, when a state or governmental body becomes a party to a business contract, its rights and responsibilities are, with few exceptions, the same as those of individuals. Smith v. State, 289 N.C. 303, 310, 222 S.E.2d 412, 417 (1976). Therefore, governmental restrictions imposed as part of a state's police power are distinguishable from contractual agreements freely entered into between parties participating in arm's-length negotiations.
*322 As detailed above, ample evidence was presented to establish that section 42 restrictions fall into the latter category. Unlike a governmental restriction such as zoning, section 42 restrictions do not diminish the property's value, but instead balance tax credits allowed to the developer against rent restrictions imposed on the developer. Because section 42 restrictions are freely entered contractual covenants, not governmental regulations, the Commission did not err in concluding that taxpayer may not artificially alter the value of its property below fair market value.
Although the Court of Appeals relied on In re Appeal of Belk-Broome Co., 119 N.C.App. 470, 458 S.E.2d 921, for the proposition that the section 42 program represents a new and distinct market requiring the consideration of its contractual restrictions, In re Appeal of Greens of Pine Glen Ltd. Part., 147 N.C.App. at 226-29, 555 S.E.2d at 616-18, we believe that Belk-Broome is distinguishable. In Belk-Broome, the taxpayer, a Belk department store that served as an anchor store for a mall, successfully challenged a final decision of the Commission that upheld the county's ad valorem tax appraisal of the Belk property using the cost approach method of valuation. The Commission concluded that the county correctly appraised the property based upon the "entire bundle of rights" without regard as to whether Belk had chosen to bargain some of those rights away. In re Appeal of Belk-Broome Co., 119 N.C.App. at 476-77, 458 S.E.2d at 925. The Court of Appeals reversed and held that Belk "unquestionably carried its burden" of showing that the county's valuation was improper and that the income approach should be the primary method for determining the value of anchor stores. Id. at 475, 480, 458 S.E.2d at 924, 927.
Under the Commission's interpretation, Belk, as an anchor store, both enhanced the square-foot value of other stores, and then was itself taxed at the enhanced rate. Id. at 479, 458 S.E.2d at 926. The Court of Appeals recognized that this enhanced tax was improper. Unlike stand-alone facilities, anchor stores hold a unique position in mall retail operations. Id. at 475-76, 458 S.E.2d at 925. Anchor stores both attract smaller stores to the mall and allow mall managers to charge increased rents to those smaller stores. Because the success of a shopping mall is dependent on the presence of anchor stores and because the developer can charge the smaller stores increased rents, the anchors are afforded discounted rents. Under these facts, the Court of Appeals held that it was improper for the Commission to use the cost approach method of valuation to equalize property values between the anchor store and the other surrounding stores in the mall. Id. at 476, 480, 458 S.E.2d at 925, 927.
Significant factual differences distinguish the case at bar from Belk-Broome. Unlike a mall anchor store, The Greens of Pine Glen does not attract or retain other taxable property, nor does its presence confer any greater value on associated or adjacent properties. Section 42 rent restrictions do not apply to all apartment complexes, and section 42 restrictive covenants are not standard in the apartment industry. Those developers who choose to participate in the section 42 program voluntarily trade away revenue potential in order to finance the property's construction. Accordingly, we conclude that the analysis in Belk-Broome is inapplicable here.
Because taxpayer failed to meet the first prong of the test by establishing that the Commission used a valuation method that was illegal or arbitrary, we need not address the second prong, whether the appraisal exceeded the "true value in money" of the property. In addition, because we reverse the opinion of the Court of Appeals on the basis of the application of the facts to the statute, we need not reach Durham County's contention that the Court of Appeals' opinion represented an unconstitutional infringement by the judiciary on the powers of the General Assembly. State v. Creason, 313 N.C. 122, 127, 326 S.E.2d 24, 27 (1985).
Our review of the record reveals that although the property was reappraised in 1998 to correct an error in the May 1997 appraisal caused by a miscalculation of the square footage of the property, the Commission considered only the uncorrected value in its 2000 Order. Durham County argues that this Court does not have authority to remand *323 this case to the Commission for reconsideration based on the correct square footage. See N.C.G.S. § 105-345.1. However, our reading of that statute satisfies us that it addresses only evidence that becomes known after the hearing before the Commission. Here, the evidence (in the form of the corrected valuation) was known before the hearing but was not considered at the hearing. Thus, the Commission considered the incorrect square footage value in its decision.
Based upon the foregoing, we reverse the decision of the Court of Appeals. We also remand this matter to the Court of Appeals for further remand to the North Carolina Property Tax Commission for the limited purpose of substituting in its final decision the correct square footage value for The Greens of Pine Glen. See N.C.G.S. § 105-345.2(b).
REVERSED AND REMANDED.
Justice BRADY did not participate in the consideration or decision of this case.
NOTES
[1]  Although the parties correctly note that the taxpayer may rebut the presumption of correctness of an assessment by showing that the method of valuation is either illegal or arbitrary, the Court of Appeals' opinion and taxpayer's brief to this Court focus almost entirely on the purported illegality of the method used here. In light of unrebutted evidence that Durham County used the cost approach to value other similar property, we believe that there is no suggestion that the method employed in the case at bar was arbitrary.