Nev. Admin. Code § 361.423 — 361.423

NAC 361.423    Income approach indicator of value: Formula for determination. ( NRS 360.090 , 361.320 )
1.  The capitalized income approach consists
of deducting from the normalized and annualized gross operating income any
direct and indirect normalized and annualized operating expenses specifically
related to the normalized and annualized gross operating income including any
annualized book depreciation. Deferred income taxes will be treated as an
operating expense. Normalized and annualized rental expense on operating
property leased from others, less imputed depreciation, income taxes and other
applicable expenses, will be disallowed as an operating expense.
2.  The resulting adjusted net operating
income will be capitalized (converted to value) using an appropriate
capitalization rate for the industry group. The capitalization rate for the
typical company will be used for the firms being appraised in each industry
group. The market capitalization rate will be derived from calculations made
for selected companies in each industry group.
3.  The operating income to be capitalized
into taxable value will be normalized and annualized based on the most recent
year’s adjusted net operating income. When the most recent year’s net operating
income is not a reasonable representation of a company’s net operating income,
such as where a company’s net operating income tends to be cyclical, a 3- or
5-year average of adjusted net operating incomes will be normalized and
annualized and may be used.
4.  Construction work in progress is not a
factor in applying the income approach to value.
5.  Any normalization or annualization
adjustments to a company’s net operating income must be based on known,
measurable and experienced changes in a company’s operation or taxable property
as of the current year’s reporting date.
(Added to NAC by Tax Comm’n, eff. 9-30-88; A by R085-98,
11-23-98)