I’m not arguing the necessity, or the fairness, or the justification of taxation, consumer protection, civil rights, etc, just stating the effect is distortion in the market.But, as I stated the taxation of a 0 - 20% rate on capital gains (ok 3.8% - 23.8%) is not only very low by the standards of the last 84 years, but also preferential to the marginal rates on earned income, investment income, and short term capital gains.  

What is the primary justification for them trying to implement something like this? 

Call the buyer's agent when the appraiser makes the appointment and ask if they can meet the appraiser with their price justification packet. 

. = $6.0M – $7.1MStep 3: Justification of ARV at $7.1MWaterfront Location: High demand for oceanfront properties in Jamestown.Luxury Market Trends: High-end buyers are paying $1,200 – $1,500 per sq. ft. for new construction.Comparable Sales Support: 4 Dewey Ln and 597 Beavertail Rd confirm the $1,500/sq. ft. estimate is realistic.Low Inventory: Waterfront lots in Jamestown are scarce, increasing property value.Your ARV analysis looks pretty solid based on the comps you’ve used.

I’m just waiting on a quote from an electrician and HVAC technician so that I can give them some justification for my numbers, if need be.

Maybe he's already charging above-market rates and needs to adjust expectations.I don't see the justification for spending $12,000 to install electric baseboard in four apartments.

what would be the justification for paying that much?

Using an unexpected repair as justification for not caring about cashflow as much as appreciation doesn't really address the issue, especially when appreciation also operates on the idea that the property's condition doesn't decline relative to comps.From what I understand about REI and cashflow, cashflow should cover not only PITI, but maintenance, repair reserves, prop management, etc.

What was their stated justification for that?

Business justification of LLC-B --> This is can be a problem.