I didn’t blog David C. Costello and Barbara A. Costello, 2015 T. C. Memo. 87, filed 5/6/15, when it first appeared, because it seemed to be the usual defectively-appraised charitable easement. I was getting bored with the tax dodges wrapped in sylvan wilderness, or plastered on historic façades.

But Judge Lauber, that scholar of classics at Cambridge, has an interesting riposte to Dave and Barb when they seek Rule 161 reconsideration in David C. Costello and Barbara A. Costello, Docket No. 24995-12, filed 7/17/15.

The Quick gambit is played to open. “’Reconsideration is not the appropriate forum for rehashing previously rejected legal arguments or tendering new legal theories to reach the end result desired by the moving party.’ Estate of Quick, 110 T.C. at 442.” Order, at p. 1.

Dave and Barb were trying to duck the 40% substantial overvaluation chop, alleging Section 6664 cover.

But the appraisal submitted with their return wasn’t qualified, and IRS and Tax Court can only consider appraisals that were in hand when the return claiming the charitable write-off was due.

“In their motion for reconsideration, petitioners challenge our findings only insofar as they relate to the penalties, and they advance three arguments to this end. First, they contend that their CPA incorrectly advised them that they had to claim the charitable contribution deduction for the easement on their original … return…. But for this advice, petitioners say, they would have filed their original return without claiming that deduction and would instead have claimed the deduction on an amended return…. By that time, petitioners say, they would have received their appraiser’s corrected appraisal, which allegedly would have been a ‘qualified appraisal.’ Since the appraisal that petitioners received ‘before the due date of the return on which [the] deduction [was] first claimed’ would then have been a qualified appraisal, sec. 1.170A-13(c)(3)(iv)(B), Income Tax Regs., petitioners conclude that they would be eligible for the reasonable cause defense but for their CPA’s erroneous advice.” Order, at p. 2.

This “does not warrant reconsideration of our holding.” It assumes facts, is purely hypothetical, and wasn’t raised in brief or on trial.

Dave and Barb next claim Judge Lauber was wrong when he said they hadn’t told their appraiser all relevant facts.

Judge Lauber is all over that one: “The thrust of petitioners’ argument is that they adequately disclosed facts to their CPA. But they cite no facts showing that the Court erred in finding that they failed to disclose all relevant facts to their appraiser, which caused him (among other things) to appraise the wrong property. Petitioners do not allege any ‘substantial error’ or ‘newly discovered evidence’ on these points. See Estate of Quick, 110 T.C. at 441. Petitioners are simply disagreeing with certain ultimate facts as found by the Court; this does not form a proper basis for a motion for reconsideration. In any event, our findings of fact on this point were relevant only to the accuracy-related penalty…. Even if we were to reconsider those findings, it would not enable petitioners to avoid the substantial valuation misstatement penalty…, T.C. Memo. 2015-87, at *38 n.13, because they lacked a ‘qualified appraisal.’” Order, at p. 3.

Finally, I can give Taishoff “good try, third class” to Dave’s and Barb’s counsel. He tries to argue that Section 6664(c)(3)(a) just requires that the taxpayer have reasonable cause for not having a qualified appraisal, not actually having gotten one in hand timely.

Well, Judge Lauber is tired of rehash, so he makes some hash.

“Given the statutory text, this argument has little to recommend it. In any event, it is a new legal argument that petitioners did not advance at trial or in their post-trial briefs. Petitioners concede that the argument they now seek to advance ‘was not well-articulated previously.’ Petitioners’ Motion at 15 n.6. That is an understatement.” Order, at p. 3.

No, this is not an exercise in schadenfreude; this could happen to any of us. I offer this order to show the limitations of Rule 161, and the draconian impact of the 40% chop.