In Uncategorized on 04/23/2016 at 11:55


Owing to my brother’s and sister-in-law’s overwhelming hospitality, there’s a one-day delay in bringing you John A. Atkinson & Judy B. Atkinson, et al., Docket No. 2683-11, filed 4/22/16.

Harking back to the Part Un version of this post, it’s another conservation easement blown up, but the blowing up took place back in December last year. The issues were much the same as my blogpost “It Ain’t Over,” 7/14/15, so I didn’t blog it.

So Judge Wells sent off the parties to the usual Rule 155 beancount. The parties stipped to $200K of expenses claimed deductible. But their submitted Computations for Entry of Decision (CED) differed, and thereby hangs the cliché.

Though they stipped to the number in gross, they didn’t stip to who got what and for what, and therefore, says IRS, there’s no way to know what, if any, of that $200K was properly deductible.

More elegantly, Judge Wells: “The parties did not, however, stipulate as to details of the services provided or…the amounts paid to each of the payees. Neither did the parties stipulate that the amounts paid to the…payees totaled the amounts deducted by petitioners. Respondent contends that without these stipulations, respondent’s determination of a zero value for the expenses is presumed correct, and that petitioners have failed to produce the necessary evidence to overcome the presumption and support a different determination.” Order, at pp. 1-2.

I can testify from my own knowledge that, at the end of a knock-down, drag-out negotiation, with the empty cardboard coffee cups littering the conference table and the floor, and the ill-digested tuna-salad-on-toast from lunch nine hours ago still wallowing around my innards, a couple the finer points (hi, Judge Holmes) of the hammered-out (and I do mean hammered) deal might get lost when banging out the final, final stip in someone else’s office with someone else’s wordprocessing software. Of course, the support staff have long since gone home at that point.

Judge Wells isn’t buying that finesse, although I do give IRS’ counsel a Taishoff “good try, Third Class.”

Section 212(3) is broad enough to cover payment of fees for obtaining tax advice. And IRS stipped that the fees and payees were “related to the Easements.” That is, the shot-down Easements.

“Respondent [IRS] stipulated that petitioners deducted appraisal, consulting, legal, and accounting fees that were ‘related to the Easements’. The fact that the accountants also provided business services and that the returns were self-prepared are not inconsistent with the stipulations; petitioners stipulated that they deducted only those fees paid in relation to the Easements, and there are plenty of accounting services to be provided apart from return preparation. In the instant cases, respondent provides no reason to set aside the stipulations and find that petitioners incurred expenses to ‘implement’ the Easements but not to ‘determine’ the tax liability related to the Easements.” Order, at p. 2.

Facilitators’ fees aren’t deductible, of course, but fees paid for tax advice, even if wrong but not fraudulent, are. (Clients please copy).

And Judge Wells does a Cohan without citing the composer of my Alma Mater’s fight song.

“…in the event that a taxpayer establishes that a deductible expense has been paid, as in this case through stipulations, but is unable to substantiate the precise amount, we generally may estimate the amount of the deductible expense. The taxpayer must present sufficient evidence to provide some basis upon which an estimate may be made. Through the stipulations and testimony as discussed in our Opinion, petitioners have provided sufficient evidence to support an estimate of between $20,000 and $25,000 in fees paid… to the four remaining payees: attorneys, accountants, NALT, and appraisers.” Order, at p. 2.

NALT is North American Land Trust, hawker of dubious easements and furnisher of incoherent testimony, in which context see my blogpost abovecited.

Judge Wells puts John’s and Judy’s beef about interest on hold pending the final numbers.

So guys, come up with fresh CEDs. Today.

Takeaway– The Devil hasn’t relocated. The Old Boy is still there, in the details. Remember, stipulate, don’t capitulate.

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