The hard-laboring clerks and flailing date-stampers at 400 Second Street, NW, in the homeplace of tomorrow’s birthday honoree, must already be on their way to the beach and barby, because the opinions that usually emerge at 3:30 EDT were up this morning before noon.

But it now falls to the hard-laboring blogger, here in The City That Never Sleeps, who has before him neither beach nor barbecue, to lay before the public the saga of RERI Holdings I, LLC, Jeff Blau, Tax Matters Partner, 149 T. C. 1, filed 7/3/17.

If somewhere in the dimmer recesses of the reader’s mind a faint tintinnabulation is heard, the reader is one sharp cookie. See my blogposts “Don’t Give a Sham,” 5/22/14, and “Don’t Give a Sham – Part Deux,” 8/11/14.

But today’s iteration of the charitable donee’s celebrated fight song “Hail to the Victors Valiant,” goes not to the chaps in yellow and blue, but to IRS, as Judge James S. (“Big Jim”) Halpern tells us in 69 pages.

You’ll remember that a remainder interest in realty that cost a hair less than $3 million gave rise to a $33 million charitable deduction, although the charitable donee, alma mater to both my mother and my nephew (but not in the same class), get way less than $33 million.

After plowing through nearly 20 pages contrasting and comparing dueling appraisals of the worth of the remainder interest transferred to the donee, Judge Big Jim goes off on the Form 8283, which does not state the cost basis of the interest donated in the hands of the donor.

RERI, the donor, claims substantial compliance.

No, says Judge Big Jim.

“The significant disparity between the claimed fair market value and the price RERI paid to acquire the SMI just 17 months before it assigned the SMI to the University, had it been disclosed, would have alerted respondent to a potential overvaluation of the SMI. Because RERI failed to provide sufficient information on its Form 8283 to permit respondent to evaluate its reported contribution, cf. Smith v. Commissioner, 2007 WL 4410771, at *19, we cannot excuse on substantial compliance grounds RERI’s omission from that form of its basis in the SMI. Therefore, RERI did not “[a]ttach a fully completed appraisal summary” to its 2003 return as required by section 1.170A- 13(c)(2)(i)(B), Income Tax Regs. Because RERI did not meet the substantiation requirements provided in section 1.170A-13(c)(2), Income Tax Regs., it is not entitled to any deduction under section 170 for its contribution of the SMI to the University. See sec. 170(a)(1); sec. 1.170A-13(c)(1), Income Tax Regs.” 149 T. C. 1, at pp. 26-28, footnotes omitted.

Since this is a petition from a FPAA, determination is made at entity level. So on with the 400% overvaluation chop.

But no chop if FMV of the donated interest cannot be proven, or proves to be under the radar for the overvaluation chop. The Section 7520 tables to be used for remainders fail to consider that the holder of the donated interest couldn’t sue for damages or to enforce the tenant for years to make good any damage, only evict the tenant for years. Thus inadequate protection for the remainder, throwing the Section 7520 tables off the table. Check out Reg, 1.7520-3(b)(1)(iii).

Follows the usual mix-and-match among appraisers, and whoever has burden of proof for enhanced chop, the evidence to prove good-faith reliance is the same. The words and deeds at time of donation are what they are.

And RERI relied on 18-month old numbers for FMV when it made the contribution. Not good enough for good-faith reliance.

IRS wins. Rule 155 beancount follows.

But individual partners may have an out. “Although the liability of a particular partner for the gross valuation misstatement penalty will depend on the arithmetic threshold provided in section 6662(e)(2), no partner will be able to avoid the penalty on the basis of the reasonable cause exception provided in section 6664(c).” 149 T. C. 1, at p. 69.

Frances L. Rogers, 2017 T.C. Memo. 130, filed 7/3/17, is no stranger to this blog, although she now appears as lead player.

More properly, she is Frances L. Rogers, Esq., member of the Chicago Bar Association, sporting the following credentials: “In 1963 she graduated with a bachelor’s degree in chemistry, and in 1965 she completed a master’s degree in biochemistry. In 1975 she completed a master’s degree in business administration (M.B.A.). In 1981 she earned a doctorate in educational administration. Petitioner attended law school, and in 1990 she completed her law degree. While attending law school she took classes in corporate and individual income tax. Petitioner has taken courses at her local community college. In 2011 and 2012 she completed multiple classes in tax and accounting, including income tax accounting, advance tax accounting, and principles of financial accounting.” 2017 T. C. Memo. 130, at pp. 2-3.

No, Frances isn’t putting out her c.v. to apply for a job as Trial Clerk in Tax Court. Rather, she is seeking Section 6015 innocent spousery from her trial counsel, spouse and well-credential master dodger John E. Rogers, whose career I and Judge Ruwe have pursued from Brazil to Seventh Circuit. There must be half-a-dozen of John’s peccadilloes that have featured in this my blog, and Frances was right by his side.

In fact, when John was ill back in 2009, Frances took over his law office and ran the whole show.

Now Judge Kerrigan has this one, and she has a lot more patience than I would have were I a Tax Court Judge (which Heaven forfend!).

This is a 90-day stand alone, which happens when there is no deficiency pending, collection has commenced, and ninety days has elapsed after the Form 8857 has gone in and IRS did nothing; they were probably still convulsed with mirth.

On the trial, Frances claims “…she did not meaningfully participate in the…deficiency case. She did not sign the court documents filed in the … deficiency case, and she testified that she had not looked at many of those documents. On her Form 8857 and in her testimony petitioner portrays herself as having a near complete lack of knowledge or sophistication with respect to business and financial matters. For example, she states that before 2009 she ‘was not capable of understanding a checking account or credit card statement’ and that she still ‘is unable to understand basic financial statements’.

“According to petitioner her husband ‘took care of everything’ regarding the family’s finances and made most or all financial decisions for her. She claims that she relied on him to handle tax and financial matters that affected the family, and she believed her reliance was appropriate given that he was a ‘tax professional * * * well respected by his colleagues and clients.’ Despite having an M.B.A. and a J.D. and having completed multiple courses in taxation petitioner contends that she has ‘no understanding’ of items and transactions reported on their joint returns, which were the subject of the … deficiency case. Petitioner testified that during the 2012 trial she ‘had no idea what was happening’. 2017 T. C. Memo. 130, at pp. 14-15.

I cannot comment on the foregoing without using language unfit for the chaste eyes of my readers, but the words “load of” and  “horse” play a role therein.

Judge Kerrigan, dainty as always: “Petitioner’s testimony about the extent of her ignorance is not credible.” 2017 T. C. Memo. 130, at p. 15.

She was independently wealthy before she married, ran her inherited real estate, ran her own real estate  brokerage, was associate principal of a high school with over 2,000 students, worked with her husband, never alleged abuse, was still married to him, and utterly failed to sustain her burden of proof.

If ever a case called for a Section 6673 chop to add to the family bill, this is the case.