In Uncategorized on 11/01/2017 at 17:46

Nothing so cheers a weary blogger on a grey autumn afternoon as a hot cup cocoa (hi, Judge Holmes) and a repeat customer. Even more so is the case when the day’s only opinion is a non-substantiation small-claimer and the only designated hitter is a one-pager better left in obscurity.

So thanks to Ten Twenty Six Investors, Douglas Oliver, Tax Matters Partner, Docket No. 29483-14, filed 11/1/17, and ex-Ch J Michael B (“Iron Mike”) Thornton, for sending this blogfeeder my way.

Remember IRS has burden of production when seeking to slug the taxpayer with a chop in the Glasshouse. Well, Dauntless Doug and the Ten Twenty Sixers claim their façade easement collapsed because they claimed same in wrong year, the beneficiary of the easement having not recorded their easement deed until two (count ‘em, two) years after the Ten Twenty Sixers claimed they’d given it and took the deduction. Therefore, either the unrecorded easement wasn’t effective, or if effective wasn’t perpetual, in the year granted, so even if invalid, there was no overvaluation and the concomitant 20% – 40% chop is off the table.

For more about the recording issue, see my blogpost “The Race to the Courthouse Door,” 6/15/17.

Ex-Ch J Iron Mike points out the obvious.

“When the correct value of property claimed on a return is zero, any claimed value is deemed to be 400% or more of the correct amount. Sec. 1.6662-5(g), Income Tax Regs. Consequently, the entire amount of the under payment resulting from disallowance of the noncash contribution deduction is attributable to a gross valuation misstatement. Respondent’s burden of production with respect to the substantive elements of the gross valuation misstatement penalty found in section 6662 is therefore met, and we shall grant in part respondent’s motion for partial summary judgment…on this issue and deny petitioner’s motion for partial summary judgment…. Order, at p. 5.

OK, so march out Dauntless Doug and the Ten Twenty Sixers, and face the chop, right?

Not so fast. It’s time for a Chai. The Section 6751(b) Boss Hoss sign-off, which IRS seems to have forgotten, is still out there, and IRS’ motion for summary J on the chop is denied to that extent.

Likewise IRS’ claim that the appraisal the Ten Twenty Sixers proffered was older than sixty days prior to granting the easement, because it was done two years before the easement was recorded  (and therefore effectively granted).

Mox nix, says ex-Ch J Iron Mike, no biggie.

“This Court has held that ‘[t]he provisions of section 1.170A-13(c)(3), Income Tax Regs., are directory, requiring substantial compliance, rather than mandatory, requiring strict compliance.’ Zarlengo v. Commissioner, T.C. Memo. 2014-161, at *32 (citing Bond v. Commissioner, 100 T.C. 32 (1993)). When we examine whether the taxpayer has substantially complied, we look at all the facts and circumstances in the light of the requirements set out in section 1.170A13(c)(3), Income Tax Regs. See Zarlengo v. Commissioner, T.C. Memo. 2014161; Rothman v. Commissioner, T.C. Memo. 2012-163. In Zarlengo, the Court concluded that the taxpayer had substantially complied with the requirements for a qualified appraisal report even though the appraisal in that case was found to have been made too early. The Court stated that ‘a taxpayer may substantially comply with the substantiation requirements notwithstanding the taxpayer’s premature appraisal.’ Zarlengo v. Commissioner, T.C. Memo. 2014-161, at *32 (citing Consol. Inv’rs Grp. v. Commissioner, T.C. Memo. 2009-290).” Order, at p. 6.

Rothman, although unblogged by me, unhorsed that appraisal for defects other than timeliness. Here, nobody is raising other defects than timeliness. As for Zarlengo, see my blogpost “Don’t Give a Sham – Part Deux,” 8/11/14.

So IRS, like Sam T. Coleridge’s ancient mariner, “stoppeth one of three.” IRS bore one burden, but dropped two others.


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