I’m not using the above in its arcane technical sense, although Judge David Gustafson’s off-the-bencher shows that the petitioner wasn’t speaking thus, in TOT Property Holdings, LLC, TOT Land Manager, LLC, Tax Matters Partner, Docket No. 5600-17, filed 12/13/19. By way of illumination, Judge Gustafson tells us that “(‘TOT’ is the initials of ‘Trail of Tears’, the route of a 19th Century forced relocation of Native Americans, which route passed through or near the property at issue in this case.)” Transcript, at p. 3.

My use thereof has to do with placement on the table and speaking candidly.

This is another syndicated conservation easement case, like the Coalholders (see my blogposts “Diamonds Are Forever,” 10/28/19, and “Out On Parol,” 12/6/19). Like them, the owner of the property held it for some time, then transferred title into a couple LLCs (hi, Judge Holmes), ending up with 99% in one (whose membership interests he sold for FMV of the land, around $1.1 million). The buyers of the LLC interests took a $6.9 million conservation easement write-off on their 1065, but were down to claiming $3.7 million in Tax Court. No go, anyway.

The TOTs claimed the land should be valued as a housing development, although the three nearest developments could not be proven to be other than flops. Their comparables were properties with mountain views and lakes, but this property had neither.

“This subject property was at least 32 miles from the nearest interstate highway. It contained no mountains, and none was nearby. It contained two small streams (which were frequently dry) and no lakes. The utilities available on the subject property in [year at issue] included telephone and electricity, but no access to public water. There is no hospital in the County.  The subject property was situated on a larger tract that had formerly been an artillery range. The surrounding area was hardwood forests (containing mostly oaks and hickory),  but at some point in the past it had been clear cut and re-planted with row upon row of loblolly pine, a softwood common to the Cumberland Plateau that grows the fastest and is the easiest to manage compared to other softwoods. (Ex. 36-R, p. 12).” Transcript, at p. 5.

There’s a scrimmage about the savings clause (if anything violates the Regs, it’s out), TOT claiming it’s interpretive and doesn’t modify the original intent to preserve the 501(c)(3)’s proportional divvy-up of proceeds on judicial extinguishment. But it’s the same language the Coalholders used, and the testimony of the attorney-drafter is out on parol.

Judge Gustafson takes IRS’ appraiser’s number of the worth of the easement ($500K), and tags the TOTs with the 40% chop on everything over that, holding that the Letter 1807 (the preliminary notice to the TOTs on the FPAA) satisfied the Section 6751(b) Boss Hoss sign-off.

“TOT’s position is essentially that the Letter 1807 signed by the supervisor and transmitting summary report could simultaneously embody the agent’s initial determination of the penalty and lack written supervisory approval of it– even though the written signature of the supervisor appears on the face of the document. The supervisor was the sole signatory of the letter that advised of ‘all proposed adjustments’ and transmitted the report that detailed the penalties (which were later asserted in the FPAA). These facts establish that the supervisor gave written approval of the initial determination of the penalties. Accordingly, the Court holds that the Commissioner has established compliance with section 6751(b) as to the penalties asserted in this case.” Transcript, at pp. 32-33.

Edited to add, 6/23/21: My colleague Peter Reilly CPA informs me that 11 Cir  has affirmed Judge David Gustafson. Now we have to wait on 6 Cir.