In Uncategorized on 06/15/2020 at 18:46

Judge Albert G (“Scholar Al”) Lauber seems to be inviting this response from Coal Property Holdings, LLC, Coal Land Manager, LLC, Tax Matters Partner, Docket No. 27778-16, filed 6/15/20.

You’ll doubtless recall that the Coalholders got left in the Extinguishment Stakes when they tried to cash out their improvements ahead of the 501(c)(3). What, no? Then see my blogpost “Diamonds Are Forever,” 10/28/19.

We all know Judge Holmes’ love for appraisals, manifested in his celebrated Oakbrook dissent, for which see my blogpost “They Always Must Be With Us,” 5/12/20. I’m sure he was disappointed that the Coalholders’ 3,713 strip-mined TN acres, which they claim went from $32.5 million to $155.5 million in three (count ‘em, three) days, didn’t get a full-dress mix-and-match with dueling experts, willing buyers and willing sellers, and the whole corps de ballet.

But Judge Scholar Al is ready to give Judge Mark V Holmes his heart’s desire in this designated hitter.

“The remaining issue in this case appears to be whether petitioner is liable for a 40% accuracy-related penalty for a ‘gross valuation misstatement’ (or a 20% accuracy-related penalty in the alternative). See I.R.C.§6662(a), (b)(3), (e)(1), (h)(2). … respondent filed a second motion for summary judgment contending that there are no genuine disputes of material fact with respect to that issue. We will direct petitioner to respond to that motion.” Order, at p. 1.

IRS claims that the Coalholders’ before-and-after valuations ($160.5 before, $5 after) are bogus, because the highest-and-best use is as a coal mine both before and after. The easement prohibits surface mining, but reserves subsurface mining rights.

“Urging that the easement thus imposes no meaningful restriction on use of the Property, respondent contends that the value of the easement is zero. If that is true, petitioner would obviously be liable for the ‘gross valuation misstatement’ penalty.” Order, at p. 2.

So to avoid the 40% chop (valuing the easement for taxes at 200% of its proven value), the Coalholders have to prove that what they bought for $32.5 million was worth at least $77.75 million three (count ‘em, three) days later. Unless what they bought wasn’t bought at arms’-length.

So let the Coalholders show facts to prove that what they bought wasn’t at arms’-length; or if it was, how the FMV wasn’t $32.5 million; and show facts to prove how the value went up north of $77 million in three days.

Time for the Coalholders to echo the title of this blogpost.


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