In Uncategorized on 11/12/2020 at 16:59

No, not another Section 469(c)(7) dance-of-the-hours. Today we have Judge Holmes doing a history and an architectural portrait of The Queen City on the Lake, comparing and contrasting income-and-expense statements, doing brokers’ set-ups, checking out local economic conditions, patterns of building code enforcement, and generally mixing-and-matching dueling appraisals. A true real estate professional.

Beyond not dissing the partitive genitive, Judge Holmes shows an unusual understanding of what it is to “beg the question.” That’s petitio principi for scholars like Judges Albert G. Lauber and Patrick J. Urda. Speaking of the IRS’ expert’s appraisal, “K instead used the selected comparable properties to calculate pre-easement values and then begged the question of an easement’s effect by concluding that the after values would remain unchanged because “there is no credible support for a Facade Easement adversely effecting the market value of a property like the subject when the property is already encumbered with Historic Preservation Restrictions.” 2020 T. C. Memo. 153, at p. 33.(Name omitted). The proof assumes the proposition; circular reasoning, as opposed to “raises” or “invokes” or “invites” the question.

You have to read the opinion to see how Judge Holmes deals with the before-and-after appraisals. IRS’ appraiser comes nearest to what my colleague Peter Reilly, CPA, has called a Gunga Din appraisal: “Was nothin’ much before, An’ rather less than ’arf o’ that be’ind.”

The case is Anthony M. Kissling and Suzanne R. Kissling, 2020 T. C. Memo. 153, filed 11/12/20. Yes, they were here before, in my classic blogpost “The Stealth Subpoena,” 7/16/15.

Tony was a NYC real estate pro who, finding the Apple scene a wee bit rich, clichéd off to Buffalo, bought a couple run-down but landmarked relics of the early-Twentieth Century-gilded age (this is Judge Holmes, after all), gave them a facelift, and put on some historic façade easements. And though Tony got the mortgagees to sign aboard from the getgo, IRS stiped away any problems with grabs of proceeds from casualty or condemnation.

When Judge Holmes gets through shredding the appraisers (two for Tony, and one for IRS) and mixing-and-matching the shards (he has tables; oh, does he have tables!), Tony and Suz only overstated their deductions by 15%, so Section 6662(h) is off the table.

My ultra-hip readers, who no doubt have read all my façade easement and conservation easement blogposts, not to mention all the cases cited by Judge Holmes, have cried out with one voice “Hold on, Champ! Where’s the extinguishment fracas? If the easement isn’t forever, it’s nothing, and there’s nada to deduct! So any number is too much!”

IRS stiped away any extinguishment objections. But even so, “The extinguishment clause grants the Trust “a portion of the proceeds * * * equal to the same proportion that the value of the initial easement donation bore to the entire value of the property * * * as estimated by a state licensed appraiser.” (Emphasis added.) Though the Commissioner stipulated away any potential issue related to the extinguishment clause, this doesn’t run afoul of our recent decision in Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo. 2020-54.” 2020 T. C. Memo. 153, at p. 17, footnote 13.

Vintage Holmes. I’ll miss him when he retires.


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: