I rank “unequivocal” with “unambiguous” in the test for lawyers who cannot find an equivocation or an ambiguity. Those who pass that test need to find another way to make a living. So we see today, in Excelsior Aggregates, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, 2021 T.C. Memo. 125, filed 11/4/21*. It’s the Escambians’ first time here, but they quarterbacked a dozen conservation easements. This one took land they bought for $3 million, Wild Turkeyed (the 501(c)(3), not the whiskey) it, and claimed a deduction of $12.5 million ninety days later.

Their appraiser had his own problems, as IRS hit him for a $12.5K Section 6695A chop, and got the other 11 (count ’em, 11) he did for the Escambians in their gunsight.

But before hitting the appraiser, the RA on the case faxed (how quaint!) the Escambians’ counsel a billet doux, labeled “Agenda” as follows.

“The agenda began with a ‘[d]isclaimer’ that the ‘discussion is based on current findings’ and that ‘the results * * * could change before the examination officially concludes.’ The agenda proposed several topics for discussion, including valuation of the easement, whether the easement had ‘a valid conservation purpose,’ and whether any penalties would be applicable. The letter provided a brief summary of RA S’s tentative position with respect to each topic.

“At the end of the telephone conference RA S offered petitioner’s counsel the opportunity to respond in writing. He did so…. Following the telephone conference RA S continued with her examination, issuing third-party summonses to obtain necessary information.” 2021 T. C. Memo. 125, at p. 5. (Name omitted).

Eventually, RA S gets the Boss Hossery and gets her boss to sign off.

Of course, the Escambians claim leg-before-wicket; there was no Boss Hossery as to the Escambians before RA S sent the billet doux to Escambians’ counsel, or before RA S put the slug on the appraiser.

Judge Albert G (“Scholar Al”) Lauber finds that the disclaimer does the trick for IRS, citing Belair, Palmolive, Frost, Thompson, Tribune, and Beland, all of which I’ve blogged. And the drubbing of the appraiser certainly doesn’t affect the Escambians, as each chop stands on its own.

But Judge Scholar Al’s parting observation brings a grin.

“The timeliness inquiry thus turns on the timing of the IRS communication to the taxpayer against whom the penalties are being asserted. We assume that Excelsior was in regular contact with Mr. [appraiser]; if he mentioned to Excelsior the Form 5701 he received…, Excelsior would likely have taken that as a worrisome sign. But it is undisputed that ‘the first formal communication to the taxpayer of penalties,’ Frost, 154 T.C. at 32, did not occur until two days after RA S’s supervisor approved her recommendation to assert penalties against Excelsior. Her approval was thus timely.” 2021 T. C. Memo. 125, at p. 16. (Names omitted).

Had Mr. Appraiser told the Escambians that IRS was about to blow up all twelve (count ’em, twelve) of their deals, with lawsuits by all their investors and mulcts by the IRS to follow, I have no doubt he’d have enough lawsuits against him to last for many years.

Edited to add, 11/5/21: Sending the agenda that says “I might impose penalties, maybe so, but let’s talk” sounds to me a little like the pre-SNOD bludgeoning tactics Section 6751(b) was supposed to prevent.

*Excelsior Aggregates 2021 T C Memo 125 11:4:21