At least for now, that is, as Corning Place Ohio, LLC, Corning Place Ohio Investment, LLC, Tax Matters Partner, T. C. Memo. 2022-12, filed 2/28/22 survives summary J. The Cornings have the Garfield Building in Cleveland, built on Rockefeller land for the late Pres. Garfield’s sons. Judge Albert G (“Scholar Al”) Lauber extols the artistic-historical merits of this desirable property, which the Cornings are converting from office to condos, without touching anything anybody can see from the street.

The Cornings paid $6 million for this treasure, but took a historic exterior write-off of $22 million. They left off their appraiser’s exhibit with his c.v., but put that in on exam when told it was missing, and ponied up the $500 filing fee called for by Section 170(f)(13) as well, both of which IRS accepted. IRS graciously responded with a FPAA bouncing the entire deduction.

IRS wants summary J on perpetuity, the defective appraisal, and the late $500 (seriously).

Of course it’s all about the deed.

“Upon initial inspection the easement deed at issue seems to track the regulation precisely. It provides that ‘Grantee’s percentage interest shall be determined as the fair market value of this Easement as of the Recording Date divided by the fair market value of the Property as a whole as of the Recording Date.’ But respondent views as problematic the sentence that appears two lines later: ‘The values upon the Recording Date of this Deed shall be those values used to calculate the deduction for [F]ederal income tax purposes allowable by reason of this grant pursuant to Section 170(h) of the Code.’” 2022 T. C. Memo. 12, at p. 6.

But IRS says if the deduction is invalid, the easement FMV is zero, so the 501(c)(3) protector gets zilch.

But that assumes IRS is the one who determines the values, whereas the more plausible reading is that the Cornings decide, as the “Recording Date” occurs long before IRS is on the scene.

IRS claims the omitted c.v., plus the fact that the photos submitted didn’t show the roof, invalidates the appraisal. Judge Scholar Al says substantial compliance plus good faith could cure this, so save it for the trial.

Ditto the late $500.

“The statute specifies that such filing fees ‘shall be used for the enforcement of the provisions of subsection (h)’ dealing with qualified conservation contributions. § 170(f)(13)(C). Respondent contends that the deduction must be denied in its entirety because Corning Place omitted a $500 filing fee when filing its original return….

“However, Corning Place did submit the $500 filing fee as soon as this omission was brought to its attention, and the IRS accepted the filing fee. Surmising that the fee has now been dedicated to the Commissioner’s section 170(h) enforcement program, petitioner contends that it substantially complied with the statutory mandate because the statute’s purpose has been accomplished. Neither this Court nor any other court has yet considered whether section 170(f)(13) can be satisfied by substantial compliance.” T. C. Memo. 2022-12, at pp. 9-10.

And the Cornings say they filed an amended return, to which they attached the $500. But that return never made it into the record.

So save it for the trial.