In Uncategorized on 06/23/2022 at 15:04

Hurry up and read High Rocks, LLC, Jeffrey Bland, Tax Matters Partner, Docket No. 14944-20, filed 6/23/22, before the Genius Baristas remove the Post-It Note® they left at page 4.

Now for the rest of the story, from Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan. The High Rockers are another GA boondockery, backwoods scrub with an asserted $6 million conservation easement charitable write-off. IRS says they left off the statement of basis or acquisition cost; the High Rockers claim their attorneys and CPAs told them they didn’t need it.

“An appraisal summary must include the cost or adjusted basis of the donated property. Treas. Reg. § 1.170A-13(c)(4)(ii)(D). Failure to comply with this requirement generally precludes a deduction. See § 170(f)(11)(A) (providing that ‘no deduction shall be allowed’ unless a taxpayer meets the appraisal summary requirements of section 170(f)(11)(C)). Section B, Part I, Box 5(f) of Form 8283 requires the taxpayer to supply the ‘Donor’s cost or adjusted basis.’ High Rocks did not supply this information on Form 8283 or in its attached explanation.

“Respondent contends that the deduction was properly disallowed because High Rocks failed to report its cost or adjusted basis on Form 8283 and thus failed to submit a fully completed appraisal summary. Petitioner contends that High Rocks substantially complied with the applicable reporting requirements. Alternatively,  petitioner contends that High Rocks reasonably relied on its advisors in preparing and filing its Form 8283.” Order, at p. 4.

Good-faith reliance is a valid defense to failure to disclose. But summary J, which IRS seeks here (as usual), isn’t the place to decide that.

“Petitioner contends that High Rocks, when completing Form 8283, reasonably relied on advice from the attorneys and accountants who helped prepare its return. Petitioner asserts that these advisers concluded that the instructions to Form 8283 were ambiguous and that High Rocks was advised that it was acceptable to state on Form 8283 that the basis was not determinable. We conclude that resolution of this issue will require us to address several questions as to which genuine disputes of material fact appear to exist.  Accordingly, the question of whether the reasonable cause defense in section 170(f)(11)(A)(ii)(II) applies in this case is inappropriate for summary adjudication.” Order, at p. 5 (Citation omitted).

There’s argy-bargy about whether the High Rockers kept too much room to use, modify, improve, or otherwise muck about the property in the deed of easement, without the consent or knowledge of the 501(c)(3) protector, thus blowing off perpetuity.

Note IRS doesn’t suggest judicial extinguishment, as Hewitt put paid to that in 11 Cir.

“On the basis of the record that currently exists, we conclude that respondent’s motion must be denied as to the perpetuity requirement. It is a factual question whether the reserved rights High Rocks could exercise without giving notice to (501(c)(3)) would have had an adverse impact on easement’s conservation interests. Likewise,  the question of whether the exercise of a right to which consent is deemed given would impair any conservation purpose presents factual questions ill-suited to summary adjudication.” Order, at p. 7 (Citation omitted).

So Ch J TBS Kerrigan gives IRS summary J that the High Rockers didn’t include the basis or acquisition statement, but the good-faith reliance and perpetuity skirmishes are for trial.


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