The method-vs-madness joust in determining whether an appraisal qualifies under the various rubrics of Section 170 (façade, scenic, conservation, artistic) has furnished forth blogfodder for more than ten (count ’em, ten) years. Solely by way of illustration of the foregoing, see my blogpost “Method to His Madness,” 6/18/12. That was when the famous 1994 IRS Audit Techniques Guide first assumed prominence.

Today, Michael Davis & Amy L. Davis, et al., Docket No. 14870-20, filed 8/8/23, brandish its successor the Conservation Easement Audit Techniques Guide to defeat IRS’ motion for summary J knocking out the appraisal in support of of Mike’s & Amy’s (and the al’s) Dixieland Boondockery.

IRS, perennially short-stacked, uses summary J as a panacea. I’m a great fan of summary J, but it can’t cure all ills.

IRS claims Mike’s & Amy’s appraisal “was riddled with errors that constituted gross negligence and was not prepared in accordance with generally accepted appraisal standards, as required under section 170(f). The appraisal purports to adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), but respondent argues that the appraisal ‘flouts’ these standards.” Order, at p. 2. IRS wants the appraisal and the deduction tossed, and a finding that Mike & Amy did not act with reasonable cause.

Judge Christian N. (“Speedy”) Weiler finds that Mike’s & Amy’s appraiser did follow the Guide.

“To the extent respondent believes that the appraiser’s method was ‘sloppy or inaccurate, or haphazardly applied,’ that ‘is irrelevant.’ Id. (quoting Schiedelman v. Commissioner, 682 F.3d 189, 197 (2d Cir. 2012)). The appraiser is required to identify the method used under the regulations, not demonstrate that the method used was reliable or probative.” Order, at p. 3.

For the backstory on Scheidelman, see my blogpost above referred to. Anyway, the reliability and accuracy of the methodology and specific basis of valuation isn’t appropriate for summary J. If there’s method, then madness is for trials. Generally Accepted Appraisal Standards aren’t the only game in town.

Reasonable cause likewise is facts-and-circumstances. See Reg. Section §1.6664-4(b)(1). That means trials.

IRS’ counsel are a couple yards (hi, Judge Holmes) short of a “Good Try.” But I love the “flout.”