Judge Albert G. (“Scholar Al”) Lauber is a jurist of many attainments, from his days as a star cadet at a prestigious NYC prep school (as recounted by his schoolmate and my colleague Peter Reilly, CPA) to unraveller of Dixieland Boondockeries. Today his long arm extends to valuing Chinese art in WT Art Partnership LP, Lonicera LLC, Tax Matters Partner, T.C. Memo. 2025-30, filed 4/9/25. Yes, I’ve been following this case for five (count ’em, five) years.

Oscar Liu-Chen Tang is a prominent Chinese-born American businessman, investor, and philanthropist and a major contributor to the Metropolitan Museum of Art, to which illustrious institution I am a vastly smaller contributor. Mr. Tang gave the Met a mouthwatering collection of antique masterpieces, most of which pass IRS muster on the valuation side, when Oscar Liu-Chen was seeking Section 170 write-offs.

But when a major Chinese auction house comes up with a nosebleed-inducing price on a painting admittedly a rarity, Oscar Liu-Chen’s past experiences with the auction house’s numbers when confronted with IRS audits (and non-audits) saves him all but the 40% gross overvaluation chop.

“Generally, an accuracy-related penalty is not imposed if the taxpayer demonstrates “reasonable cause” and shows that he ‘acted in good faith with respect to [the underpayment].’ § 6664(c)(1). This defense may be available where a taxpayer makes a substantial valuation overstatement with respect to charitable contribution property. See §6664(c)(3) (second sentence). But this defense is not available where the overstatement is “gross.” See id. (first sentence). The 40% penalty thus applies to the portion of WT Art’s underpayment attributable to claiming a value for Palace Banquet in excess of $12 million. T. C. Memo. 2025-30, at pp. 39-40.

Take a look at p. 10 if you want to see this painting, or better yet, come to the Met, and tell ’em Lew Taishoff sent ya.

The auction house was recommended by an acknowledged expert. Even though it flunks the Section 170(f)(11)(E)(ii)(I) tests for qualification as an appraiser (not an individual, and no individual from auction house testifies on the trial that they have the requisite qualifications), Oscar Liu-Chen showed good faith in relying on them, so the reasonable reliance test of Section 170(f)(11)(A)(ii)(II) saves the deduction.

Judge Scholar Al also explores the worth of a non-deaccessioning agreement, whereby a museum agrees not to sell, trade, or dispose of a donated work, and whether same devalues a donated work. It really doesn’t. This isn’t an investment like stock, where values constantly change (and you can say that again!).

I wonder what Lark Mason would make of all this.