More syndicated conservation/scenic easement cases today, and though they all go off on extinguishment (the 501(c)(3) doesn’t get the stepped-up value for improvements on extinguishment, thus not perpetual), the valuation gambit is the better move.

It’s well-known that I have touted Judge Holmes’ dissent in Oakbrook as soon as his wordprocessor cooled down. See my blogpost “They Always Must Be With Us,” 6/12/20. And Judge Kerrigan’s conclusion that “Treasury exercised reasoned judgment in its effort to reach the goal of section 170(h)(5)(A),” while it sounds good, is just what Judge Holmes said: a sledgehammer that takes out legitimate easements as well as syndicated, marked-up phonies.

So let’s compare and contrast Lumpkin One Five Six, LLC, 156 Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 94, filed 6/23/20, and its companion Lumpkin HC, LLC, Hurricane Creek Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 95, filed 6/23/20, with Plateau Holdings, LLC, Waterfall Development Manager, LLC, Tax Matters Partner, 2020 T. C. Memo.93, filed 6/23/20.

The phrase above quoted comes from 2020 T. C. Memo. 94, at p. 13.

And though Judge Kerrigan in both Lumpkin cases hews to the Oakbrook majority line, with a healthy dose of Chevron for good measure, the basic objection remains. Treasury’s reg. 1.170A-14(g)(6)(ii) gives the 501(c) a windfall and penalizes the honest grantor. Like a certain hard master in a story told by a far more exalted personage, in the extremely unlikely event of judicial extinguishment, the 501(c)(3) is “reaping where you have not sown, and gathering where you have not scattered seed.” And the reg torpedoes the easement, properly valued or overvalued, on the possibility of an event “so remote as to be negligible.” No governmental authority is going to raise taxes to condemn this kind of junk property. These strip-mined GA wastelands, miles from nowhere, with low six-figure bases, somehow are allegedly worth millions. In a valuation case, they are toast.

Judge Lauber does a better job with Plateau Holdings. The easement, supposedly reducing the value of this TN ex-strip mine by $25.5 million, covered land sold eight (count ’em, eight) days before for less than $6 million. And the best part of the land was not included in the easement.

True, Judge Lauber plays the Oakbrook extinguishment gambit, but goes on to slug the Plateau crew with the 40% chop. And the job he does on the Plateau’s appraisal is well worth reading in full. That should have been the opinion.

Judge Lauber does want to know how to deal with the 20% chop on whatever was left of the deduction after he demolished it. So let the parties brief that, and he’ll give me more blogfodder anon.

Footnote to my colleague Peter Reilly, CPA: Though Lumpkin was the name of a Hobbit pony, this Lumpkin is a county in GA.

I hope y’all have your money on Judge Holmes in the Oakbrook appeal. I didn’t even have a sentimental penny on Tiz The Law.

They’re Back

The “neither rain, nor snow” guys, so apostrophized by “The Father of History,” are headed back to the locked-down Glasshouse on July 10.

Here’s the scoop.

So if your snail-mailed petition, amendment, motion, or birthday card is sitting in a USPS warehouse, the postal workers will be hauling it over.

If your billet doux got bounced back to you, resend with original envelope that shows the USPS official postmark. But wait until July 10.

That’s the job description of James A. Lloyd, 2020 T. C. Memo. 92, filed 6/22/20, at p. 4. He runs a religious-type sales operation and internet-based radio stations. For the years at issue, he employed no one and was employed by no one. He also claimed that the Federal income tax was null and void, and if it wasn’t, then he’s a church.

Judge Halpern has this one.

Jim’s income tax-is-void argument got Crained. “Petitioner’s argument that the income tax is null and void is devoid of merit, and we reject it summarily. We do so in mind of what the Court of Appeals for the Fifth Circuit said many years ago and reiterated earlier this year: ‘We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.’ Williams v. Commissioner, 801 F. App’x 328, 329 (5th Cir. 2020) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)); see also Wnuck v. Commissioner, 136 T.C. 498, 501 (2011); Wells v. Commissioner, T.C. Memo. 2019-134, at *5.” 2020 T. C. Memo. 92, at p. 13.

Of course, Jim’s tax liability is computed via bank account reconstruction, because Jim never filed anything. His only objection to IRS’ numbers falls short. “Indeed, in response to respondent’s proposed findings of facts with respect to petitioner’s financial activity and income, petitioner has a stock response: ‘Petitioner Objects to the financial figures as they are too voluminous to evaluate within any realistic time frame.’ That is not a claim that the figures are incorrect, only that petitioner has had inadequate time to evaluate them, a claim we do not believe. Petitioner had access to the KeyBank, eBay, and PayPal records at least by December 11, 2018, the date of trial, when the records were received into evidence. Petitioner’s answering brief was not due until more than six months after. Facsimiles appear in the Court’s docket and are available to petitioner electronically.” 2020 T. C. Memo. 92, at pp. 14-15.

Jim can’t be exempt from tax, because organizations may be, but individuals aren’t. I’m sort of surprised Jim didn’t try the corporation sole dodge, but maybe that’s too obvious, and excites unwelcome attention.

IRS drops the Section 6651(f) fraudulent nonfiling chop. But Jim does get nonfiling, nonpayment, nonestimateds, and SE chops.

What makes this case interesting is Judge Halpern hitting Jim with a Section 6673 frivolity chop.

“We may, on our own initiative, require a taxpayer to pay a section 6673(a)(1) penalty. Petitioner failed to report substantial amounts of income for six years and his argument that the Code is null and void is frivolous. We need not decide whether petitioner’s other argument, that he is functioning as a church (which, in the context of this case, we reject), is also frivolous. A taxpayer who makes frivolous arguments is not immune from penalty just because some of his arguments may not be frivolous. Petitioner was warned by respondent both in the answer and in respondent’s pretrial memorandum that he was making frivolous arguments in challenging the constitutionality of the Federal income tax system. Petitioner ignored those warnings at his peril. We believe petitioner is deserving of a penalty under section 6673(a)(1) of $2,500.” 2020 T. C. Memo. 92, at pp. 23-24. (Citations omitted).

I was wondering last week what it took to get a Section 6673 chop. See my blogpost “Titanium? Tungsten? Chromium?” 6/19/20.

It seems I’ve gotten my answer. Dodge paying tax frivolously enough (after IRS warning), get chopped. Repeatedly deny your sworn testimony, resulting in delay of collection and waste of judicial resources, no chop.

Back in May, 2013, some person using the name Alex chided me for blogging when  “…people are already in a difficult place and with your blogger persecution making it worse.” I protested the word “persecution,” then and now, because Alex never furnished particulars, only badly-constructed generalities. He never surfaced again.

Howbeit, I am left with the blogger’s unfortunate lot, always “an hour to play and the last man in.”

The litigants, their counsel, and the Judges and STJs have all had their innings.

When I get my turn, I’m always out of time. But what was written, was written, and it remains. And it’s all the daily grist that comes to the blogger’s mill. I object to being accused of “piling on.”

So here’s Dan Israely & Zahava Israely, Docket 18108-18, filed 6/19/20. It’s not Dan’s or Zahava’s story, although they’ve something to say at the end.

Perhaps it’s the strain of isolation; or the strains of family, friends, cohabitants, pets, or all the above; or the temptation of kitchen and Amazon-chock-a-blocked refrigerator, freezer, and cupboards; whichever it is, has caused IRS’ counsel to turn out less than a perfect effort. I won’t name her, because I’m sure ex-Ch J Michael B (“Iron Mike”)’s gentle admonition stings more than my “persecution.”

“Respondent’s motion for leave to file first amendment to answer states that it is made ‘in order to assert additional bases for the adjustments to Schedule C expenses and an increase in the deficiency and [sic] for tax years 2014 and 2015.’ However, neither respondent’s motion nor the first amendment to answer lodged therewith states the amount or contemplated calculation of any increased deficiencies. In fact, the first amendment to answer as lodged…concludes by requesting that ‘respondent’s determination, as set forth in the notice of deficiency, be in all respects approved.’ Consequently, we are left in doubt as to whether respondent is actually seeking increased deficiencies and, if so, in what amounts. We are also left in doubt as to how any increased deficiencies relate to the various alternative ‘additional bases’ respondent has advanced in his lodged first amendment to petition.” Order, at p. 1.

Of course, Dan’s and Zahava’s counsel comes in to oppose, but appropriately raises Section 7491 “new matter” BoP shift, both as to facts and legal theories.

So let IRS’ counsel respond to Dan’s & Zahava’s counsel’s objections, but don’t forget ex-Ch J Iron Mike.

Unlike Frances L. Rogers, Docket No. 30586-09, filed 6/19/20, I have neither a bachelor of science degree in chemistry nor a master’s degree in biochemistry. I have no expertise in metallurgy. But I am told that the above-captioned are among the hardest metals known, and therefore are singularly appropriate anatomically with respect to the herein-referred-to order from Judge Goeke.

Frances moves out of time (that’s Fedspeak for after the train left) for a new trial. “Mrs. Rogers asserts that her husband had a conflict of interest when he represented her and that she was not adequately represented in the prior proceeding which resulted in opinions finding she is not eligible for relief under I.R.C. § 6015 for 2003, 2005, 2006, 2007 and 2009.” Order, at p. 1.

Really, Frances should sit down with her husband’s now or former partner, Mrs. Susan Hartigan, who also claimed to have trouble with her tax lawyer husband. Susan has the same problem that Frances has: Tax Court Judges are hard-hearted souls, and don’t buy what Frances and Susan are selling.

See my blogpost “Getting Out of the Neighborhood,” 8/11/17, for Susan’s story.

Now here’s Judge Goeke’s take on Frances’ latest.

“Her position blatantly ignores her prior testimony and representations to this Court that the interests of her husband and herself were the same, because he had no assets and was in fact her financial dependent. She gave such testimony at length and clearly made the representations in an affidavit and pleadings to successfully oppose respondent’s motions to have Mr. Rogers removed as her counsel.” Order, at p. 1.

“We found previously based upon her sworn affidavit and later testimony that there was no conflict and there is no basis to change that finding even if we were to entertain her motion for a new trial. Therefore, if we granted petitioner’s motion, we would not grant a new trial on the factual record regarding the now alleged conflict.

“We find that Mr. Rogers was and is highly motivated to sustain her innocent spouse claims because he has stripped himself of assets and wishes to preserve her wealth to maintain their lifestyle. His most recent testimony in the trial of the innocent spouse claim for 2010 and later years reinforces this finding. He testified he has no assets and accordingly it is logical he has made himself collection proof. It is important to note that the Rogerses remain devoted to each other and share the same home and Mrs. Rogers’ assets as the basis for their support.” Order, at p. 2.

Judge Goeke denies the motion. and orders the parties to file their Rule 155 numbers-crunch.

What he doesn’t order is more interesting: no Section 6673 friviolity/delay-of-the-game chop. Judge, if this doesn’t merit even a warning, what does merit a chop? If a catcher won’t even try a pick-off, I’m running with the pitch. And Frances probably has Louis Clark Brock beaten.

And you, dear reader, lest you feel neglected, choose your metal.

This refrain from an ancient wheeze (the punchline of which cannot well be set forth in a blog meant for family reading) befits John E. Rogers and Frances L. Rogers, et al.. 2020 T. C. Memo. 91, filed 6/18/20, but it’s Frances’ story.

She wants innocent spousery (again, though her previous efforts along that line did not end well), but for different years.

Judge Goeke, successor to Judge Wherry in this never-ending saga, though sympathetic, isn’t buying. And Judge Kerrigan was down this road before, as well. See my blogpost “When All Else Fails – Redivivus,” 7/3/17.

John E. and Frances, married fifty (count ‘em, fifty) years and devoted to each other, also worked closely together through all the years at issue. Frances was a lawyer, as well as a chemist, a real estate investor, licensed real estate broker, and developer with an MBA, and a teacher with a doctorate in educational administration. Though times were tough (John was an alcoholic and their son had a tough life), she was by his side throughout, paying bills, balancing checking accounts, but claims that before John was hospitalized “I did not understand how to read a credit card or bank statement until my husband was suddenly hospitalized from growing depression in 2009, when I was immediately faced with these matters.” 2020 T. C. Memo. 91, at p. 7.

Now maybe the items at issue fall more on John E’s side than Frances’, but that isn’t the point. Frances also laid off assets and helped John do likewise.

Frances claims she relied solely upon John E, the great tax lawyer. Except.

“…the facts and Mrs. Rogers’ own testimony are inconsistent with her factual summary. Mrs. Rogers was well aware that in 2011 they lost their case in this Court regarding 2003 joint tax liabilities, Rogers v. Commissioner, T.C. Memo. 2011-277, aff’d, 728 F.3d 673 (7^th Cir. 2013).” 2020 T. C. Memo. 91, at pp. 18-19.

And if she weren’t aware, she could have read my blogpost “Mr. Rogers’ Neighborhood – The Adventure Continues,” 11/23/11.

Nothing daunted, “(N)evertheless, she testified, ‘I figured that at some point he’d win.’ Mrs. Rogers maintained control of the home and office banking in the years at issue. She monitored and wrote checks related to the litigation which flowed from Mr. Rogers’ tax advice and related pass-through entities such as Jetstream and the Sugarloaf Fund.

“The relentless IRS attack on the tax shelters Mr. Rogers promoted also should not have been lost on Mrs. Rogers. She should have know [sic] further investigation was required. Ultimately these failed tax schemes have increased the Rogerses’ joint tax liabilities, and Mrs. Rogers clearly must have suspected what was coming. Early in the years at issue a grand jury subpoena was served at their home, and she had sat through months of trials involving Mr. Rogers’ tax schemes and her own joint liabilities during the preceding decade. She was also aware of his dispute with his former law firm and the litigation related to client suits about his failed advice.” 2020 T. C. Memo. 91, at p. 19. (Citation omitted).

“While Mrs. Rogers’ blind confidence in her husband evidences her love and devotion, her emotional decision to ignore the facts and circumstances she well knew on an intellectual level is not a lack of knowledge for purposes of section 6015(b)(1)(C) and (D) and (f). We have explained Mrs. Rogers’ education and her thirst for knowledge. Her willingness to set aside her intellect to support Mr. Rogers does not cause her to be eligible for relief from her joint tax liabilities.” 2020 T. C. Memo. 91, at pp. 20-21.

But the title first set forth at the head hereof (as my capairiñha-quaffing, high-priced colleagues would say) echoes the words of Judge Goeke’s envoi.

“Mrs. Rogers was by Mr. Rogers’ side every step of that unfortunate, ill-fated journey. She cannot credibly assert she had no reason to know what was coming.” 2020 T. C. Memo. 91, at p. 20.

With all due deference to this sentiment, from an even more exalted authority and family law expert than STJ Panuthos, taxes are just as strong as love and death.

To explain, STJ Panuthos gives IRS partial summary J over the grieving widow (but innocent spouse) Sarah S. O’Nan, Docket No. 5115-17, filed 6/18/20. Turns out IRS assessed two (count ‘em, two) years’ worth of taxes, served a CP14 notice and demand for the elder of the years, whereupon Sarah’s spouse quitted this vale of tears eight (count ‘em, eight) days later. The following Spring IRS hit Sarah and late spouse with a NFTL, whereupon Sarah sold the marital domicile, forked over $123K to IRS in full satisfaction of both years’ liabilities, filed innocent spousery, got it, and sued for a refund timely.

Sarah’s attorney’s argument was that the lien was improper. Now that’s a problem with these orders; not being able to see all the papers, it leaves the blogger with “a bald and unconvincing narrative,” as a much greater writer than I put it. One wants to second-guess, and ask “Why not the Rodgers v US gambit? See my blogpost “Whose Money Is It Anyway?” 1/11/12.”

But that’s unfair; I have no way of knowing what tactical considerations counsel faced. And the spouse in my blogpost sought innocent spousery pre-levy, while here Sarah sought same post-lien. And STJ Panuthos’ order makes it clear that liens and levies aren’t the same. So I’ll drop Monday-morning quarterbacking.

“Petitioner asserts the tax lien in issue was untimely, as it could not arise until 10 days after assessment or, in the alternative, the due date of the Notice CP14. To support this assertion, petitioner asks the Court to compare the language of section 6321 with that of section 6331(a). She notes that the two statutes are similar in that they both require (1) a demand and (2) neglect or refusal to pay following such demand. Although the 10 day limitation found in section 6331(a) is absent from the language of section 6321, petitioner argues that a Federal tax lien should not arise until the end of 10 days because the statutes are otherwise similar.” Order, at p. 3.

Except Section 6322 says the lien arises at moment of assessment. “Accordingly, when respondent made the assessment of the [elder year’s] liability…, a section 6321 lien arose immediately and attached to all of Mr. O’Nan’s property and rights to property. Secs. 6321, 6322. Thus, the Federal tax lien was valid and arose prior to Mr. O’Nan’s death.” Order, at p. 3. (Footnote omitted).

There’s an argument about OH law, where a surviving spouse takes full title. OK, says STJ Panuthos, Sarah indubitably has title, but subject to the US tax lien. And for any OH lawyers who might chance to read this, there’s a USDC case interpreting OH law squarely on point, and IRS won that one too.

But I’m still wondering about the tactics here. I hope anyone with better insight would put me wise.

I’m sure it’s no longer the case, and even in my young day, when we used that nomenclature for more than geographical reference, it wasn’t universally true. But in my salad days at the Bar of Our Fair State, we used that phrase to denote a pettifogging, sly, sharp practice that supposedly flourished on that thoroughfare in a county just across the river (which isn’t a river, but that’s another story) from our Minor Outlying Island.

I can’t end today’s blogging without a word from Judge Albert G (”Scholar Al”) Lauber. He gives us a designated hitter, wherewith he upbraids IRS’ counsel for discovery tactics not dissimilar from those more particularly described in the title set forth at the head hereof (as my already-on-their-second-Grey-Goose-and-tonic colleagues would say).

Little Horse Creek Property, LLC, Little Horse Creek, LLC, Tax Matters Partner, Docket No. 7421-19, filed 6/17/20, wants Judge Scholar Al to review for sufficiency IRS’ responses to the Little Horses’ request for admissions.

Ya gotta know I love the request for admissions. Cheap, quick, and smokes out adversaries.

Y’all will recall IRS wanted partial summary J (another favorite tactic of mine, when the paper barrage has lifted and the infantry starts moving), while deciding the which Judge Scholar Al stayed all discovery save the aforesaid requests for admissions. No? Well, see my blogpost “Friday on Friday,” 4/17/20.

“…respondent filed his responses to petitioner’s First and Second Requests for Admissions. Apart from admitting that certain language contained in the easement deed was contained in the easement deed–admissions that were meaningless–respondent did not admit to any fact but simply provided boilerplate objections. Primarily, respondent contends that the facts about which petitioner inquires are not relevant in light of respondent’s legal theory and that petitioner’s requests are premature in light of respondent’s pending motion for summary judgment.” Order, at p. 2.

Need I say that Judge Scholar Al is less than impressed with such a response?

“A party opposing discovery has the burden of establishing that the information sought is not relevant or is otherwise not discoverable, e.g., because it is protected by privilege. For purposes of discovery the standard of relevancy is liberal: our Rules permit discovery of any material relevant ‘to the entire “subject matter” of the case.’ A party may seek discovery of information if that information is reasonably calculated to lead to admissible evidence or if it may assist that party in understanding relevant material. If information is relevant to a party’s legal theory, it is discoverable even if that legal theory is debatable or unsettled. It is improper for a party to refuse to answer discovery because it believes the opposing party’s legal theory to be incorrect.” Order, at p. 2. (Citations omitted, but get them for your memo of law).

Besides, Judge Scholar Al most particularly wanted discovery on the points raised in the requests.

“Our… order expressed our view that answers to petitioner’s requests would assist us in determining whether there are any genuine disputes of material fact. But respondent supplied no answers, only boilerplate objections. We will therefore direct respondent to file and serve on petitioner forthright and comprehensive responses to the requests for admissions enumerated below.” Order, at p. 3.

But IRS’ counsel, whom I don’t name because I am a charitable type under this curmudgeonly veneer, really I am, isn’t done.

“Petitioner also requested four admissions with respect to whether respondent had satisfied the requirement of I.R.C. § 6751(b)(1) that all penalties receive timely supervisory approval. Rather than answer these questions, respondent in each instance objected that petitioner had not attempted to obtain this information during informal discovery. See Tax Court Rule 90(a). Rather than waste additional time skirmishing over this question, we will direct respondent to file forthright and comprehensive responses to each of petitioner’s requests relating to I.R.C. § 6751(b)(1).” Order, at p. 3.

But of course counsel for the Little Horses, a heavy-hitting Peachtreet Street white shoe, is also trying for an extra base. Judge Scholar Al knows that game well.

“The rest of petitioner’s requests seek to elicit admissions concerning respondent’s legal position in other proceedings and information regarding different land conservancies. Petitioner remains free to cite this material or propose its inclusion in a stipulation, but we will not require respondent to file responses to these sorts of questions.” Order, at p. 3.

From the foregoing, it seems to me that PLR 200836014 (June 3, 2008) is gonna get a real workout on the easement circuit.

Once again, Scotland’s Greatest comes to the fore, in David F. Hewitt and Tammy K. Hewitt, 2020 T.C. Memo. 89, filed 6/17/20. Even though Dave’s conservation easement craters for tax purposes, he has saved his daddy’s farm from the mobile homesters. And his subsequent fall from grace doesn’t change that.

Dave’s problem (Tammy never had title, and AL isn’t a community property State) is that he saved five homesteads for his and Tammy’s babies, in locations to be determined. Judge Goeke may or may not like Swiss cheese on rye, but Swiss cheese in a conservation easement doesn’t get it. See my blogposts “Perpetually Swiss,” 12/27/18, and “Swiss Cheese,” 2/3/20.

IRS blew Year One of Dave’s deduction when they left it off the SNOD, but the two-year big carryforwards are toast. There’s an extinguishment problem (the 501(c)(3) gets short-sheeted), but the Swiss cheese is enough for Judge Goeke.

Happily for him, good faith saves Dave the 40% overvaluation chop.

A business acquaintance turned Dave on to a knowledgeable CPA firm, who in turn set Dave up with a 501(c)(3). The CEO thereof, a Ph.D. conservation biologist, scoped out Dave’s domain and did baseline reports. Dave put the easement on the part of his farm most likely to be used as a mobile home park: near the highway to Atlanta and Birmingham, flat and accessible, unlike the back acreages, hilly and wooded.

There’s the usual argy-bargy about Reg. 1.170A-14(g)(6), but that has yet to be overturned on appeal.

The new wrinkle concerns PLR200836014 (June 3, 2008). Dave claims IRS switched its position, and that ambushed him. “Petitioners further argue that we should consider the 2008 private letter ruling because the Court of Appeals for the Eleventh Circuit, to which this case is appealable, has recognized that while not binding precedent under section 6110(k)(3) courts may treat private letter rulings as ‘persuasive authority because they ‘do reveal the interpretation put upon the statute by the agency charged with the responsibility of administering the revenue laws.’ Davis v. Commissioner, 716 F.3d 560, 569 n.26 (11th Cir. 2013) (quoting Hanover Bank v. Commissioner, 369 U.S. at 687), aff’g T.C. Memo. 2011-286; see sec. 6110(k)(3) (providing that written determinations such as private letter rulings cannot be cited as precedent).” 2020 T. C. Memo. 89, at p. 21.

Judge Goeke tosses that, saying the PLR didn’t analyze Section 170(h)(5), so it isn’t “the agency’s fair and considered judgment on the matter in question.” 2020 T. C. Memo. 89, at pp. 21-22. (Citation omitted).

Practice tip: Get the citations and argument here. Someday might want to wildcard in some PLRs that look good for you.

Howbeit, Dave’s valuers beat IRS’. Dave bought other land near his farm, and the prices he paid are in line. His valuers delivered the goods, while IRS’ seems to be a professional lowballer.

“We find that petitioners did not grossly misstate the value of the easement by claiming a deduction of $2,788,000. Mr. [IRS’ valuer] was unduly pessimistic in his valuation and incorrectly applied a uniform value to the entire Hewitt property. Our decision not to impose the gross valuation misstatement penalty does not depend solely on expert valuations. Mr. Hewitt gave credible testimony that the easement property was the most valuable part of the Hewitt property, confirming Mr. B’s and Mr. V’s opinions. Mr. Hewitt believed that the easement property was the portion of his family’s land that most needed protection from development. He has lived in Randolph County his entire life and has experience in land acquisition. We find his testimony helpful and reliable.” 2020 T. C. Memo. 89, at p. 35. (Names omitted).

And Dave ducks the 20% chops as well. Although the 8283 didn’t have disclosure of basis, that doesn’t vitiate good faith, and the easement was dead on other grounds. Dave really wanted to save the old homestead.

Now Dave wasn’t just a pore ol’ dirt farmer. “However, after [granting the easement] Mr. Hewitt began a troubling practice of purchasing rural, undeveloped land and selling interests in pass-through entities that he created to hold the land. Numerous entities associated with Mr. Hewitt granted conservation easements on the recently purchased land, and the investors, including Mr. Hewitt, claimed charitable contribution deductions for the easement donations far in excess of the original purchase prices for the recently purchased, underlying properties. Respondent asserts that Mr. Hewitt has realized over $3.5 million in gain from these transactions and the investors claimed millions of dollars of improper charitable contribution deductions. Petitioners claimed the carryover deductions at issue here for years during which Mr. Hewitt was engaging in this activity.” 2020 T. C. Memo. 89, at pp. 40-41.

But Dave’s fall from grace post-granting this easement doesn’t mean hitting him with chops for this easement.

“Mr. Hewitt’s activities of land purchases and conservation easements after [granting easement] are problematic. However, we find that under the circumstances of the easement donation of his family’s farm land Mr. Hewitt reasonably and in good faith relied on [CPA]’s experienced advice. We have weighed Mr. Hewitt’s post-[granting easement] activities against his sincere intent to preserve his family’s farm land for his father and children. The reasonable cause defense depends on the particular facts and circumstances of each case. Petitioners claimed a deduction for the easement that aligned with Mr. Hewitt’s opinion of the easement property’s fair market value. We disallowed the easement deduction because the deed did not satisfy technical requirements for a conservation easement deduction. We do not expect petitioners to understand these technical requirements. They made a sufficient good-faith effort to assess their tax liability and reasonably relied on professional advice when claiming the easement deduction.” 2020 T. C. Memo. 89, at p. 42.

Leticia C. Santos, 2020 T. C. Memo. 88, filed 6/17/20, runs an apartment and office cleaning service, using persons recruited “…through advertisements she posted in Brazilian hair salons and other businesses in Allston, Massachusetts.” 2020 T. C. Memo. 88, at p. 5.

I bet you didn’t know you could recruit apartment and office cleaners in Allston, MA, in Brazilian hair salons, either. And neither you nor I could, unless you speak Spanish or Portuguese. I don’t; Leticia does.

Howbeit, IRS wants to whang Leticia’s pate to the tune of $125K unpaid FICA/FUTA for the 50-some workers she paid over four (count ‘em, four) years at issue. Leticia had an accountant who provided 1099-MISCs to at least some of Leticia’s crew, but it’s unclear if any made their way to IRS as well.

Judge Ashford has all the factors, with the appropriate 1st Cir gloss thereon (see 2020 T. C. Memo. 88, pp. 11-12, footnote 9 for the ganze myceh, if I may use an arcane technical phrase). Leticia makes the cut.

“Petitioner’s role was more that of a dispatcher, acting as a financial and linguistic bridge or intermediary between her workers and the apartment complexes (and the property managers at those complexes). Petitioner directed her workers as to the result to be accomplished and expected the result to be done in accordance with the contracts’ specifications and in turn to the satisfaction of the property managers, but she otherwise allowed her workers to use their discretion as to the means and methods of accomplishing this result. Petitioner credibly testified that her workers (all of whom were experienced cleaners in their own right and thus needed no training) did not have to take any cleaning job she offered them; and when they did take such a job, they by and large traveled to the apartment complexes using their own or public transportation and performed the job at their own pace using their own cleaning supplies that they brought with them. Additionally, petitioner credibly testified that her workers were free to hire their own assistants and that they (not she) were responsible for paying these assistants. Petitioner also credibly testified that she would relay to her workers any special instructions with respect to a cleaning job from an apartment complex’s property manager because they by and large spoke only Portuguese or Spanish, languages that she also spoke, and she would rarely go to a property and supervise the cleaning or do a postcleaning inspection; the only “quality control” that she exercised was directing a worker after a cleaning job was finished and the worker had already left the property to return to the property if the property manager contacted her indicating that the cleaning was deficient in some respect.” 2020 T. C. Memo. 88, at pp. 13-14 (footnote omitted).

Leticia had to carry general liability and workers’ comp, because no property owner or manager in their right mind would let anyone go cleaning on their premises without. But that is a relationship between Leticia and her employers, not between Leticia and her non-employees.

Leticia’s crew were free to take other jobs. They had no guaranteed minimum pay or number of jobs, and since they could take other jobs, Leticia never had to fire any of them. Like certain dinner guests, if they didn’t suit, they didn’t get invited back.

Leticia wins.