Opinion
13073-20
01-19-2022
WARD MOUNTAIN INVESTMENTS I, LLC, J. WESLEY MANIS, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
ALBERT G. LAUBER JUDGE.
This case involves a charitable contribution deduction claimed by Ward Mountain Investments I, LLC (Ward), for a conservation easement. The Internal Revenue Service (IRS or respondent) disallowed this deduction in its entirety and determined penalties under section 6662 and section 6662A. Petitioner timely petitioned this Court for readjustment of the partnership items. Ward had its principal place of business in Georgia when the petition was filed. Absent stipulation to the contrary, this case is appealable to the U.S. Court of Appeals for the Eleventh Circuit. See § 7482(b)(1)(E).
Unless otherwise indicated, all statutory references are to the Internal Revenue Code in effect at all relevant times, all regulation references are to Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
On August 30, 2021, respondent filed a motion for partial summary judgment contending that the deduction was properly disallowed because the deed of easement does not comply with the "judicial extinguishment" regulation. See Treas. Reg. § 1.170A-14(g)(6)(ii). Specifically, respondent argues that the deed contains an impermissible carve-out for donor improvements, which would improperly reduce the charitable grantee's share of the proceeds if the property were sold following judicial extinguishment of the use restriction. Separately, respondent contends that the IRS complied with the requirements of section 6751(b)(1) by securing timely supervisory approval of the penalties. On December 15, 2021, this case was assigned to the undersigned for trial or other disposition, and petitioner at our direction timely responded to the motion.
On the "donor improvements" point, petitioner contends that the motion should be denied in light of the Eleventh Circuit's opinion in Hewitt v. Commissioner, F.4th (11th Cir. Dec. 29, 2021), rev'g and remanding T.C. Memo. 2020-89. In Hewitt the Eleventh Circuit held that "the Commissioner's interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements … is arbitrary and capricious and therefore invalid under the APA's procedural requirements." Id. at (slip op. at 36). We are obligated to follow the law as established by the Eleventh Circuit on this question. See Golsen v. Commissioner, 54 T.C. 742 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). We will accordingly deny respondent's motion for partial summary judgment with respect to the "donor improvements" issue, without prejudice to respondent's resubmission of his motion should subsequent developments at the appellate level warrant that course of action.
In support of his position on the section 6751(b) issue, respondent submitted the declaration of Adam Wooten, the immediate supervisor of the revenue agent who initially determined the penalties in question. The facts set forth in this declaration, submitted under penalties of perjury, show that Mr. Wooten approved the penalties in timely fashion. Petitioner does not challenge any of Mr. Wooten's averments and concedes, in light of them, that the IRS "complied with the procedural requirements of Code § 6751(b)(1)." There being no genuine dispute of material fact on this point, we will grant respondent's motion for partial summary judgment with respect to penalty approval, recognizing that petitioner has preserved all of his arguments disputing Ward's substantive liability for the penalties.
In consideration of the foregoing, it is
ORDERED that respondent's Motion for Partial Summary Judgment, filed August 30, 2021, is denied in part and granted in part, to the extent set forth in this Order. It is further
ORDERED that the parties shall file, on or before March 4, 2022, a status report (jointly if possible, otherwise separately) expressing their views as to the conduct of further proceedings in this case.