Opinion
8792-20
11-21-2022
DONALD W. THOMPSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber, Judge
This conservation easement case is calendared for trial at a special session of the Court beginning on August 28, 2023, in Atlanta, Georgia. On September 28, 2022, petitioner filed a Motion to Compel Discovery, to which the Internal Revenue Service (IRS or respondent) responded. In its Motion petitioner continues its quest to challenge the reasonableness of the IRS's penalty and/or deficiency determinations on the theory that the IRS did not secure a formal appraisal of the easement (or secured an inadequate appraisal) before making those determinations.
Petitioner's Motion to Compel seeks two items of information. In its second request for production of documents, petitioner asked respondent to produce "copies of any and all appraisals the [IRS] obtained or relied upon to value the Conservation Easement" before filing its answer to the petition. In its second set of interrogatories petitioner asked respondent to identify all IRS employees who may have received any such appraisal and the dates of any such receipt.
This is not our first encounter with this subject. In April 2021 respondent filed a motion for partial summary judgment contending (among other things) that the IRS had secured timely supervisory approval for penalties first asserted in the answer to the petition. See § 6751(b)(1). In its Objection to the motion petitioner contended that supervisory approval of those penalties, even if timely secured, was inadequate because the IRS "ha[d] not attempted to determine value of the easement." According to petitioner, "discovery in this case reveals there was no attempt [by the IRS] to determine the actual value of the property" before it determined the penalties. Petitioner thus urged that approval of the penalties, even if timely secured, "cannot have been the result of meaningful review by either the attorney asserting the penalty or the supervisor who review[ed] and approve[ed] his work."
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the 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.
In an Opinion served July 20, 2022, we granted partial summary judgment for respondent on this point. See Thompson v. Commissioner, T.C. Memo. 2022-80. As we said there: "We have repeatedly rejected any suggestion that a penalty approval form or other document must 'demonstrate the depth or comprehensiveness of the supervisor's review.' Belair Woods, 154 T.C. at 17. Indeed, because petitioner's claimed deductions presupposed that the Property had appreciated by 890% in just over a year, the IRS did not need a formal appraisal to support its determination that a valuation misstatement likely existed. In any event, we have held that a supervising attorney's signature on an answer, without more, is sufficient to satisfy the statutory requirements for penalties first asserted in the answer." Thompson, T.C. Memo. 2022-80, at *9.
In its Objection petitioner also urged that summary judgment regarding penalty approval was premature because petitioner had outstanding discovery requests on this point. We addressed that argument as follows: "Three weeks after asserting in his Objection that the IRS made 'no attempt to value the easement,' petitioner issued informal discovery asking whether the IRS had attempted to value the easement. Petitioner then issued formal discovery directed to the same point, to which respondent objected. Because the information sought (i.e., whether the supervisor attempted to value the property or the easement) is not relevant to any issue in this Opinion, we need not further address this discovery dispute." Thompson, T.C. Memo. 2022-80, at *9 n.6.
That discovery dispute is now back before us. Under the law of the case doctrine, the information petitioner seeks in its Motion to Compel is irrelevant to disposition of the penalty approval issue, which we have already decided. But petitioner appears to contend that whether the IRS secured an appraisal (from an IRS engineer or outside professional) before issuing the notice of deficiency may be relevant in ascertaining the propriety of the deficiency determination. We have some doubt about that proposition: To be discoverable, evidence must be non-privileged and relevant to the subject matter involved in the case. Rule 70(b). As a general matter, we will not attempt to evaluate respondent's motives by going behind the notice of deficiency, which we presume to be correct. See Greenberg's Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974).
That said, we think litigation of this case will be simplified if respondent informs petitioner, once and for all, whether the IRS secured an appraisal of the conservation easement before issuing the notice of deficiency. If the answer to that question is no, respondent will have complied fully with this Order. If the answer to that question is yes, respondent shall either produce the appraisal to petitioner or explain why he is declining to produce it. We do not believe that doing this would be "unduly burdensome." Rule 70(c)(1)(C).
Upon due consideration, it is
ORDERED that petitioner's Motion to Compel Discovery, filed September 28, 2022, is granted to the extent set forth in this Order.