Opinion
14433-17 14434-17 14435-17
02-14-2022
HABITAT GREEN INVESTMENTS, LLC, MM BULLDAWG MANAGER, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
David Gustafson Judge
We address in this order petitioners' motions in these three consolidated cases for leave to file, out of time, their motions for reconsideration (lodged with the motions for leave).
In January 2019 the Commissioner filed a motion for partial summary judgment, which we granted by order dated June 30, 2020, stating:
In Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. at, (slip op. at 9-33) (citing PBBM Rose-Hill, Inc. v. Commissioner, 900 F.3d 193, 207 (5th Cir. 2018), we upheld the validity of the Commissioner's interpretation of the regulation that is at issue here--i.e., that "the regulation does not permit that 'any amount, including that attributable to improvements, may be subtracted out' of the proceeds". In the concurrently issued opinion Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo. 2020-54, we held that a deed violates the "protected in perpetuity" requirement of section 170(h)(5), as interpreted in 26 C.F.R. sec. 1.170A-14(g)(6), Income Tax Regs., if the donee's share of the extinguishment proceeds is reduced by excluding the value of any improvements made by the donor after the date of gift. We reached the same conclusion in Hewitt v. Commissioner, T.C. Memo. 2020-89, where the deed at issue was equivalent to the Deeds at issue here. (The provision allocating the proceeds in the event of a judicial extinguishment in the deed in Hewitt contained language virtually identical to the critical parenthetical in paragraph 19 in the LLCs' Deeds).Petitioners filed a motion for reconsideration, which we denied in April 2021.
On December 29, 2021, the U.S. Court of Appeals for 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." Hewitt v. Commissioner, __F.4th__, __ (slip op. at 36) (11th Cir. Dec. 29, 2021), rev'g and remanding T.C. Memo. 2020-89. The pleadings in these cases show that each of the three partnerships at issue here maintains its principal place of business in Georgia, so that venue for an appeal of this case would lie in the Court of Appeals for the Eleventh Circuit. See sec. 7482(b)(1)(E).
In light of the reversal of Hewitt, petitioners filed on February 9, 2022, their motions for leave to file, out of time, their motions for reconsideration. The motions for leave state that the Commissioner does not object to those motions (i.e., does not object to the filing of the motions for reconsideration), and we will therefore grant the motions for leave and will file the motions for reconsideration that were lodged with them. However, the motions state that the Commissioner objects to the motions for reconsideration. It is therefore
ORDERED that the motions for leave to file out of time are granted. The Clerk of the Court shall file the motions for reconsideration as of this date. It is further
ORDERED that, no later than March 11, 2022, the Commissioner shall file a response to the motions for reconsideration. We note that in response to an apparently equivalent motion in Oconee Landing Property, LLC v. Commissioner, No. 11814-19, the Commissioner filed on January 27, 2022, "Respondent's Notice of No Objection". We do not insist that the Commissioner is obliged to take the same position in this case as in Oconee Landing, but that position does seem reasonable in light of the Eleventh Circuit's reversal of Hewitt.