Opinion
12421-19
07-19-2024
LONGWOOD PRESERVE HOLDINGS, LLC, LONGWOOD PRESERVE INVESTORS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge.
This is a syndicated conservation easement case. On April 23, 2024, petitioner filed a Motion for Partial Summary Judgment. On May 13, 2024, respondent filed an Objection to Motion for Partial Summary Judgment. On May 23, 2024, petitioner filed a Motion for Leave to File Reply to Objection to Motion for Partial Summary Judgment and lodged a copy of the Reply with the Court. The Court granted respondent's Motion for Leave, and his Reply was filed on May 28, 2024.
Having considered petitioner's Motion for Partial Summary Judgment, respondent's Objection thereto, and petitioner's Reply, the Court is now prepared to rule on the Motion.
Background
The following facts are derived from the pleadings, the parties' motion papers, and the exhibits and declarations attached thereto. They are stated solely for purposes of deciding petitioner's Motion and not as findings of fact in this case. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd, 17 F.3d 965 (7th Cir. 1994).
By Deed of Conservation Easement, dated December 15, 2015, Longwood Preserve Holdings, LLC (Longwood Preserve) contributed a conservation easement to the Georgia-Alabama Land Trust, Inc. (GALT) of approximately 519 acres of unimproved land. Longwood Preserve is a Georgia limited liability company, and it had its principal place of business in Georgia when it timely filed its Petition. Longwood Preserve recorded the Deed of Conservation Easement with the Glynn County, Georgia, public records department on December 15, 2015. Longwood Preserve timely filed Form 1065, U.S. Return of Partnership Income, for tax year 2015 and claimed a noncash charitable contribution deduction. Longwood Preserve completed and attached Form 8283, Noncash Charitable Contributions, to its Form 1065.
Discussion
I. Summary Judgment
A party may move for summary judgment regarding all or any part of the legal issues in controversy. See Rule 121(a); Wachter v. Commissioner, 142 T.C. 140, 145 (2014). We may grant summary judgment if the pleadings, stipulations and exhibits, and any other acceptable materials show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(a) and (b); see also CGG Americas, Inc. v. Commissioner, 147 T.C. 78, 82 (2016); Elec. Arts, Inc. & Subs. v. Commissioner, 118 T.C. 226, 238 (2002). We construe the facts and draw all inferences in the light most favorable to the nonmoving party to decide whether summary judgment is appropriate. Sundstrand Corp., 98 T.C. at 520. The moving party has the burden of proving that there is no genuine issue of material fact. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). However, the nonmoving party may not rest upon the mere allegations or denials in its pleadings but instead must "set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d); see Sundstrand Corp., 98 T.C. at 520. Alternatively, under Rule 121(h), the Court may issue an order stating any material fact that is not genuinely in dispute and treat the fact as established in the case.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C. or Code), 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.
II. Summary of the Parties' Arguments
A. Petitioner's Arguments
Petitioner asks the Court to enter an order granting favorable summary adjudication on the following issues as a matter of law:
1. Longwood Preserve made a valid noncash charitable contribution during the 2015 tax year (Issue 1);
2. The Deed of Conservation Easement that Longwood Preserve conveyed constitutes a "qualified real property interest" under section 170(h)(1)(A) and (2)(C) (Issue 2);
3. The donee in this case, GALT, is a "qualified organization" under section170(h)(1)(B) (Issue 3);
4. Longwood Preserve donated the Deed of Conservation Easement "exclusively for conservation purposes" under section 170(h)(1)(C) (Issue 4);
5. GALT properly issued a contemporaneous written acknowledgment letter to Longwood Preserve, which satisfies the requirements in section 170(f)(8) (Issue 5);
6. The Form 8283 filed by Longwood Preserve satisfies the appraisal summary requirements under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(4) (Issue 6);
7. The appraisal prepared by Messrs. Martin H. Van Sant and Thomas F. Wingard is a "qualified appraisal" under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(3) (Issue 7); and
8. Messrs. Van Sant and Wingard are each a "qualified appraiser" under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(5) (Issue 8).(collectively, Issues)
B. Respondent's Arguments
Respondent argues that there remains a genuine dispute of fact as to whether the appraisal is a "qualified appraisal" under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(5) and whether the appraisers are "qualified appraisers" under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(5)(ii). Respondent states that these two issues are the subject of outstanding discovery. Respondent also asserts that there is a genuine dispute of fact as to whether Form 8283 meets the requirements of section 170(f)(11).
Respondent asks the Court to deny summary judgment on issues 1, 2, 3, 4, and 5 as moot. Respondent asks the Court to find some of these issues moot because they are "issues that are not in dispute." As to whether Longwood Preserve made a valid noncash charitable contribution during the 2015 tax year, respondent states that he "does not challenge" petitioner's request for summary judgment on this issue. As to whether (1) Longwood Preserve conveyed a qualified real property interest (2) to a qualified organization (3) exclusively for a conservation purpose, respondent states that he "has stipulated to numerous factual elements . . . and admitted" these issues. Respondent also asks us to find the issue of whether GALT properly issued a written contemporaneous acknowledgement letter as now moot since respondent has "already admitted" that GALT did do so. Respondent is requesting we deny summary judgment as to these issues because he is not alleging anything different from what petitioner argues.
III. Qualified Appraisals and Qualified Appraisers
Section 170(a)(1) allows taxpayers to deduct the fair market value of charitable contributions of property made within the taxable year if the contributions are verified in accordance with substantiation and reporting requirements prescribed in the Treasury regulations. See Treas. Reg. § 1.170A-1(c)(1). Section 170(f)(11) imposes heightened substantiation requirements for the contribution of property where the amount of the deduction depends on the value of the donated property. See Cave Buttes, L.L.C. v. Commissioner, 147 T.C. 338, 347-48 (2016); Albrecht v. Commissioner, T.C. Memo. 2022-53, at *3. Such a deduction is disallowed unless specified substantiation and documentation requirements are met. I.R.C. § 170(f)(11). In the case of a contribution of property valued in excess of $500,000, the taxpayer must obtain and attach to his return "a qualified appraisal of such property." I.R.C. § 170(f)(11)(D). An appraisal is "qualified" if it is "conducted by a qualified appraiser in accordance with generally accepted appraisal standards" (emphasis added) and meets requirements set forth in "regulations or other guidance prescribed by the Secretary." I.R.C. § 170(f)(11)(E)(i).
Treasury Regulation § 1.170A-13 provides further requirements for a qualified appraisal. Under Treasury Regulation § 1.170A-13(c)(3)(ii), a qualified appraisal must include the following 11 lines of information: (1) a description of the donated property in sufficient detail for a person who is generally not familiar with the property to ascertain that the property being appraised is the property that was donated; (2) if the property is tangible, the physical condition of the property; (3) the date (or expected date) of the donation; (4) the terms of any agreement or understanding entered into by the donor or the donee, or on their behalf, relating to the use, sale, or other disposition of the property; (5) the appraiser's name, address, and identifying number; (6) the appraiser's qualifications, including his background, experience, education, and memberships in professional appraisal associations; (7) a statement that the appraisal was prepared for income tax purposes; (8) the date of the appraisal; (9) the property's appraised fair market value on the donation date; (10) the method used to determine the fair market value; and (11) the specific basis for the valuation, such as the specific comparable sales or statistical sampling, including a justification for using sampling and an explanation of the sampling procedure employed.
The Code defines a qualified appraiser as an individual who (1) has "earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements set forth in regulations prescribed by the Secretary," (2) regularly performs appraisals for compensation, and (3) meets other requirements in the regulations. I.R.C. § 170(f)(11)(E)(ii). The appraiser also must demonstrate "verifiable education and experience in valuing the type of property subject to the appraisal." I.R.C. § 170(f)(11)(E)(iii)(I). Respondent does not argue that the appraisers in this case, Messrs. Thomas Wingard and Martin H. Van Sant, have failed to meet the requirements of qualified appraisers contained in section 170(f)(11)(E)(ii) and (iii)(I). Instead, respondent contends that Messrs. Wingard and Van Sant were not qualified appraisers for the purposes of this case by virtue of the "exception" set forth in the Treasury regulations.
Treasury Regulation § 1.170A-13(c)(5)(ii) provides that an individual is not a qualified appraiser with respect to a particular donation "if the donor had knowledge of facts that would cause a reasonable person to expect the appraiser falsely to overstate the value of the donated property." This will be true, for example, if "the donor and the appraiser make an agreement concerning the amount at which the property will be valued and the donor knows that such amount exceeds the fair market value of the property." Id. The "knowledge" requirement in Treasury Regulation § 1.170A-13(c)(5)(ii) implicates the donor's actual and/or constructive knowledge. See Dunlap v. Commissioner, T.C. Memo. 2012-126 (considering whether the information the donor knew or should have known would cause a reasonable person to believe that the appraiser would falsely overstate the value of an easement).
IV. Form 8283
The IRS requires that a taxpayer attach an appraisal summary to their tax return when claiming non-cash charitable contributions greater than $5,000. See Treas. Reg. § 1.170A-13(c)(2)(i)(B). The IRS has prescribed Form 8283 to report the necessary elements of an appraisal summary. Treas. Reg. § 1.170A-13(c)(4)(i)(A); Jorgenson v. Commissioner, T.C. Memo. 2000-38, slip op. at 21.
The appraisal summary must include a number of important items of information regarding the donation, including the appraised fair market value of the donated property. See Treas. Reg. § 1.170A-13(c)(4)(ii)(D), (E), (G), and (J). The qualified appraiser and the donee must sign the appraisal summary. See Treas. Reg. § 1.170A-13(c)(4)(i)(C) and (iii).
We have said the requirements of Treasury Regulation § 1.170A-13(c)(2)(i)(B) are directory rather than mandatory, and thus substantial compliance (rather than strict compliance) is allowed. Mohamed v. Commissioner, T.C. Memo. 2012-152, slip op. at 18; see also Bond v. Commissioner, 100 T.C. 32 (1993). We have also said, however, that a taxpayer cannot be found in substantial compliance if he fails to comply with an 'essential requirement' of the governing statute. Because the requirement to furnish a qualified appraisal is statutorily imposed, it is an essential requirement. Mohamed, T.C. Memo. 2012-152, slip op. at 20 (quoting Estate of Clause, 122 T.C. 115, 122 (2004)). In other words, if a taxpayer fails to obtain a contemporaneous qualified appraisal, we are precluded from finding he has substantially complied with the prescribed appraisal summary requirements. Mohamed, T.C. Memo. 2012-152, slip op. at 20-21.
V. Analysis
As to Issues 1, 2, 3, 4, and 5, respondent does not dispute any of petitioner's assertions; rather, he states these issues are "moot" simply because he does not disagree with them. We do not accept respondent's contention that Issues 1 through 5 are now somehow "moot" since they are not in genuine dispute. Under our Rules, we are either to grant summary judgment when there is no genuine dispute, see Rule 121(a)(2), or at a minimum we are to treat the material fact not in dispute as established in the case. See Rule 121(h). Respondent's response clearly demonstrate that no genuine disputes remain for trial as to these issues. Therefore, we find summary adjudication to be appropriate here. We will grant petitioner's Motion for Partial Summary Judgment as to Issues 1, 2, 3, 4, and 5 and treat these facts as established in the case. See Rule 121(a)(2) and (h).
As to summary adjudication of the remaining issues sought by petitioner, we conclude summary judgment is not appropriate since there remain material facts in genuine dispute.
Regarding Issues 7 and 8 more specifically, respondent contends, and we agree, that material facts remain the subject of discovery as to whether the appraisal was a qualified appraisal and whether the appraisers in question were qualified appraisers. Construing the facts and drawing all inferences in the light most favorable to the respondent, we conclude petitioner is not entitled to summary judgment on these two issues.
Whether the appraisal is a 'qualified appraisal' is dependent on whether Messrs. Wingard and Van Sant are qualified appraisers. If we ultimately conclude Messrs. Wingard and Van Sant are not qualified appraisers for the assignment in question, we will then likewise conclude that their appraisal is not a qualified appraisal for the purposes of this case.
Regarding Issue 6 and whether the Form 8283 filed by Longwood Preserve satisfies the appraisal summary requirements under section 170(f)(11) and Treasury Regulation § 1.170A-13(c)(4), the issue is also contingent upon a finding that the attached appraisal is in fact a qualified appraisal. Since we have declined to rule on whether the original appraisal in this case is (or is not) a qualified appraisal by summary adjudication, it is inappropriate to now rule by summary adjudication on Issue 6. In sum, we will refrain from ruling on Issues 6, 7, and 8 until trial of this matter.
Considering the foregoing, it is
ORDERED that petitioner's Motion for Partial Summary Judgment, filed on April 23, 2024, is granted in part, as to Issues 1, 2, 3, 4, and 5, and we will treat these facts as established at trial of this matter. It is further
ORDERED that petitioner's Motion for Partial Summary Judgment, filed on April 23, 2024, is denied in part, as to Issues 6, 7, and 8.