Opinion
11598-20
05-09-2022
MAXWELLTON PROPCO, LLC, MAXWELLTON MANAGER, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber Judge
This case involves a charitable contribution deduction claimed by Maxwellton Propco, LLC (Maxwellton), 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. Maxwellton 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, 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.
On May 14, 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. On December 15, 2021, this case was assigned to the undersigned, and petitioner at our direction timely responded to the motion.
Petitioner contends that the motion should be denied in light of the Eleventh Circuit's opinion in Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), rev'g and remanding T.C. Memo. 2020-89. In Hewitt the Eleventh Circuit held that "the Com- missioner'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 1353. 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, without prejudice to his resubmission of the arguments set forth therein should subsequent developments warrant that course of action.
Upon due consideration, it is
ORDERED that respondent's Motion for Partial Summary Judgment, filed May 14, 2021, is denied. It is further
ORDERED that the parties shall file, on or before June 6, 2022, a status report (jointly if possible, otherwise separately) expressing their views as to the conduct of further proceedings in this case.