Opinion
11814-19
11-15-2022
OCONEE LANDING PROPERTY, LLC, OCONEE LANDING INVESTORS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber, Judge.
This case is calendared for trial at a two-week special session in Atlanta, Georgia, beginning November 14, 2022. On October 31, 2022, petitioner filed a Motion in Limine at docket entry #323. Petitioner contends that respondent should be precluded from raising, allegedly for the first time in his Pretrial Memorandum (PTM), the issue of whether petitioner's charitable contribution deduction, to the extent allowable, is limited under section 170(e).Petitioner alternatively contends that, if respondent is not precluded from raising this issue, he must bear the burden of proof with respect to it because it is allegedly "new matter" within the meaning of Rule 142(a)(1). For the reasons stated by respondent in his Response filed November 11, 2022, we will deny the Motion.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C, in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
The Notice of Final Administrative Adjustment (FPAA) determined that the charitable contribution deduction was being disallowed because Oconee had "failed to establish that the gift or contribution satisfied all the requirements of IRC Section 170 and the corresponding Treasury Regulations for deducting a noncash charitable contribution." In the case of a non-cash charitable contribution, section 170 and its implementing regulations condition the allowance of a deduction on the satisfaction of numerous requirements. One of these requirements is set forth in section 170(e)(1)(A). It provides that "[t]he amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by . . . the amount of gain which would not have been long-term capital gain . . . if the property had been sold by the taxpayer at its fair market value (determined at the time of such contribution)."
Respondent alleges that the subject property was inventory property in the hands of the Reynoldses and that it retained this character in the hands of the partnership. Thus, any gain realized on sale of the property, in excess of the partnership's basis, "would not have been long-term capital gain." According to respondent, therefore, section 170(e)(1)(A) mandates that any deduction otherwise allowable "shall be reduced by . . . the amount of [such] gain."
The section 170(e) argument advanced by respondent would not produce an "increase[] in deficiency." Rule 142(a)(1). Nor does it constitute "new matter." Ibid. It is simply an additional legal argument-among many arguments respondent has advanced-in support of the FPAA's determination that Oconee "failed to establish that the gift or contribution satisfied all the requirements of IRC Section 170 and the corresponding Treasury Regulations for deducting a noncash charitable contribution." Although petitioner professes surprise at this argument, respondent shows in his Response that Oconee's principals and their legal advisors were aware of the section 170(e) issue as early as 2014. We conclude that respondent may properly advance this argument and that he does not bear the burden of proof with respect to it under Rule 142(a)(1).
Upon due consideration, it is ORDERED that petitioner's Motion in Limine, filed October 31, 2022, at docket entry #323, is denied.