The Tax Court formulated the test for substantial compliance as "whether the donor provided sufficient information to permit the Commissioner to evaluate the reported contributions, as intended by Congress." 149 T.C. at 16 (quoting Smith v. Comm’r , 94 T.C.M. (CCH) 574, 586 (2007), aff’d , 364 F. App'x 317 (9th Cir. 2009) ). The IRS advocates a significantly more stringent test under which anything short of complete compliance is excused only if "(1) [the taxpayer] had a good excuse for failing to comply with the regulation and (2) the regulation’s requirement is unimportant, unclear, or confusingly stated in the regulations or statute."
See Smith v. Commissioner, T.C. Memo. 2007-368, slip op. at 47, aff'd, 364 Fed.Appx. 317 (9th Cir. 2009). Respondent's arguments raise concern with respect to four items required under Treasury Regulation § 1.170A-13.
In Sperapani v. Commissioner, 42 T.C. 308, 331 (1964), we suggested that a rule is mandatory if it "relate[s] to the substance or essence of the statute." And in Smith v. Commissioner, T.C. Memo. 2007-368, 2007 WL 4410771, at *19, aff'd, 364 Fed.Appx. 317 (9th Cir. 2009), we suggested that a taxpayer's imperfect compliance is nonetheless substantial if it "adequately serve[s] the purposes intended by Congress." See also Durden v. Commissioner, T.C. Memo. 2012-140, 2012 WL 1758655, at *2 (suggesting that a taxpayer's compliance is substantial if it is sufficient to "fulfill[] the essential statutory purpose").
. The requirement to set forth terms relating "to the use, sale, or other disposition of the property contributed," Treas. Reg. § 1.170A-13(c)(3)(ii)(D), goes to the IRS's evaluation of whether the taxpayer received anything of value as part of a sale, see Costello, T.C. Memo. 2015-87, at *19; Smith v. Commissioner, T.C. Memo. 2007-368, 2007 WL 4410771, at *20, aff'd, 364 Fed.Appx. 317 (9th Cir. 2009); see also RERI Holdings I, LLC v. Commissioner, 149 T.C. 1, 16-17 (2017) (framing substantial compliance as focusing on whether the donor provided sufficient information to permit the IRS to evaluate the reported contribution), aff'd sub nom.Blau v. Commissioner, 924 F.3d 1261 (D.C. Cir. 2019). This issue is at the very heart of the matter.
To determine whether a taxpayer has substantially complied with the reporting requirements of Treasury Regulation § 1.170A-13(c), we "consider whether [the taxpayers] provided sufficient information to permit [the IRS] to evaluate their reported contributions, as intended by Congress." Smith v. Commissioner, T.C. Memo. 2007-368, 94 T.C.M. (CCH) 574, 586 (first citing Bond, 100 T.C. 32; and then citing Hewitt v. Commissioner, 109 T.C. 258 (1997), aff'd per curiam without published opinion, 166 F.3d 332 (4th Cir. 1998)), aff'd, 364 Fed.Appx. 317 (9th Cir. 2009).
To determine whether a taxpayer has substantially complied with the reporting requirements of Treasury Regulation § 1.170A-13(c), we "consider whether [the taxpayers] provided sufficient information to permit [the IRS] to evaluate their reported contributions, as intended by Congress." Smith v. Commissioner, T.C. Memo. 2007-368, 94 T.C.M. (CCH) 574, 586 (first citing Bond, 100 T.C. 32; and then citing Hewitt v. Commissioner, 109 T.C. 258 (1997), aff'd per curiam without published decision, 116 F.3d 332 (4th Cir. 1998)), aff'd, 364 Fed.Appx. 317 (9th Cir. 2009).
See, e.g., Presley v. Commissioner, T.C. Memo. 2018-171, at *78, aff'd, 790 Fed.Appx. 914 (10th Cir. 2019); Costello, T.C. Memo. 2015-87, at *24-25; Alli, T.C. Memo. 2014-15, at *24; Smith v. Commissioner, T.C. Memo. 2007-368, 2007 WL 4410771, at *18-19, aff'd, 364 Fed.Appx. 317 (9th Cir. 2009).
t gave rise to the claimed deduction." See also Estate of Evenchik v. Commissioner, T.C. Memo. 2013-34, at *8 (concluding that taxpayers did not obtain a "qualified appraisal" of "the contributed property", consisting of 72% of the shares in a corporation, because the appraisals obtained were appraisals of the corporation's assets and not of the contributed shares); Smith v. Commissioner, T.C. Memo. 2007-368, slip op. at 47-48 (concluding that taxpayers' charitable contribution of fractional interests in a family limited partnership that was supported by an appraisal of the partnership's sole underlying asset, along with their failure to attach a qualified summary appraisal to their return and show that the appraisal was completed by a qualified appraiser, did not "substantially comply or otherwise provide * * * [the Commissioner] with sufficient information to accomplish the statutory purpose" of enabling the Commissioner to "understand and monitor the claimed contributions"), aff'd, 364 F. App'x 317 (9th Cir. 2009). Although the 2007 Marshall & Stevens appraisal included Mr. Campbell's 3,432 eyeglass frames, we (and the IRS) have no way to determine whether what he alone contributed is overvalued.
In assessing whether Oakhill substantially complied with the regulation in question here, we consider whether it provided sufficient information to enable the IRS "to evaluate the[] reported contributions, as intended by Congress." Smith v. Commissioner, T.C. Memo. 2007-368, 94 T.C.M. (CCH) 574, 586, aff'd, 364 F. App'x 317 (9th Cir. 2009). As noted infra p. 27, Congress in 2004 added to the Code section 170(f)(11)(A)(ii)(II), which sets forth a statutory "reasonable cause" defense for failure to comply with the reporting requirements discussed above.
We have stated that the test for substantial compliance is whether the donors "provided sufficient information to permit * * * [the Commissioner] to evaluate their reported contributions, as intended by Congress." Smith v. Commissioner, T.C. Memo. 2007-368, 2007 WL 4410771, at *19, aff'd, 364 F. App'x 317 (9th Cir. 2009). Petitioners' appraisal summary omitted much of the required information and provided no reasonable cause explanation for the omissions.