T.C. Mem o. 2 01 4- 38

UNITED STAT ES TAX COURT

MIC HAEL S. MOUNTA NOS, Pet it io ne r v. COM MIS SIONER OF INTERNAL REVENUE , Res po nd en t *

Doc ke t No . 81 58 -1 0. Fil edMarc h 6 , 20 14 . W en dy Abki n andDon al d L. Feu rzei g, fo r pe ti ti on er. Ch ris ti anA. Spec k andMat th ew D. Carl so n, fo r res po nd en t.

SUPPLEMENTAL MEMORANDUM OPINI ON KROUPA, Ju dg e: Thi s m at te r is be fo re the Co urt o n p et it io ne r’s Ru le 16 1 1 m ot io n t o re co ns id er o urop in io n i n, an d p et it io ne r’s Ru le 16 2 m ot io n t o v acat e o r Thi s o pi ni onsupp le m en ts ou r pr io r op in io n, M ou nt an os v. Co m m is si on er, * T.C. Mem o. 2 01 3- 13 8. Ru le refe ren ces are t o the Tax C ou rt Rul es of P ract ic e an d P ro cedur e, an d 1 se ct io n re fere nc es are t o the Int ern al Rev enue Co de ineffe ctforth e y ears inis su e, un le ss othe rwis e in di cat ed .-2 -

[* 2] rev is e th e d eci si onen te redun de r, Mo un tano s v . Comm is si on er, T.C. Mem o. 20 13 -1 38 (Mo un tano s I) . W e h el d i n M ount an os I th atpe ti ti on er was no t en ti tl ed to cert ai n c arryov er d educ ti on s fr om th e ch ari tabl e co nt rib ut io n o f a co ns erv at io n eas em en t (c arryov er d educ ti on s) . W e fu rth er h el d tha t p et it io ne r was li ab le foran accu racy-rela te d p en al ty becau se he cla im edth e co ns erv at io n e as em en t’s v al ue was 40 0% o r m or e o f th e am ou ntde te rm in edto be co rrec t. See sec . 66 62 (a), (h ). Pet it io ne r no w ask s u s, i n acal cu la te d m an eu ve r to av oi d the accu racy-rela te d pe na lty , to ad dr es s the alt ern at iv e g ro un ds res po nd en t ra is edfordi sa ll owi ng th e carry ov er d educ ti on s. We will de ny his m ot io ns . Bac kg ro un d W e ad op t the fin di ng s o f fac t we m ad e in Mo un tano s I. We repe aton ly the fact s n eces sa ry

to res ol ve th es e m ot io ns . Pet it io ne r own edth e Bl ue Lake s R an ch(ran ch ) th ro ug h the Mi ch ael S. Mo un tano s Li vi ng Trus t. The ran chco ns is te d o f la rg el y un de ve lo pe d l an d i n Lak e Co un ty, Cal ifo rn ia . In Dec em be r 20 05 pe ti ti on er co nv ey eda co ns erv at io n eas em en t o n the ran chto th e Gol de n S ta te LandCo ns erv an cy (Gol de n S ta te ), a no n- pr of itco rp or at io n. Atth e ti m e p et it io ne r co nv ey edth e eas em en t t o Go ld en St at e, th e ran chwas und er a co nt ractth atli m it edth e ran ch ’s us e an d d ev el op m en t-3 -

[* 3] acco rd in g t o the Cal ifo rn iaLandCo ns erv at io n Actof 1 96 5. Ca l. Go v’t Co de se cs . 51 20 0- 51 29 7.4 (W es t 2 01 2) . Pet it io ne r ti m el y

fil edanin di vi du al Fed eral in co m e ta x re tu rnfor20 05 an d cl ai m eda $4 ,69 1,5 00 ch ari tabl e co ntrib ut io n d educ ti on for co nv ey in g the co ns erv at io n e as em en t. Pet it io ne r co ul d u se on ly $1,3 43 ,70 4 o f th e d educ ti on for 20 05 be cau se of t he gro ss in co m e li m it at io ns ap pl ic ab le to hi s 2 00 5 re turn . See se c. 17 0( b) (1 )(B) . Peti ti on er fi le d re tu rn s cl ai m in g c arryov er d educ ti on s fo r th e fo ll owi ng th ree years. Res po nd en t i ss ue d p et it io ne r a d efi ci en cy no ti ce d is al lo win g the carry ov er de du ct io ns . Peti ti on er t im el y fil eda pe ti ti on . In M ount an os I we he ldth at pe ti ti on er fa il edto pro ve co nv ey in g the co ns erv at io n e as em en t h adany effe cton th e h ig he stan d b es t u se of t he ran ch . Accor di ng ly, we he ldth atpe ti ti on er fa il ed to pro ve th atth e co ns erv at io n e as em en t h adan y va lu e. Res po nd en t ch al le ng edth e carry ov er d educ ti on s o n a lt ern at iv e g ro un ds as well . Spe ci fic al ly, res po nd en t cl ai m edth atpe ti ti on er fa il edto acqui re a re qu is it e

“ co nt em po ran eo us writ te n a ckno wled gm en t” fro m th e d on ee o rg an iz at io n o r a

“ qu al ifi edap pr ai sa l.” Se e se c. 17 0( f)(8 )(A); sec . 1.1 70 A-1 3( c), In co m e Tax Reg s. W e d idno t ad dr es s the se alt ern at iv e g ro un ds be cau se we di sp os it iv el y fou ndth at pe ti ti on er fa il edto est ab li sh th e co ns erv at io n e as em en t h adva lu e.-4 -

[* 4] Pet it io ne r no w ask s u s t o a dd res s the se alt ern at iv e g ro un ds fordi sa ll owi ng th e carry ov er d educ ti on s i n h op es th atou r do in g s o wi ll all ow h im to av oi d the accu racy-rela te d p en al ty. Dis cu ss io n W e fi rs t ad dr es s the st an da rd s thi s C ou rt u se s i n d eci di ng whet he r to gra nta Ru le 16 1 m ot io n fo r rec on si de rat io n o f anop in io n o r a Ru le 16 2 m ot io n t o v acat e orrev is e a d eci si on . W e th enad dr es s p et it io ne r’s co nt en ti on s. I. Sta nd ard s Un de r Ru le s 1 61 an d 1 62 W e b eg inwith the st an da rdth e Co urt u se s t o d eci de whet he r to granta Ru le 16 1 m ot io n fo r rec on si de rat io n. Th e d eci si on res ts withi n the Co urt’s d is cret io n. CWT Farm s, In c. v. Co m m is si on er, 7 9 T.C. 1 05 4, 1 05 7 (1 98 2) , aff’d, 7 55 F.2d 79 0 (1 1th C ir. 1 98 5) . W e g en eral ly do n otex erci se ou r di sc ret io n t o re co ns id er an op in io n abs en t a s ho win g o f subs tant ia l erro r orun us ua l ci rcu m st an ces . Haft Trus t v . Comm is si on er, 6 2 T.C. 1 45 (19 74 ), aff’d o n thi s g ro un d, 5 10 F.2d43 , 45 n.1 (1s t Ci r. 19 75 ). W e n ow fo cu s o n the st an da rdth is Co urt u se s i n d eci di ng whet he r to gra nta Ru le 16 2 m ot io n t o v acat e o r rev is e a d eci si on . Rul e 1 62 do es no t p ro vi de us with a st an da rdby whi chto ev al ua te a m ot io n t o v acat e o r rev is e a d eci si on . See Brewe r v. C omm is si on er, T.C. Mem o. 2 00 5- 10 . Accor di ng ly, we wil l re fer t o the-5 -

[* 5] Fed eral Ru le s o f Ci vi l Pr oc edur e fo r gu id an ce. Ru le 1(b ). W e h av e o fte n refe rredto rul e 6 0 o f th e Fed eral Ru le s o f Ci vi l Pr oc edur e an d c as es ap pl y in g tha t ru le to ass is t u s i n re so lv in g i ss ue s ra is edina m ot io n t o v acat e o r rev is e a de ci si on . See, e.g ., Cin em a ‘84 v. Co m m is si on er, 1 22 T.C. 26 4, 2 67 -2 68 (20 04 ), aff’d, 4 12 F.3d36 6 (2 d C ir. 2 00 5) ; Br an no n’s o f Sh awn ee, In c. v. Co m m is si on er, 69 T.C. 99 9, 1 00 1 (1 97 8) . Mot io ns to va cat e o r rev is e a d eci si on are g en eral ly de ni edab se ntun us ua l ci rcu m st an ces or s ub st an ti al erro r. See Fe d. R. C iv . P. 60 (b ); M it ch el l v . Comm is si on er, T.C. Mem o. 2 01 3- 20 4. II. Pet it io ne r’s Mo ti on s A. Rul e 1 61 Mo ti on forReco ns id erat io n W e n ow fo cu s o n the m ot io n fo r reco ns id erat io n. Pe ti ti on er u rg es us to reco ns id er Mo un tano s I t o a dd res s the alt ern at iv e g ro un ds th atres po nd en t ra is ed fo r di sa ll owi ng th e carry ov er d educ ti on s. We will ad dr es s p et it io ne r’s arg um en ts intu rn . Pet it io ne r arg ue s thi s C ou rt m us t ad dr es s the alt ern at iv e g ro un ds res po nd en t rai se d i n M ou nt an os I be cau se itwou ldall ow h im to av oi d the accu racy-rela te d pe na lty . Peti ti on er re li es on two cas es th atho ldanov erv al ua ti on pe na lty m ay no t be im po se d wh enth ere i s s om e o th er g ro un d fo r di sa ll owi ng th e en ti re p orti on of a de du ct io n tha t o th erwi se m ig htbe di sa ll owe d fo r ov erv al ua ti on . See Kel le r v.-6 -

[* 6] Co m m is si on er, 5 56 F.3d10 56 (9t h C ir. 2 00 9) , aff’g i n p art , rev ’g inpart T.C. Mem o. 2 00 6- 13 1; Gain er v . Comm is si on er, 8 93 F.2d22 5 (9 th Cir . 19 90 ), aff’g T.C. Mem o. 1 98 8- 41 6. Res po nd en t d is ti ng ui sh es th is cas e fro m Kell er an d Gai ne r be cau se inth os e cas es th e ta xp ay ers st ip ul at edth e n on -v al ua ti on fla ws i n the de du ct io ns at i ss ue . Res po nd en t re as on s tha t b ecau se pe ti ti on er d idno t co nc ed e a n on -v al ua ti on fla w, Kell er an d Gai ne r are no t b in di ng . See Go ls env. Co m m is si on er, 5 4 T.C. 7 42 (1 97 0) , aff’d, 4 45 F.2d98 5 (1 0t h C ir. 1 97 1) . W e ag ree wi th res po nd en t. 2 Add it io na ll y , th e Supr em e Co urt h as rece nt ly spo ke n o n the ap pl ic at io n o f 2 th e g ro ss va lu at io n m is st at em en t p en al ty. See Un it edSta te s v . W oo ds , 57 1 U.S.

__ , 13 4 S . Ct. 5 57 (20 13 ). The C ou rt h el d tha t the Co m m is si on er’s d et erm in at io n th ata pa rtn ers hi p was a sh am is no t i nd ep en de ntfro m

a ta xp ay er’s o ve rs ta te m en t of ba si s fo r pu rp os es of t he gro ss va lu at io n m is st at em en t p en al ty. Id. a t _ _, 1 34 S. Ct . at 5 67 -5 68 . The t ax pa y er ar gu edth atth e fo rm ul a in th e Gen eral Exp lana ti on of th e Eco no m ic Reco ve ry

Tax Actof 1 98 1, at33 3 & no te 2 (J . Comm . Prin t 19 80 ) (b lu e b oo k) ex pl ai ni ng th e ap pl ic at io n o f th e g ro ss va lu at io n m is st at em en t pe na lty co m pe ll eda di ffer en t re su lt . Id. at__ , 13 4 S . Ct. at56 8. Th e Co urt reco gn iz edth atth e b lu e b oo k m ay be rel ev an t t o the ex te ntitis pe rs ua si ve . Id. The C ou rt t he n s ta te d tha t the form ul a was no t p ers ua si ve be cau se itde sc rib eda si tu at io n wh ere the re ar e “ two sep arat e, no n- ov erl ap pi ng un de rp aym en ts , on ly one of whi chis att rib ut ab le to a va lu at io n m is st at em en t.” Id . The Co urt’s ch arac te riz at io n o f th e b lu e b oo k fo rm ul a fo r ap pl y in g the gro ss va lu at io n m is st at em en t p en al ty is i n d ire ctco nf li ctwith the ch arac te riz at io n o f th e sa m e fo rm ul a as rel ie d upo n b y

Kell er v . Comm is si on er, 5 56 F.3d10 56 (9t h C ir. 2 00 9) , aff’g i n p art , rev ’g inpart T.C. M em o. 2 00 6- 13 1 andGain er v . Comm is si on er, 8 93 F.2 d 2 25 (9t h C ir. 1 99 0) , aff’g T.C. Mem o. 1 98 8- 41 6. Acco rd in gl y , th e co nt in ui ng vi ab il ity

of t he li ne of c as es on whi chpe ti ti on er re li es is inqu es ti on , an d o urrev ers al by the Co urt o f App eal s fo r th e Nin th Cir cu itwou ldno t b e as a (co nt in ue d...)-7 -

[* 7] W e n ow fo cu s o n wh y we are n otbo un d b y

Kell er o r Gai ne r in th is cas e. W e st artwith Gai ne r, as itwas the ba si s fo r th e h ol di ng inKell er. The parti es in Gain er s ti pu late d tha t the tax pa y er was no t en ti tl edto de du ct io ns st emmin g fr om anin te res t i n ash ip pi ng co nt ai ne r be cau se itwas n otpl acedinservi ce u nt il a la te r y ear. Gai ne r v. C ommis si on er, 8 93 F.2dat 2 26 . The Co m m is si on er n on ethe le ss so ug htto im

po se a pe na lty

on th e ta xp ay er fo r ov erv al ui ng th e co nt ai ne r. Id. 3 The co urt re li edon a fo rm ul a in th e Gen eral Exp lana ti on of t he Econ om ic Rec ov ery Tax Act o f 19 81 , at 3 33 & n ot e 2 (J. Co m m . Prin t 1 98 0) (bl ue bo ok ) to un de rs tandth e st atut e’s ap pl ic at io n. Gai ne r v. C omm is si on er, 8 93 F.2dat 2 26 . Fo ll owi ng th e fo rm

ul a, th e co urt h el d tha t the tax pay er’s und erp aym en t co ul d n ot be sai d t o b e at tri bu tabl e to th e o ve rv al ua ti on of t he sh ip pi ng co nt ai ne r. Id. at22 7. The co urt re as on edth atth e und erp aym en t d idno t v ary de pe nd in g o n h ow m uc h th e co nt ai ne r was ov erv al ue d b ecau se th e p art ie s s ti pu la te d tha t n o d educ ti on was al lo wab le inth e fi rs t i ns tanc e. Id . Accor di ng ly, th e ta xp ay er’s actua l t ax li ab il ity , aft er ad jus ti ng for

fai lu re t o p la ce the co nt ai ne r inservi ce, was no di ffer en t fr om (...co nt inue d) 2 m at te r of co ur se . See Go ls env. Co m m is si on er, 5 4 T.C. 7 42 (19 70 ), aff’d, 4 45 F.2 d 9 85 (10 th Cir . 19 71 ). The Co urt o f App eal s i n Gai ne r in te rp ret edsec . 66 59 , no w rep eal ed , whi ch 3 al so im po se d ape na lty

on tax pa y ers who un de rp ai d the ir t ax es by ove rv al ui ng an as se t.-8 -

[* 8] hi s l iabi li ty after a dju st in g fo r an y ov erv al ua ti on . Id. The refo re, n o p en al ty co ul d app ly. Id. W e n ow l oo k t o Kel le r. The p art ie s i n Kel le r st ip ul at edth atth e ta xp ay er was no t en ti tl edto de du ct io ns st emmin g fr om a Hoyt pa rtn ers hi p t ax sh el te r. Kell er v . Comm is si on er, 5 56 F.3dat 1 05 8. Th eref or e, th e so le is su e fo r tr ia l was whe th er the Co m

m is si on er co ul d i m

po se th e g ro ss va lu at io n m is st at em en t p en al ty. Id . The co urt re as on edth atwhen a de pr eci at io n d educ ti on is di sa ll owe d i n t ot al , an y ov erv al ua ti onis subs um edinth atdi sa ll owa nc e. Id . The co urt h el d tha t the st ip ul at io n re nd eredth e ta xp ay er’s b as is ov ers tate m en t i rrel ev an t b ecau se th e ta x de fic ie nc y

was a ttrib ut ab le to anun lawfu l d ep reci at io n d educ ti on --n otan ov erv al ua ti on . Id. Ag ai n, the refo re, n o p en al ty cou ldap pl y . Id. Bo th Kell er an d Gai ne r co nc erntax pa y ers ’ st ip ul at in g tha t d educ ti on s wer e un lawfu l o n agro un d o th er tha n v al ua ti on . Peti ti on er d idno t s o s ti pu late . Rath er, pe ti ti on er ch al le ng edres po nd en t’s d et erm in at io n re ga rd in g the va lu at io n o f th e co ns erv at io n e as em en t as well as t he alt ern at iv e g ro un ds . 4 Pet it io ne r no w att em

pt s t o l os e h is red et erm in at io n arg um en t o n adi ffer en t 4 gr ou ndso as t o avo idli ab il ity for our ap pl y in g the gro ss va lu at io n m is st at em en t pe na lty . Thu s, h e is att em pt in g t o t ak e two bi te s atth e sa m e ap pl e. The C ourt o f App eal s i n Kel le r no te d tha t a t ax pa y er’s co nc es si on ha d s ig ni fic an t co ns eque nc es be cau se itm ean t tha t the tax pa y er was no lo ng er ab le to arg ue th e m eri ts of h is de fic ie nc ie s i n the Tax C ou rt. Kel le r v. C ommis si on er, 5 56 F.3dat 1 06 1. Here , (co nt in ue d...)-9 -

[* 9] Neit he r Kel le r no r Gai ne r requi res us to rul e o n the alt ern at iv e g ro un ds th at pe ti ti on er fa il s t o c on ced e. Rathe r, Kell er an d Gai ne r requi re tha t we n otup ho ld 5 th e Co m m is si on er’s i m

po si ng th e g ro ss va lu at io n m is st at em en t p en al ty whe re a ta xp ay er co nc ed es th e unl awfu ln es s o f a d educ ti on ongro un ds othe r th an va lu at io n. Se e, e.g ., Berg m an n v . Commis si on er, 1 37 T.C. 13 6 (2 01 1) (fi nd in g ta xp ay ers co nc ed edon gro un ds othe r th anva lu e o r ba si s tha t the y were n ot en ti tl edto de du ctan y

po rti on of t he lo ss es at i ss ue ), aff’d, _ _ F ed . App x. _

_, 2 01 4 W L 11 57 13 (9t h C ir. J an . 14 , 20 14 ); B LAK Inv s. v . Comm is si on er, T.C. Mem o. 20 12 -2 73 (fi nd in g tha t the tax pa y er co nc ed edde du ct io ns on gro un ds un rel at edto th e v al ue of b as is of t he pro pe rty in t he tra ns act io n) ; Be rg m ann v . Comm is si on er, T.C. Mem o. 2 00 9- 28 9 (f

in di ng itpre m atur e to rul e o n asu m m ary jud gm en t m ot io n tha t the gro ss va lu at io n m is st at em en t p en al ty doe s n otap pl y be cau se th e ta xp ay er d idno t co nc ed e th atno de du ct io ns were al lo wab le ). W e h av e al so rel ie d on th e rea so ni ng of Ga in er wh ere we h av e ref us edto up ho ldth e im

po si ti on of a (...co nt inue d) 4 pe ti ti on er i s at te m

pt in g t o g ai n a dv an ta ge by bot h arg ui ng th e m eri ts of h is de fic ie nc ie s i n the Tax C ou rt a ndth enlat er s eek in g t o l os e h is red et erm in at io n arg um en t o n ano n- va lu at io n g ro un d t o a vo idth e g ro ss va lu at io n m is st at em en t pe na lty . Eve n i f we were t o a tt em ptto rul e o n the alt ern at iv e g ro un ds jus t fo r 5 pu rp os es of t he gro ss va lu at io n m is st at em en t p en al ty, th ere i s n o ra ti on al way to li mitth os e h ol di ng s t o the pe na lty an al y si s.-1 0-

[* 10 ] gro ss va lu at io n m is st at em en t p en al ty whe n we f ou ndde du ct io ns un lawfu l on gro un ds othe r th anva lu at io n. Se e Derb y v. Co m m is si on er, T.C. Mem o. 2 00 8- 45 . Pet it io ne r al so co nt en ds we m us t ad dr es s the alt ern at iv e g ro un ds no w to sa ve us fro m

ha vi ng to rev is itth is is su e sh ou ldth e Co urt o f App eal s fo r th e Nin th Ci rcu itrem an d M ou nt an os I. Res po nd en t co un te rs th atou r pr in ci pl e o f no t gr atui to us ly deci di ng co m pl ex is su es th atcan no t af fectth e d is po si ti on of acas e m il it at es ag ai ns t p et it io ne r’s arg um en t. We agre e wit h re sp on de nt . Pri nc ip le s o f jud ic ia l ad m in is tra ti on gu id e u s t o n otgra tu it ou sl y de ci de co m pl ex is su es th atcan no t af fectth e d is po si ti on of acas e b efo re u s. LTV Cor p. v. Co m m is si on er, 6 4 T.C. 5 89 , 59 5 (1 97 5) ; s ee al so Cig naCo rp . v. Co m m is si on er, T.C. Mem o. 2 01 2- 26 6. Re so lv in g am oo t i ss ue is tan ta m ou ntto ren de rin g an advi so ry op in io n. Se e LTV Corp . v. Co m m is si on er, 6 4 T.C. at59 5; Grynb erg v. Co m m is si on er, T.C. Mem o. 2 00 0- 15 . This we refu se to do . W e h el d d is po si ti ve ly in M ou nt an os I th atpe ti ti on er fa il edto pro ve th atth e co ns erv at io n e as em en t h adva lu e. Our a dd res si ng th e al te rn at iv e g ro un ds th at res po nd en t ra is edwou ldha ve no im pa ct , th enor n ow, o n o urdi sp os in g o f th is cas e. See Grynb erg v. Co m m is si on er, T.C. Mem o. 2 00 0- 15 . The al te rn at iv e gr ou nd s tha t re sp on de ntrai se d fo r di sa ll owi ng th e carry ov er d educ ti on s ar e-1 1-

[* 11 ] th eref

or e m oo t. Acco rd in gl y , we dec li ne th e in vi ta ti on to is su e anadvi so ry op in io n. Se e LTV Corp . v. Co m m is si on er, 6 4 T.C. at59 5. Pet it io ne r ha s n otsh own th atwe co m m it te d s ub st an ti al erro r orth atan y un us ua l ci rcu m st an ces ex is t. See HaftTrus t v . Comm is si on er, 6 2 T.C. 1 45 . Thu s, th ere i s n o b as is on whi chto reco ns id er o urop in io n i n M ount an os I. See i d. B. Ru le 16 2 M ot io n To Vacat e o r Rev is e W e n ow fo cu s o n the m ot io n t o v acat e o r rev is e o urde ci si on inMo un tano s I. Pet it io ne r an d re sp on de ntrep eatth e arg um en ts th ey m ad e wit h re sp ectto th e m ot io n fo r rec on si de rat io n o f ou r op in io n. An d we r each th e sam e co nc lu si on . The re i s n o v al idba si s o n wh ic h t o re vi se or v acat e o urde ci si on inMo un tano s I. See F ed . R. Civ . P. 60 (b ). III. Co nc lu si on Pet it io ne r ha s p ro vi de d n o v al idba si s fo r us to reco ns id er o urop in io n o r va cat e o r rev is e o urde ci si on inMo un tano s I. Acco rd in gl y , we wil l d en y hi s m ot io ns . W e h av e co ns id eredall rem ai ni ng arg um en ts th e p art ie s m ad e an d, t o the ex te ntno t ad dr es se d, we fi ndth em to be irr el ev an t, m oo t o r m eri tl es s.-1 2-

[* 12 ] To re fle ctth e fo reg oi ng , An ap pr op ria te ord er wi ll be is su ed .