T.C. M em o . 2 0 2 0 -3

UNITED STATES TAX COURT

CHAD LOUBE AND DANA M . LOUBE, Pet it i o n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 5 0 9 2-1 7. Fi l edJ an uary8 , 2 0 2 0
.
Ch adLo ub e an dDan a M . Lo ub e, p ro s es e. * Sco t t A. Ho v ey

an dDeb o rah Al oo f, fo r res p o n d en t .

M EM ORANDUM OPINION COPELAND, Ju d g e: Ina n o t i ce o f d efi ci en cy d at edDecem

b er 2 , 2 0 1 6 , res p o n d en t d et erm i neda d efi ci en cy o f $ 1 1 7 ,6 1 2 i n Fed eral i n co m e t ax fo r p et i t i o n ers ’ 2 0 13 t ax ab l e y ear. Pen d i ng b efo re t h i s Co u rti s res p o n d en t ’ s m o t i o n

* Bri ef am ici cu ri ae was fi l edb y Th om as J . O’ Ro u rk e an dDerekP. Ro u s s i l l o n as at to rn ey s fo r Seco n dCh an ce, In c.- 2
-

[* 2 ] fo r s u m

m ary ju d g m en tfi l edp u rs u an tt o Ru l e 1 2 1
. 1 Res p o n d en th as m o v ed fo r s u m m ary ju d g m en to n th e g ro u n d s th at , b y o p erat i o n o f th e d ocu m en t s s o far
co n tai n edi n th e reco rd , th ere are n o g en u i n e d i s p u t es as t o m at eri al fact s an dth i s
cas e s h o ul dtherefo re b e ru l edo n n o w as a m at t er o f l aw. Pet i t i o ners fi l edb o th a res p o n s e t o the m o t i o n fo r s umm ary ju d g m en tan d a fi rs ts up p l em en t t o th ei r res p on s e. Becau s e we fi ndn o g en ui n e d i s p u t e as t o an y m at eri al fact , an db ecau s e we fi ndth atp et i t i o ners n ei th er s tri ct l y n o r s ub st an t i al ly

co m p l i edwi th th e req u i rem en t s o f s ect i o n 1 5 5 o f t h e Defi ci tReduct i o n Acto f 1 98 4 (DEFRA), Pub. L. No . 9 8 -3 6 9 , 9 8 St at . at6 91 , we wi l l g ran t res p on d en t ’ s m o t i o n . Back gro u n d Pet i t i o ners res i d edi n M ary l an dwh en th ey fi ledth ei r p et it i on . Ono r ab o u t J u l y 1 , 2 0 1 3 , p et i t i o n ers p u rch as edreal p ro pert y i n Po t o m ac, M ary l an d . Th e p ro p erty was p u rch as ed fo r $ 7 9 5 ,0 0 0 an d co n s i st edo f 0 .3 8 acres o f l an dan da
s i ng l e-fam i l y

h o u s e. Pet it i on ers d es i redt o d em ol is h th e h ou s e an dco n st ru cti n i t s p l ace a n ew res i d en ce o f thei r o wnd es i g n .

1 Un l es s o th erwi s e i nd i cat ed , ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an d Pro cedu re an ds ect i o n referen ces are t o th e In t ern al Rev en u e Co d e i n effect fo r t h e y ear i n i s s u e.- 3
-

[* 3 ] Seco n dCh an ce, In c. (Seco n dCh an ce), i s i n co rp o rat edu n der t h e l aws o f M ary l an dan dqu al i fi es as a ch ari t ab l e o rg an i zat i o n u n der s ect io n 5 01 (c)(3 ). Seco n dCh an ce p erfo rm s d eco n s tru ct i o n , wh ich i s s om et h i n g l es s th an d em o l i t i o n . Wh ere d em o l i t i o n t y

p ical l y res u l t s i n an n i h i l at i o n o f a s tru ctu re, d eco n s tru ct i o n
m i g h ti n v o l v e o nl y

th e rem o val o f fu rn itu re, ap p l i an ces , fi x tu res , l u m b er, an d
o th er m at eri al s . Seco nd Ch an ce s el l s s al v ag eab l e m at eri al fro m d eco n s tru ct i o n o n th e o p enm ark etth ro u g h i t s wareh o u s e. Bu tSeco n dCh an ce’ s rai s o n d ’ être i s t o
u s e t h e d eco n st ru ct i o n p ro ces s t o t each m ark et ab l e s k i l l s t o p ers o n s faci n g b arri ers t o em p l o y m en tran gi n g fro m

l im i t ededu cat i o n t o cri m i n al reco rd s wh i l e
en v iro n m en t al ly

reu s i n g m at eri al s th atwo ul do therwi s e en dup as l an d fi l l d eb ri s . Ty p i cal ly , atthe s t ag e wh ere t h e d eci s i o n h as b een m ad e t o d em o l is h a
s tru ctu re, t he o wn er wi l l en t er i n t o an ag reem en twi th Seco n dCh an ce t o al l o w Seco n dCh an ce t o u s e t h e s tru ctu re fo r d eco n s tru ct i o n . Th e o wn er wi l l al s o m ak e
a cas h co n tri b u t i o n t o Seco n dCh an ce, wh i ch co v ers th e up fro n tco s ts o f Seco n d Ch an ce’ s d eco n st ru ct i o n . On ce Seco n dCh an ce h as fi n i s h edi t s trai n in g an d
rem o v eds al v ag eab l e m at eri al s , th e o wn er wi l l en g ag e a th i rdp arty t o d em o l i s h th e
s tru ctu re. Seco n dCh an ce co n t act edp et i t i o n ers v i a em ai l o n M ay 3 , 2 0 1 3 , ex p l ai n i n g i t s d eco n s tru ct i o n p ro g ram . Th e em ai l n ot edth ata co n tri b u t i o n wo u l dg en erat e a- 4
-

[* 4 ] t ax d edu ct i o n an di n cl u deda “ Tax St rat eg y Pl an n in g W o rk s h eet ”. Itfu rt h er
n o t edth ata d em o l i ti on co m p an y wo u l ds t i l l h av e t o b e en g ag ed an dth atth e d em o l it i o n co m

p an y ’ s co stwo ul db e co n s t an t i n th e p ro ject
. 2 OnJ u ly 1 , 2 0 1 3, p et i t i o ners en g ag edan ap p rai s er, Pat ri ckM . Sm i th, Sr., o f No VaSt ar Ap prai s al s , In c. Ono r ab o u t J u l y

1 6 , 2 0 1 3 , p et i t i o n ers an dSeco ndCh an ce en t eredi n t o an

“ Ag reem en tfo r Ch ari t ab l e Co n tri b ut i on ”, rel at in g t o d eco n s tru ct i o n , an d p et i t i o n ers s i g n eda “ Ch ari t ab l e Pl ed g e Ag reem en t ”, rel at i n g t o m ak i n g a cas h
co n tri b u t i o n . Th e ag reem en ti n co rp o rat edb y referen ce t h e p l ed g e an di n cl u d ed th e fo l lo wi n g t erm s : W HEREAS, Own er d es i res t o co n tri b ut e t o Seco n dCh an ce t h e ex i s ti n g i m

p ro v em en t s , b u i l d i n g s , an dfi x tu res up o n s u ch Prem i s es (co l l ect i v el y

th e “ Im p ro v em en t s”), wh ich s u ch Im p ro v em en t s s h al l b e treat edas p ers o n al l y

s ev eredfro m

th e Prem is es , fo r th e ex p res s p u rp o s e o f Seco n dCh an ce u s i n g th e Im p ro v em en t s i n i t s ch ari t ab l e o p erat i o n s [.]
* * * * * * * 2 . Do n at i o n ; Co n v ey an ce o f Im p ro vem en t s . Own er h ereb y d o nat es , co n v ey s an dg iv es t o Seco n dCh an ce al l o f t h e Own er’ s ri g h t , t i tl e an di n t eres ti n t h e Im

p ro v em en t s an dSeco n dCh an ce h ereb y accep ts s u ch Im p ro v em en t s . Th e p art i es i n t en dfo r t h e Im p ro v em en t s t o b e

2 Th e p art i es i n th is cas e ap p ear t o ag ree t h at Seco n d Ch an ce’ s d eco ns tru ct i o n d i dn o tap preci ab l y redu ce p et i t i o ners ’ d em o l i t i o n co s t s .- 5
-

[* 5 ] treat edas p ers o n al ty an dd es i re b y

th i s Ag reem en tt o effect u at e a co n s tru ct iv e s ev eran ce o f t h e Im p ro v em en ts fro m th e Prem i s es . As i d e fro m

th e “ Im p ro v em en t s ” referen cedab o v e, t h e ag reem en td i dn o t
s p eci fy wh ati tem s , o b

j ect s , o r p ro p ert y

were b ei ng d o n at ed . Th e ag reem en twas
n o treco rd ed . Th e p l ed g e i n cl ud edp et i t io n ers ’ co m m i t m en tt o d on at e t o Seco n d Ch an ce $ 2 7 ,5 0 0 o n o r b efo re Decem b er 3 1 , 2 01 3 . Th e p l ed g e was m ark edwi th a h an dwri t t en s l as h acro ss th e fro n twi th the wo rd“ Ren eg ot i at ed ” u n d erl i nedan di n al l cap s i n i t s up per ri g h th an dco rn er. M r. Sm i th s en tp et i t i on ers an ap prai sal fo r t h e p ro p ert y b y l et t er d at ed J u l y 1 7 , 2 0 1 3. Th e ap p rai s al h adan effect i ve d at e o f J u l y 1 , 2 0 13 , an du s eda

“ Co s tAp p ro ach t o Val u e”, wh i ch i n v o l v ed es t i m at i n g “ th e cu rren tco s ts t o rep ro du ce o r creat e a p ro p ert y wi th an o th er o f co m

p arab l e u s e an dm ark et ab i l i t y .” Th e ap p rai s al i n cl u ded9 9 d et ai l edp h o t o s o f t he h o m e an d p ers o n al p ro p ert y i n s i d e t h e h o m e b efo re rem o v al th ro u g h d eco n s tru ct i o n . Th e ap p rai s al u sedd at a fro m th e R.S. M ean s Co ., wh i ch s p eci al izes i n co n s tru ct i o n co s t es t i m at i n g d at a, i n
o rd er t o cal cu l at e t h atth e cu rren tco s tt o rep ro du ce t h e h o us e wo u ldb e $ 6 7 4 ,0 0 0
. Th e ap p rai s al th en redu ced th atam o u n tfo r t h e co s t s o f l ab o r, arch i t ectu ral fees , th e g en eral co nd i t i o n o f t h e h o u s e, an dth e o v erh eadan dp ro fi tfo r a h y p o th et i cal
co n st ru ct i o n co m

p an y , wh ich res u l t edi n a “ n ew m at eri al s co s t ” fo r th e h ou s e o f- 6
-

[* 6 ] $ 3 3 0 ,4 5 3. Th e n ew m at eri al s co s to f $ 3 3 0 ,4 53 was th enredu cedb y 1 0 % fo r d ep reci at i o n (i
. e., a redu ct i on o f $ 33 ,0 4 5 .3 0 ). Th e n ew m at eri al s co st , l es s th e t o t al d ep reci at i o n , res u l t ed i n a ro u n d edfai r m ark etv al u e fo r t h e d eco ns tru ct ed h o u s e o f $ 29 7,0 0 0. To co m e t o t h e i n i t i al v al ue o f $ 6 74 ,0 0 0 , th e ap p rai sal l i s t ed cat eg o ri es o f d o nat edi t em s as fo l l o w s : Si t e wo rk $ 1,7 5 0 Fo un dat i o n s 3 4,7 0 0 Fram i n g 4 8,6 1 6 Ex t eri o r wal l s 5 5,3 7 8 Ro o fi n g 1 1,1 0 0 In t eri o rs 9 7,3 6 0 Sp eci al t i es 1 8 2,7 1 8 M ech an i cal 2 5,0 7 3 El ect ri cal 1 1,0 2 5 Subto ta l $4 6 7,7 2 0 Gen eral co n d i ti o n s 4 6,5 0 0 G.C. O&P 7 7,0 0 0 Arch i t ectu ral fee 3 5,5 0 0 Co n tract o r fee $ 4 7,0 0 0 Es ti m a te to ta l $6 7 3,7 2 0 (ro u n d ed ) $6 7 4,0 0 0- 7
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[* 7 ] Each o f t h e cat eg o ri es ab o v e h add et ai l edco m po n en tv al u at io n s s u ch as th at fo r t h e cat eg o ry

l ab el ed“ s p eci al t i es ”, wh i ch i n cl u d ed :

Des cri pti o n Ex t. To ta l i ncl O&P Refri g erat or, n o fro s t , 2 1 -2 9 C.F $ 3 ,3 5 0 Garb ag e d i s p o s al 2 7 8 Garag e d o o r o p en er 5 8 0 Gab le d o rm er, 2 ’ x 6 ’ ro o f fram e 5 7 ,0 0 0 W at er h eat er, g as , g l as s l i n ed 5 0 g al
. 1 ,5 0 0 M i cro w av e o v en 6 5 0 Ran g e 3 0 ” free s t an di n g , 1 o v en 1 ,8 7 6 Heat i n g s y s t em s , h o twat er 5 ,3 0 0 Fi rep l ace & ch i m

n ey 8 ,9 2 5 Sm o k e d et ect o r 7 0 0 Hal f b at h –

i n cl u d i n g p l u m

b i n g , wal l an dfl o o r fi n i s h es 5 ,4 2 8 Fu l l b at h –

i n cl u d i n g p l u m

b i n g , wal l an dfl o o r fi n i s h es 1 9 ,0 0 0 Up g rad e k i t ch encab i n et s 2 7 ,6 0 0 Two car at tach edg arag e 2 8 ,1 0 0 Di s h was h er, b u il t -i n , 4 o r m o re cy cl es 1 ,3 7 8 Ki t ch en , cu s to m

g rad e 1 6 ,9 0 0 Si n k s , p o rcel ai n o n CI s i n g le b o w l , d o ub l e b o wl , 2 0 ” x 3 2 ” 1 ,8 0 0 W at er h eat er, g as , 7 5 g al
. 1 ,9 7 5 M ed i ci n e ch es twi th m i rro r, 3 6 ” x 2 4 ” 3 7 8 To ta l s fo r 0 7 Speci a l ti es $ 18 2 ,7 1 8- 8
-

[* 8 ] In ad d i t i o n , ap pen d i x E o f t h e ap p rai sal l i s t ed the m o s trecen t t ax i n fo rm at i o n fo r t h e p ro p ert y , wh i ch i n cl u d eda t ot al as s es s edv al u e fo r 2 0 1 3 o f $ 7 5 9 ,4 0 0 , co n s i s t in g o f a l an d v al ue o f $ 45 1 ,2 0 0 an dan i m pro v em en t s v al u e o f $ 3 0 8 ,2 0 0
. Ono r ab o u t Decem

b er 2 3 , 2 0 1 3 , p et i t io n ers i s s u eda ch eckt o Seco nd Ch an ce fo r $ 1 5 ,0 0 0
. Pet i t i o ners co n tract edwi th Des i gn -Tech Bu i l d ers , In c. (Des i g n-Tech ), o n J an u ary 1 0 , 2 0 1 4, fo r t h e co n s tru ct i on o f a n ew s i n g le-fam i ly h o u s e o n th e p ro p erty . Th atco n tract au th ori zedDes i gn -Tech t o s ub co n tract fo r t he d em o l i t i o n
o f t h e h o u s e an d co n s tru ct i o n o f a fo u n dat i o n fo r a n ew h o u s e. Ono r b efo re Feb ru ary 2 4 , 2 0 1 4 , Des i g n -Tech h i redM o d ern Fo u n d at i o ns , In c., t o d em o l i s h an d
rem o v e th e ex i s t i n g s tru ctu re ata b i d p ri ce o f $ 1 4,5 0 0
. Pet i t i o ners t i m el y

fi l edth ei r 2 0 1 3 Fed eral i n co m e t ax retu rn , cl ai m i n g a $ 2 9 7 ,0 0 0 n o n cas h ch ari tab l e co n tri b u t io n d edu ct i o n fo r t hei r d o n at io n o f th e i m p ro v em en t s t o Seco n d Ch an ce. Pet i ti o n ers at t ach edt o th ei r 2 0 1 3 retu rn a Fo rm 8 2 8 3 , No n cas h Ch ari t ab l e Co nt ri b u t i o n s (ap p rai s al s u m m ary ). Onth e ap p rai s al
s u m m ary , Sect i o n B, Part I, Bl ock4 (j) i s ch eck ed , i d en t ify i n g t h e t y pe o f p ro p ert y d o n at ed as “ Oth er”. Bl o ck5 (a), wh i ch as ks fo r a d es cri p t i on o f t h e d o n at ed p ro p erty , s t at es “ Ho u s e Im p o rv em en t s [s ic] ”. Bl o ck5 (b ) s ay s “ Ex cel l en t ” wh ere i t- 9
-

[* 9 ] as k s fo r a s u m

m ary o f t h e o v eral l p h y s ical co n d i t i o n o f t h e p ro p erty , i f t an g i b l e p ro p ert y

was d o n at ed
. Bl o ck5 (c) ap p rai s es th e i m p ro v em en ts ata fai r
m ark etv al u e o f $ 2 97 ,0 0 0 . Bl o ck s 5 (d ) th ro ug h 5 (i ), wh ich p ro v id e cri t i cal i n fo rm at i o n rel at ed t o th e d o nat i o n, are al l b l an k . In p art i cu l ar, Bl o ck5 (d ), wh i ch
as k s fo r t h e d at e th atth e d o n at edp ro p erty was acq u i red , i s b l an k; an dBl o ck5 (f), wh i ch as ks fo r t h e d o n o r’ s co s to r ad ju s t ed b as i s , i s b l an k
. PartIII, Decl arat i o n o f Ap p rai ser, i s n o ts i g n edb y th e ap p rai s er b u ti s d at ed an ds h o ws th e ap prai s er’ s ad dres s an dh is i d en t i fy i n g n u m b er. Seco n dCh an ce i s l i s t edu n d er PartIV, Do n ee Ackno wl ed g m en t ; i t s ad dres s an di d en t ify i n g n u m b er are rep o rt ed , b u t th e

“ Au th o ri zeds i g natu re” b l o cki s b l an k
. 3 Th e o n l y o th er i n fo rm at i o n i n th e ap p rai s al s u m

m ary i s p et i t i o n ers ’ n am es an di d en t i fy i n g n u m b ers atth e t o p o f each p ag e. Pet i t i o n ers d idn o t p ro v i d e an y ex p l an at i o n fo r t he b l an k p o rt i o n s o f t h e ap p rai s al s u m

m ary , b u tth ey

d i dat tach th e ap p rai s al t o th e ret u rn . Res p o n d en ti s su edth e n o t i ce o f d efi ci en cy , d et erm i ni n g t h atp et i t i o n ers
were n o t en t i t l ed to th e $ 2 9 7,0 0 0 n on cas h ch ari t ab le co nt ri bu t i o n d educt i o n . Th e In t ern al Rev enu e Serv i ce (IRS) ex am i n er’ s Fo rm 8 8 6 -A, Ex p l an at i o n o f Ad ju s t m en t s , s t at edth atth e reas o n th e n o n cas h ch ari t ab l e co n tri b u t i o n d edu ct i o n

3 Res p o n d en ti n d i cat es th atp et it i o n ers fi l ed th ei r 2 0 1 3 retu rnel ect ro n i cal l y an d ats o m e p o i ntap pear t o h av e p ro v i d ed res p on d en twi th a Fo rm 8 28 3 thatwas p ro p erl y s i g n ed an dd at ed
.- 1 0 -

[* 1 0 ] was b ei n g d i s al l o wedwas th atth ere were “ n o o ffi ci al ap p rai s al s fo r t h e i n d i v i du al i t em s t h atwere d o n at edaft er t h e d eco ns tru ct i o n o f t he h o u s e o n ce t h e i n d i v i du al co m

p o nen t s were t ak en ap art .” Qu o t i n g s ect i o n 1
. 1 7 0A-1 (c)(2 ), In co m e Tax Reg s ., th e ex am i n er p o in t edo u tth at th e fai r m ark etv al ue o f a
n o n cas h ch ari t ab l e co n tri b u t io n i s “ th e p ri ce atwh i ch th e p ro p ert y wo u l dch an g e h an ds b et ween a wi l l i n g b u y er an da wi l l i n g s el l er, n ei th er b ei n g u n d er an y
co m p u l s i o n t o b u y

o r s el l an db o th h av in g reas o n ab l e kn o wl ed g e o f rel ev an t fact s.” Th erefo re, “ [t ] h e ap p rai s al s ho u l d h av e b een d o n e fo r each i n di v i du al i t em th atwas d o n at ed aft er i twas d et ach edfro m th e h om e co n tem

p o ran eo us l y , s i n ce th atwo u l db e t h e t ru e v al u e o f t h e p i ece t h at i s b ei n g d on at ed
. ” Pet i t i o ners th en i n s ti tu t edth i s act i on fo r red et erm i n at i on b y t i m el y fi l i n g th ei r p et i t i o n . Di s cu ss i o n I. Bu rd en o f Pro o f Su m m ary ju d g m en ts erv es t o “ ex p ed i t e l it i g at i on an d av o i d u n n eces s ary an d
ex p en s i v e t ri al s.” Fl a. Peach Co rp . v . Co m m i s s io n er, 9 0 T.C. 6 7 8, 6 8 1 (1 9 8 8 ). It i s n o t , h o wev er, a s ub s t i tu t e fo r tri al an ds h ou l dn o t b e u s edt o res o lv e g en u i n e d i s p u t es o v er i s s u es o f m at eri al fact . See Val l on e v . Co m m i s s i o n er, 8 8 T.C. 7 9 4 , 8 0 1 -8 0 5 (1 9 8 7 ). Th e Co u rtm ay g ran ts u m

m ary ju d gm en twh enth ere i s n o- 1 1 -

[* 1 1 ] g en u i n e d i s p u t e as t o an y m at eri al factan da d eci s i o n m ay b e ren d eredas a
m at t er o f l aw. Ru l e 1 2 1 (b ); Su n d s tran d Co rp . v . Co m m i ss i o ner, 9 8 T.C. 5 1 8 , 5 2 0 (1 9 9 2), aff’ d , 1 7 F.3 d 9 6 5 (7 th Ci r. 1 9 9 4 ). Th e m o v i ng p art y h as th e b u rd en o f
s h o wi n g th e ab s en ce o f a g enu i n e d i s p u t e as t o an y m at eri al fact . FPL Grp ., In c. v . Co m m i s s i o n er, 1 1 5 T.C. 5 5 4 , 5 5 9 (2 0 0 0); Bo n dv . Co m m i s s i o n er, 1 0 0 T.C. 3 2 , 3 6 (1 9 9 3); Naft el v . Co m

m i s s i o n er, 8 5 T.C. 5 2 7 , 5 2 9 (1 98 5 ). Fo r t hes e p urp o s es we affo rdth e p art y

o p p o s i n g th e m o t i o n th e b en efi to f al l reas o nab l e d o ub t , an dwe
v i ew t h e m at eri al s ub m i tt edb y b o th s i d es i n th e l i g htm o s tfav o rab le t o th e
o p p o s i n g p art y . Su n d s tran dCo rp . v . Co m m i ss i o n er, 9 8 T.C. at5 2 0 . Th ati s , we
res o l ve al l d o ub t s as t o th e ex i s t en ce o f a d i s p ut e as t o an y m at eri al factag ai n s tthe
m o van t . Id .; s ee, e.g ., Ad i ck es v . S.H. Kres s & Co ., 3 98 U.S. 1 4 4, 1 5 7 (1 9 7 0 ). Ho wev er, wh ere t h e m o v in g p arty p ro p erl y m ak es an ds upp o rt s a m o ti o n fo r
s u m m ary ju d g m en t , th e o p p o s i n g p art y “ m ay n o tres t upo n the m ere al l eg at i o n s o r d en ial s o f s u ch p art y ’ s p l ead i n g ” b u t m u s ts etfo rt h s p eci fi c fact s s h owi n g th at th ere i s a g en u i ne d i s p u t e fo r t ri al . Ru le 1 2 1 (d ). II. Res p o n d en t ’ s Arg u m en t s Res p o n d en tm ak es th ree p ri n ci p al arg u m en t s fo r wh y h e s h ou l db e g ran t ed
s u m m ary ju d g m en t . Fi rs t , res p o n d en targ u es th atp et i ti o n ers are b arred fro m d educt i n g a ch ari t ab l e co n tri b ut i o n fo r 2 0 1 3 b ecau s e t h ei r ap p rai s al s u m m ary- 1 2 -

[* 1 2 ] o m i t t edi n fo rm at i on req u i redb y DEFRA s ec. 1 5 5 (a)(1 ) an d(2 ). Sp eci fi cal l y , res p on d en t ci t es th e ap prai s al s u m m ary ’ s fai l u re t o i n cl u d e t h e d at e th e d o nat edp ro pert y

was acq u i redo r i ts co s tb as i s , as wel l as i t s p u rp o rt i n g t o d o n at e i t em s o f t an gi b l e p ro p ert y y etv al u i n g th e en t i re h o us e (l es s cert ai n
co n st ru ct i o n , o v erh ead , p ro fi t , an dd ep reci at i o n co s t s ). Seco n d , res p o nd en targ u es th atth e ap p rai s al i s n o t a qu al i fi edap p rai s al wi th i n th e m ean i n g o f s ect i on 1 7 0(f)(1 1 )(E) b ecau s e i td i dn otap p rai s e t h e p ro p erty th at p et i ti o n ers actu al ly

d on at ed . Acco rd in g t o res p o n d en t , ev en i f p et i t i o n ers h adco m

p l i edfu l l y

wi th th e DEFRA s ec. 1 5 5 ap p rai s al s u m m ary req u i rem en t s , th e ap p rai s al i t s el f n ev ert h el es s fai l edb ecau s e i td et erm i n ed a d ep reci at edco s tfo r reb u il d in g th e en ti re h o u s e rat her t han v al u i n g th e i n d i v i du al i t em s actu al l y

rem o v edb y

Seco n dCh an ce. Th ati s , acco rd i n g t o res p o nd en t , th e ap p rai s al fai ls b ecau s e i tv al u edth e h o us e wh i l e p et i t i o n ers d o n at edo n ly s o m e p art s o f t h e h o us e--t h e p art s rem o v edan d t ak en t o Seco n d Ch an ce’ s wareh o u s e. Acco rd in g t o res p o nd en t , s ect i o n 1 70 (f)(1 1 )(E)(i ) p ro v id es th at“ [t ] h e t erm

‘ qu al i fi edap p rai s al ’ m ean s , wi th res p ect t o an y p ro p ert y , an ap p rai s al o f s u ch p ro p erty ” (em

p h as i s ad d ed ), an dp et i t i on er’ s ap p rai s al fai ls t o i den t i fy s u ch p ro p erty d o n at ed
.- 1 3 -

[* 1 3 ] Res p o n d en tfu rth er co n t en d s th atp et i t i o n ers can n ev er i den t i fy th e s p eci fi c p ro p erty d o n at edb ecau se “ [n ] o reco rdex i s t s i nd i cat i n g the s co p e o f Seco nd Ch an ce’ s d eco n st ru ct i o n wo rko n th e p ro p ert y o r wh ats p eci fi c i tem s Seco nd Ch an ce s al v ag edth erefro m ” an d“ [n ] o wi tn es s i s av ai l ab l e t o t es t i fy th atcan
ex p lai n wh ati t em s were act u al l y s al v ag edfro m th e p ro p ert y .” Th e o n ly ev i d en ce
cu rren t l y s up p o rt i n g res p on d en t ’ s th i rd cl ai m ap p ears t o b e res p o n d en t ’ s ci t at i o n
o f t h e d ecl arat i o n o f Sco t tA. Ho v ey i n s up po rto f res p o n d en t ’ s m o t i o n fo r
s u m m ary ju d g m en t . M r. Ho v ey , wh o i s res p o nd en t ’ s co u n s el , b as edh is d ecl arat io n o n h is o wnrev i ew o f res p on d en t ’ s ad m in i s trat iv e fi l es . Las t ly , res p o n den tal t ern at i v el y arg u es thatev en i f t he ap p rai s al i s qu al i fi ed , p et i t i o n ers g av e a p art i al i n t eres ti n p ro pert y , fo r wh i ch a d edu ct i o n i s g en eral l y p ro h ib i t edu n d er s ect i on 1 7 0 (f)(3 ). III. Pet i t i o ners ’ Arg um en t s Pet i t i o ners arg ue t h atth ey en g ag eda p ro fes si o n al th i rd -p art y ap p rai s er, at t ach edth e ap p rai s al s u m m ary t o th ei r retu rn , an dat t ach ed the act u al ap p rai s al t o th ei r retu rn . Fu rt herm o re, p et i ti o n ers co n t en dthey were m erel y

try i n g t o v al u e t h e h o u s e i n a way

th atap p eared co n s i s t en twi th IRS p o l i cy atth e t i m e an dthatan y d i s ag reem en to v er t h e v al u at io n m et h o ds el ect edb y a p ro fes s i o n al ap p rai s er d o es
n o tch an g e t h e i d en t i ty

o f t h e p ro p ert y

d o n at ed . Pet it io n ers h av e n o trai sed , an ds o- 1 4 -

[* 1 4 ] we d o n o tad dres s , reas o n ab l e cau s e u nd er s ect i o n 1 7 0 (f)(1 1 ) as a d efen s e fo r fai l u re t o s at i s fy

reg u l at o ry rep o rt i n g req u irem en ts . Pet i t i o ners al s o arg u e t h atres p o n d en t ’ s d ecl arat i o n , wh i ch cl ai m s thatth e actu al p ro p ert y

d o n at ed can n ev er b e i den t i fi ed , i s i n ad m i s s i bl e b ecau s e Ru l e 1 2 1 (d ) req u i res th at“ [s ] upp o rt i n g an do p p o s i n g affi d av i t s o r d ecl arat i o n s s h al l b e
m ad e o n p ers o nal kno wl ed g e, s h al l s etfo rt h s u ch fact s as wo ul db e ad m i s s i b l e i n
ev i d en ce, an ds h al l s h ow affi rm at iv el y th atth e affi an to r d ecl aran ti s co m p et en tt o t es t i fy t o th e m at ters s t at ed th erei n .” (Em p has i s ad d ed .) Pet i t i o n ers as s ertth at
res p o n d en t fai l s t o i d en ti fy wi th s p eci fi ci ty wh atp ro vi si o n s o f DEFRA were n o t
s at i s fi ed , an dthey

p o i n t t o th e g en eral i ty

o f res p o n d en t’ s as s ert i on th atth e “ l ack
o f cl ari ty i n th e Ap p rai s al as t o wh atp ro p erty was d o n at edh as a cas cad i n g effect
o n th e o th er ap p rai s al req u i rem en t s .” Pet i ti o n ers al s o ci t e, as ev i d en ce fo r
s p eci fi ci ty , th e 6 0 -p l us p ag e ap p rai s al
. Las t ly , p et i t i o ners arg ue t h atth ey d i d n o tg i ve a p art i al i n t eres tt o Seco n d Ch an ce b u trat h er th atth ey g av e an en ti re i n t eres ti n the i m pro v em en t s t o th e l an d
. Pet i t io n ers rel y

p ri m ari l y o n two M ary l an d cas es t o s up p o rtthi s p o s i t i o n . Th e fi rs t i s ci t edfo r t he p ro p o s i t i o n t h atp art i es are p erm i t t edt o ag ree t o s ev er fi x tu res , i n cl u d i n g b u i l di ng s , fro m real p ro p ert y . W al k er v . Sch i n d el , 5 8 M d. 3 6 0, 3 6 8 (1 8 8 2). Th e s eco ndi s ci t edfo r t h e p ro po s i ti o n th at“ a p ers o n wh o o wn s b o th- 1 5 -

[* 1 5 ] real ty

an d fi x tu res up o n t h e real ty m ay effect a co n s tru ct i v e s ev eran ce o f t he fi xtu res ”. Bo h l e v . Th o m p s o n , 5 5 4 A.2 d 8 1 8 , 8 2 4 (M d . Ct
. Sp ec. Ap p . 1 9 8 9 ). IV. An al y s i s Becau s e we wi l l ru l e o n th e b as i s o f DEFRA, we n eedn o tan d d o n o t ad dres s res p on d en t ’ s s eco n d an dth i rdarg u m en ts o r p et i t i on ers ’ as s o ci at ed reb u t t al s . A. Wh et h er Pet it i o n ers Co m p l i ed W i th DEFRA Sec. 1 55 Sect io n 1 7 0 (a)(1 ) al lo w s as a d edu ct io n an y ch ari t ab l e co n tri b ut i o n m ad e wi th i n th e t ax ab le y ear. If t h e t ax p ay er m ak es a ch ari tab l e co n tri b u t i on o f p ro p erty o th er th an m o n ey , th e am o u n to f t h e co n tri b u t i o n i s g en eral l y equ al t o th e fai r m ark etv al u e o f t h e p ro p ert y atth e t i m e o f co n tri bu t io n . See s ec. 1 .1 7 0 A1 (c)(1 ), In co m e Tax Reg s . Wh ere a co n tri b u ti o n o f p ro p ert y (o th er t h an p ub l i cl y

trad eds ecu ri t i es ) i s
v al u edi n ex ces s o f $ 5 ,0 00 , th e t ax p ay er m us t“ o bt ai n [] a qu al i fi edap p rai s al o f
s u ch pro p ert y

an dat t ach [] t o t h e ret u rn * * * s u ch i n fo rm at i o n reg ard i n g s uch p ro p erty an ds uch ap p rai s al as th e Secret ary m ay req u i re.” Sec. 1 7 0(f)(1 1 )(c). Th e req u ired i n fo rm at i o n i n cl u d es “ an ap prai s al s umm ary ” t h atm u s t b e at tach ed

“ t o th e retu rn o n wh i ch s u ch d edu ct i o n i s fi rs tcl ai m edfo r s u ch co nt ri bu t i on ”. DEFRA s ec. 1 55 (a)(1 )(B); s ee s ec. 1 .1 7 0 A-1 3 (c)(2 ), In co m e Tax Reg s.- 1 6 -

[* 1 6 ] Sp eci fi cal l y , DEFRA s ec. 1 5 5(a)(1 ) d i rect edth e Secret ary t o p ro m ul g at e reg u l at i o n s req u i ri n g a t ax p ay er cl ai m i n g a d edu ct i o n fo r a n o n cas h ch ari tab l e
co n tri b u t i o n (A) t o o bt ai n a qu al i fi edap p rai s al fo r th e p ro p ert y co n tri b u ted ,

(B) t o at t ach an ap p rai s al s u m m ary t o t h e ret urn o n wh i ch s u ch d edu ct i o n i s fi rs tcl ai m edfo r s u ch co n tri b u t i o n , an d (C) t o i n cl u d e o n s u ch retu rn s uch ad d i t i o n al i nfo rm at i on (i ncl u d i n g th e co s t b as i s an dacq u i s i t i o n d at e o f t h e co n tri b u t ed p ro p ert y ) as th e Secret ary m ay p res cri b e i n s u ch reg u l at i o n s . Sect io n 1 .1 7 0 A-1 3 (c)(4 ), In co m e Tax Reg s ., th en d efi n es th e n eces s ary el em en t s o f an “ ap p rai s al s u m m ary ”. Th o s e el em en ts i ncl u d e, am o ng o thers , “ [a] d es cri p t io n o f t h e p ro p ert y i n s u ffi ci en td et ai l fo r a p ers o n wh o i s n o tg en eral l y fam i l i ar wi th th e t y

p e o f p ro p ert y

t o as cert ai n th atth e p ro p ert y th atwas ap p rai s ed i s the p ro p ert y th at was co n tri b u t ed ”, “ [t ] h e m an n er o f acq u i s i t i o n (e.g ., p u rch as e,
ex ch an g e, g i ft , o r b equ es t ) an d t h e d at e o f acq u i s i t i o n o f t h e p ro p ert y b y th e d o n o r”, an d “ [t ] he co s to r o th er b as i s o f t h e p ro p ert y ”. Sec. 1 .1 7 0 A1 3 (c)(4 )(i i )(B), (D), (E), In co m e Tax Reg s . Th e “ ap p rai s al s u m m ary ” i s a
s u m m ary o f a qual i fi edap p rai s al wh i ch m u s tb e m ad e o n a Fo rm 8 2 8 3 , an dth at fo rm m u s tb e at t ach edt o th e ret u rn . Sec. 1 .1 7 0A-1 3 (c)(4 )(i )(A), In co m e Tax Reg s. Fai l u re t o m eetth e req u i redel em en t s o f an ap prai s al s umm ary g en eral l y- 1 7 -

[* 1 7 ] res u l t s i n a d is al lo wedd edu ct i o n u n l es s a t ax pay er “ has reas on ab l e cau s e fo r b ei n g u n ab l e t o p ro v id e t he i n fo rm at i o n * * * rel at i ng t o th e m an n er o f acq u i s i t i o n
an d b as i s o f t h e co n tri bu t edp ro p ert y ” an dat tach es “ an ap pro p ri at e ex p l an at i o n ” t o th e ap p rai s al s u m

m ary . Id . s ub d i v . (i v )(C)(1 ). W e co ncl u d e t h at p et i ti o n ers fai l edt o s tri ct ly co m p l y wi th DEFRA s ec. 1 5 5
an d th e reg u l at i on s th ereu n der b ecau s e t hey fai l edt o p ro v i d e, am o n g o th er i n fo rm at i o n , th e b as i s an dth e acq u i s i ti o n d at e o f t he co n tri b ut edp ro pert y o n th e ap p rai s al s u m

m ary . Pet i t i o n ers al s o fai l edt o at t ach t o th e ap p rai s al s u m m ary an
ex p lan at i o n o f reas o n ab l e cau s e fo r t h ei r i n ab i l i ty t o p ro v i de t he b as i s , acqu i s i t i on d at e, o r o th er i n fo rm at i o n rel at edt o th e co nt ri bu t edp ro p ert y . B. Wh et h er Pet it i o n ers Sub s t an ti al l y Co m p l i edW i th DEFRA Sec. 1 5 5 Pet i t i o ners co n t en dth atwh i l e t h ey m ay n o th av e s tri ct ly

co m p l i edwi th th e req u i rem en t s o f DEFRA s ec. 1 5 5 , they n ev ert h el es s s ub st an t i al ly co m p l i edwi th i t s req ui rem en t s . Th i s Co urt reco g n i zes th e d oct ri ne o f s ub s t an t i al co m p l i an ce. See RERI Ho l di n g s I, LLC v . Co m m i s s i o n er, 1 4 9 T.C. 1 , 1 5 -1 6 (2 01 7 ), aff’ ds ub
n o m . Bl auv . Co m

m i s si o ner, 9 2 4 F.3 d1 2 61 (D.C. Ci r. 2 0 1 9 ). Un d er t h at d o ct ri n e th e k ey qu es t i on i s wh et h er th e req u i rem en t s rel at e “ t o th e s ub s t an ce o r es s en ce o f th e s t atu t e.” Bo n dv . Co m m i s s i o n er, 1 0 0 T.C. at4 0 -4 1 (qu o t i ng Tay lo r v . Co m m i s s i o n er, 6 7 T.C. 1 07 1 , 1 0 7 7 (1 9 77 )). If t h e req ui rem en t s d o rel at e t o th e- 1 8 -

[* 1 8 ] s ub s t an ce o r es s en ce o f t h e s t atu t e, t h en s tri ctad h eren ce t o th e s t atu t o ry an d reg u l at o ry

req u i rem en ts i s m an d at ory . See Du n av an tv . Co m m i s s i o ner, 6 3 T.C. 3 1 6 , 3 1 9 -3 2 0 (1 9 74 ). If t h e requ i rem en t s are i n s teadp ro cedu ral o r d i rect o ry , th en th e req u i rem en t s m ay

b e fu l fi l l edb y

s ub s t an t i al co m

p li an ce. RERI Ho l di n g s I, LLC, v . Co m

m i s s i o n er, 1 49 T.C. at1 5 -1 6
. W e h el di n Bo n d v . Co m m i ss i o n er, 1 0 0 T.C. at4 1 -4 2 , th ats o m e o f t h e rep o rt i n g req u i rem en t s o f s ect i o n 1 .1 7 0 A-1 3 , In co m e Tax Reg s ., are d i rect o ry an d req u i re o n l y

s ub s tan t i al co m

p l i an ce. Becau s e t h e rep o rt i n g req ui rem en t s are d i rect o ry , a t ax p ay er wh o fai l s t o s tri ct l y co m p l y b u t “ s ub st an t i al l y

co m p l i es ” wi t h
s ect i on 1 .1 7 0 A-1 3 , In co m e Tax Reg s ., i s s ti l l en t i tl edt o th e d edu ct i o n . Nev erth el es s , th ere m ay

s t i l l b e an el em en t(s ) wh i ch i s s o es s en t i al t o th e p u rp o s e
o f t h e reg u lat i o n thato n e can n ev er fai l t o co m p l y wi th i ti n fo rm

an ds t i l l co m

p l y i n s ub s t an ce wi th t h e reg u l at io n . See Bo n dv . Co m m i s s i o n er, 1 0 0 T.C. at4 1 ; s ee al s o Bel ai r W o o d s, LLC v . Co m m is s i o n er, T.C. M em o . 2 01 8 -1 5 9 , at* 1 5 -* 1 7
. Sub s tan ti al co m

pl i an ce i s n o tm ean tt o ex cu s e al l fai l u res . In st ead , i ti s u s ed wh ere “ th e t ax p ay ers h adp ro v i d edm o s to f t h e i nfo rm at i on req u i red ” o r m ad e
o m is s i o n s “ s o l el y

th ro u gh i n adv ert en ce.” Hewi t t v . Co m m i s s i o n er, 1 0 9 T.C. 2 5 8 , 2 6 5 & n .1 0 (1 99 7 ), aff’ dwi tho u tp ub l i s hedo p i n i o n, 1 6 6 F.3 d 3 3 2 (4 th Ci r. 1 9 9 8 );
s ee Du rd env . Co m

m i s s i o n er, T.C. M em o . 2 0 1 2 -1 4 0 , 2 0 1 2 W L 1 7 5 8 6 5 5, at* 2- 1 9 -

[* 1 9 ] (“ T h e d o ct ri n e o f s ub st an t i al co m p l ian ce i s d es i g n edt o av o i dh ard s hi p i n
cas es wh ere a t ax p ay er d o es al l th ati s reas o n ab l y p o s s i b l e, b utn o net h el es s fai l s t o
co m p l y wi th th e s p eci fi c req ui rem en t s o f a p ro v i s i o n .”). Th u s , i ti s a d o ctri n e t h at i s n o t“ li b eral l y

ap p l i ed .” Co s t el l o v . Co m m i s si on er, T.C. M em o . 2 01 5 -8 7, at* 2 3 (qu o ti n g Al l i v . Co m

m i s s i o ner, T.C. M em o. 2 0 14 -1 5, at* 5 4 ); s ee, e.g ., M o h am ed
v . Co m m i s s i o n er, T.C. M em o . 2 0 1 2 -1 5 2 , 2 0 1 2 W L 1 9 3 7 5 5 5 , at* 1 0 (“ [T] h e p ro b lem s o f m i s v al u edp ro p ert y are s o g reat th atCo n g res s was qu i t e s p eci fi c ab o utwh atth e ch ari t ab l y i ncl i n edh av e t o d o t o d efen dth ei r d edu ct i o ns [.] ”); s ee al s o Kau fm an v . Sh u l m an , 6 87 F.3 d2 1 , 2 9 (1 s tCi r. 2 0 1 2 ) (s t at in g th atth e
s ub s t an t i al co m

pl ian ce d o ct ri n e m ay

b e u s edt o fo rg i ve “ m i n o r d i s crep an ci es ” i n th e t ax p ay er’ s rep o rt i n g ), aff’ g i n p art , v acat i n g an drem an d i n g i n p art1 3 6 T.C. 2 9 4 (2 01 1 ), an d1 3 4 T.C. 1 82 (2 0 1 0 ); Pru s s n er v . Un i tedSt at es , 8 9 6 F.2 d2 1 8 , 2 2 4 (7 th Ci r. 1 9 9 0 ) (s t at i n g th atthe s ub s t an t ial co m p l i an ce d oct ri n e “ s h ou l db e i n t erp ret edn arro wl y ”). If p et i ti o n ers can s ub st an t i al l y co m p l y wi th s ect i o n 1 .1 7 0 A-1 3 , In co m e Tax Reg s., th enwe m

u s td eci d e wh et h er t h ey

d i d . W e h av e s t at edthatth e t es tfo r
s ub s t an t i al co m

pl ian ce i s wh et h er t h e d o n o rs “pro v i d eds u ffi ci en ti n fo rm at i o n t o p erm i t* * * [t h e Co m

m i s s i on er] t o ev al u at e t h ei r rep o rt edco n tri b u t io n s , as i n t en d edb y

Co n g res s .” Sm i th v . Co m m i s s i on er, T.C. M em o . 2 0 0 7 -3 68 , 2 00 7 W L- 2 0 -

[* 2 0 ] 4 4 1 0 7 7 1 , at * 1 9 , aff’ d , 3 6 4 F. Ap p ’ x 3 17 (9 th Ci r. 2 0 0 9). Pet i t i o n ers ’ ap p rai s al s u m

m ary o m i t tedm

uch o f t h e req u i redi n fo rm at i o n an d p ro v i d edn o
reas on ab l e cau s e ex p l an at i o n fo r t h e o m i s s io ns . W e h av e recen t l y

h el dth ata t ax p ay er wh o fai ls t o d i s cl o se “ co s to r ad ju s t ed b as i s ” o n i t s ap p rai s al s u m m ary h as fai ledt o s ubs t an ti al l y co m p ly wi th s ect i o n 1 .1 70 A-1 3 , In co m e Tax Reg s . RERI Ho ld i n g s I, LLC v . Co m m i ss i o ner, 1 4 9 T.C. 1 . W e d eci d eds o b ecau s e Co n g res s s p eci fi cal l y en act edDEFRA’ s h ei gh t en ed rep o rt i n g req u i rem en t s i n o rd er t o co m b ati nfl at ed ch ari t ab l e d edu ct i o n s b y req u i ri n g, wh ere reas o nab l y o b t ai n ab l e, t h e d i s cl o s ure o f “ co s to r ad ju s t edb as i s ” t o “ faci l i tat e t h e Co m

m i ss i o n er’ s effi ci en ti d en ti fi cat i o n o f o v erv al u edp ro p ert y .” Bel ai r W o od s , LLC v . Co m m i s s i o ner, at * 1 7 . Thu s , a t ax p ay er’ s fai l u re t o p ro v i d e th e “ co s t o r ad

ju s t edb as i s ” o n an ap p rai s al s u m m ary i s a fai l u re t o s ub s t an t i al l y
co m p l y wi th DEFRA s ec. 1 5 5 b ecau s e i ti s a fai l u re t o “p ro v i d e[] s u ffi ci en t i n fo rm at i o n t o p erm i t * * * [t h e Co m m is s i o n er] t o ev al uat e t he[] rep o rt ed
co n tri b u t i o n s, as i n t en dedb y Co n g res s .” Sm i th v . Co m m is s i o n er, 2 00 7 W L 4 4 1 0 7 7 1 , at* 2 0 ; s ee al s o Bel ai r W o o d s , LLC v . Co m m i s si on er, at* 1 5 -* 2 0
. In RERI Ho ld in g s I, LLC v . Co m m i s s i o n er, 1 4 9 T.C. at 2 -3 , a p art n ers h i p acq u iredan dd o nat eda fu tu re i n t eres ti n co m m erci al p ro p ert y

t o a u ni v ers i ty . Th e p art n ers hi p cl ai m eda $ 3 3 ,0 1 9 ,0 0 0 ch ari t ab l e co n tri b u t i o n d edu ct i o n o n i t s- 2 1 -

[* 2 1 ] i n fo rm at i o n al retu rn . Id . Th e p art n ers h i p at t ach edt o i t s retu rn a co m p l et e ap p rai s al as wel l as an ap p rai s al s u m m ary . Id . at7 . Ho wev er, th e ap p rai s al
s u m m ary l eftb l an k th e s p ace fo r t h e d o n o r’ s co st o r ad ju s t edb as i s an d p ro v i d ed
n o ex p l an at i o n fo r t h e o m i s s i o n . Id . W e h el di n RERI t h atthe o m i s s i o n o f b as i s fro m an ap p rai s al s u m

m ary p rev en t s th e ap p rai sal s u m m ary fro m ach i ev i n g i t s i n t en d edp u rp o s es an d can n o tb e ex cu s edb y s ub s t an t ial co m

pl i an ce. Id
. at1 6 -1 7
. In Bel ai r W o o d s , LLC v . Co m m i s s i o ner, at * 3 -* 5 , a l i m i tedl i ab il i ty
co m p an y (Bel ai r) en t ered i n t o a d eedo f co n s erv at i o n eas em en t wi th a l an d t ru s t . Th e eas em en tco v ered1 4 1.1 5 acres o f l an d . Id
. Bel ai r cl ai m eda res u l t i n g ch ari t ab le co n tri b u t i on d educt i o n o f $ 4 ,7 7 8 ,0 0 0 o n i t s t ax retu rn . Id . at* 5 -* 6
. Bel ai r at tach edan ap p rai s al s u m m ary wh i ch d i dn o t s t at e th e co s to r t he ad ju s t ed b as i s o f t h e p ro p ert y

co nt ri b u t ed . Id . at* 6 -* 7 . Bel ai r al s o at t ach eda l et t er i n d i cat i n g t h at i td i d n o t s tat e t he b as i s b ecau s e “ th e b as i s o f t h e p ro p ert y i s n o t t ak en i n t o co ns i derat i o n wh en co m p u t i n g th e am ou n to f t he d edu ct io n .” Id . at* 7. Th e Co u rtfo u n dth atBel ai r d i d n o ts tri ct l y co m p l y wi th th e reg ul at o ry req u i rem en tb ecau s e th e ap p rai s al s u m m ary d i dn o trep ortth e b as i s an d t h e at t ach edl et t er fai l edt o p ro v i d e a s u ffi ci en tex p l an at io n s h o wi n g wh y Bel ai r was
u n ab le t o p ro v i d e t h ati n fo rm at i o n . Id . at* 1 1-* 1 2
.- 2 2 -

[* 2 2 ] Bel ai r’ s t ax m at t ers p art n er arg u ed th atth e d i s cl o s ure i n th e ret u rn h ad
s ub s t an t i al l y

co m p l i edb ecau s e Bel ai r’ s co s tb as is i n the co n serv at i on eas em en t
co u ldb e effect i v el y

d eri v edfro m

s ev eral at t ach m en t s t o i t s p art n ers h i p t ax retu rn : (1 ) a Sch edu l e L, Bal an ce Sh eet s p er Bo o k s; (2 ) a Sch edul e M -1 , Reco nci l i at i o n
o f In co m e (Lo s s ) Per Bo o k s W i th In co m e (Lo s s ) Per Ret u rn ; (3 ) a s ect i o n 7 4 3 (b ) el ect io n an dcal cu l at i o n s h eet ; an d(4 ) t h e at t ach edap p rai s al . Id . at* 1 9 . W e reject edth e t ax m at t ers part n er’ s arg u m en tb ecau s e s upp l y i n g t h e co s to r ad ju s t ed b as i s o n th e ap p rai s al s u m m ary g o es d i rect l y t o th e es s en ce o f s t atut e. Id . at
* 1 5 -* 1 6 (ci t i n g Bo ndv . Co m m i s s i o n er, 1 0 0 T.C. at4 1 ). Pet i t i o ners co n t en dth atat t ach i n g th e fu l l ap p rai s al t o th ei r retu rn p ro v i d ed th e n eces s ary

i nfo rm at i o n s u ch th atth ey s ub s t an t i al l y

co m p li ed . W e are n ot
s way ed . Wh i l e i tm ay

h av e b een p o s s i b l e fo r t he Co m m i s s i on er t o g l ean s uffi ci en t i n fo rm at i o n fro m th e p u rch as e p ri ce an dt ax i n fo rm at i o n l i st edi n th e ap prai s al , th atd o es n o th i n g t o ch an ge t h e fact th atCo n g res s s p eci fi cal l y p as s edDEFRA’ s h ei g h t en eds ub s t an t i at io n req u irem en t s s o t h atth e Co m m i s s i o ner co u l deffi ci en t l y fl ag p ro p ert i es fo r o v erv al u at i o n fro m the face o f ap p rai s al s u m m ari es . Ins o d o i n g , Co n g res s wan t ed p reci s el y t o p rev en t th e Co m

m i s s io n er fro m h av i n g t o
s l eu th t h ro u g h th e fo ot n o t es o f m i l l i o n s o f retu rn s . “ T h e IRS rev i ews m i ll i o n s o f retu rn s each y ear fo r au d itp o t en t i al , an dth e d i s cl o s u re o f co s t b as i s o n th e Fo rm- 2 3 -

[* 2 3 ] 8 2 8 3 i t sel f i s n eces s ary t o m ak e t h i s p ro ces s m an ag eab l e. Rev en u e ag en t s
can n otb e req u i redt o s i ftth ro u g h d o zen s o r h un dred s o f p ag es o f co m p l ex retu rn s l o o k i n g fo r cl u es ab o u twh at th e t ax p ay er’ s co s tb as i s m i g htb e.” Bel ai r W o o d s , LLC v . Co m

m i s s i o n er, at* 2 0 . “ If co s tb as is i s n o tex p l i ci t ly d i scl o s edwh ere i ti s req u i redt o b e d i s cl o sed , th e Co m m is s i o n er wi ll b e h an d i cap p edi n i den ti fy i n g
s u s p i ci o u s ch ari t ab l e d educt i o n s an dd et erri n g t ax p ay ers fro m ‘ co n t i n u [i ng ] t o p l ay the “ au d i tl ot t ery .”’ ” Id
. (qu o t i n g S. Prt . No . 9 8-1 6 9 (Vo l . 1 ), at4 4 4 (1 9 8 4)). Th ati s wh y

we ru l edas we d i di n RERI an dBel ai r W o o d s an dwh y we ru l e as we d o n o w. To refl ectthe fo reg o i n g , res p o n d en t ’ s m o ti o n fo r s u m m ary ju d g m en twi l l b e g ran t ed
. Anap p ro p ri at e o rd er an d d eci s i o n wi l l b e en t ered
.