T.C. M em o . 2 0 2 0 -7 6

UNITED STATES TAX COURT
BRANNAN SAND & GRAVEL CO., LLC, J . CURTIS M ARVEL, TAX

M ATTERS PARTNER, Pet i t i o ner v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 7 4 74 -1 6
. Fi l edJ u n e 4 , 2 0 2 0
.

Kev i n A. Pl an eg g er, fo r p et i t i o ner. Rub a Nas ral l ah , fo r res p o n d en t .

M EM ORANDUM OPINION COHEN, Ju d g e: Th i s cas e was fu l l y s t i pu l at ed an d s ub m i t t edt o th e Co u rt
u n d er Ru l e 1 2 2 . Aft er co n ces s i o n s , the i s s u e fo r d eci s io n i s wh et h er Bran n an San d & Grav el Co ., LLC (Bran n an San d ), s ub st an t i at ed --as req u i redu n der s ect i o n 1 .1 70 A-1 3 (c), In co m e Tax Reg s .--a $ 2 0 0 ,0 00 ch ari t ab l e co n tri b ut i o n cl ai m edfo r- 2
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[* 2 ] d o n at i o n o f cert ai n wat er s t o rag e ri g h t s . Un l es s o th erwi s e i n d i cat ed , al l
s ect i on 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,
an d al l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedure. Back gro u n d Al l o f t h e fact s h av e b een s t i p u l at ed , an dth e s ti p u l at ed fact s are i n co rp o rat edas o u r fi n d i n g s b y th i s referen ce. When th e p et i ti o n was fi l ed , Bran n an San d’ s p ri n ci p al p l ace o f b u s i n es s was i n Co l o rad o, an di t s t ax m at t ers p art n er J . Cu rt i s M arv el res i d edi n Co l o rad o . Bran n an San d i s a Co l o rad o l i m it ed l iab i li ty co m pan y wh os e b u si n es s
co n si s t s o f ex tract i n g ro ck , s an d , an dg rav el fro m th e g ro un d an dp ro ces s i n g th o s e
m at eri al s i n t o as p hal t . Th e m at eri al s n o tm ad e i nt o as p h al tare ei th er u s edi n p av in g o p erat i o n s o r s o ld
. Bran n an San dm i n edth e s an dan dg rav el d ep o s i t s fo r i t s b u s i nes s fro m

1 57 acres i t o wn edi n Ad am s Co un ty , Co l orad o (p ro p erty ). Bro m ley Di s tri ctW at er Pro v i d ers , L.L.C. (Bro m l ey ), i s a Co l orad o l i m i t ed l i ab i l i ty co m

p an y . Si l v er Peak s M et ro p o l i tan Di s tri ctNo . 1 (Di s tri ct ) i s a p o l i t i cal
s ub d iv i s i o n o f t he St at e o f Co lo rad o t o wh i ch co nt ri b u t i o n s m ad e fo r ex cl u s i v el y p ub l i c p u rp o s es are t reat ed as ch ari tab l e co n tri b u t i o n s u n d er s ect i o n 1 7 0.- 3
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[* 3 ] Hi s t o ry

o f the Tran sact i o n s In 2 0 0 3 , Bran n an San dp l an n edt o m i n e s an d an dg rav el d ep o si t s o n th e p ro p erty fo r t h e n ex t1 0 t o 2 0 y ears . Itai m edt o m i n e t h es e d ep o si t s i n atl eas ttwo
s ep arat e m in i n g cel l s : th e No rt h Cel l an dth e So ut h Cel l
. Bran n anSan d p l an n ed t o m i n e t h es e cel l s i n a m an n er t o al l o w co n s tru ct i o n o f s l u rry cel l l i n i n g wi th l i nedem b an km en t s ab o v e s o th atth ey co u ldb e u sedas wat er s t o rag e res erv o i rs . Bro m l ey an dth e Di s tri ctn eed edl i nedwat er s t o rag e n ear t he Pro p ert y . Bran n an San d en t eredi n t o an Ag reem en tt o Bu y an d Sel l Real Es t at e an dOp t io n (b u y an d
s el l ag reem en t ) o n J an u ary 2 1 , 2 0 0 3 , wi th Bro m l ey . Onth e s am e d at e Bran n an San d en t eredi n t o a Co n tri b u t i o n Ag reem en t(co n tri b u t i o n ag reem en t ) wi th Bro m l ey an dth e Di s tri ct . As d es cri b edi n th e b u y

an ds el l ag reem en t , Bran n an San ds o l d t h e p ro p ert y t o Bro m l ey

b u tres erv edcert ai n m i n eral ri g ht s an dwat er ri g h t s an da p erp etu al an d
ex cl u s i v e eas em en tfo r t h e p u rp o s e o f creat i n g wat er s t o rag e ri g h t s (wat er s t o rag e
eas em en t ). Th e wat er s to rag e eas em en twas d efi n edi n the b u y an d s el l ag reem en t
as a “ p erp etu al , ex cl u s i v e eas em en ti n , o v er, acro s s , o n , an du n der t he Pro p ert y fo r th e p u rp o s e o f creat i n g an d/ o r u s i n g an y s p ace i n , o v er, acro s s , o n , an d u n d er t he Pro p erty fo r t h e s t o rag e o f wat er, an dan y an d al l wat er s t o rag e ri g h t s an dri g h t s t o
s t ore wat er as s o ci at edth erewi th wi th ou ti nt erferen ce fro m th e fee o wn er o f th e- 4
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[* 4 ] Pro p ert y .” Bran n an San dal so res erv edth e ri g h t t o co n s tru ctl i n ed
em ban km en t s ab o v e t h e s l urryl i n i n g o f t he No rt h an dSo u th Cel l s fo r t h e p u rp o s e
o f i n creas i n g th e wat er s t o rag e cap aci ty . Th e o b ject i v es o f t he b u y

an ds el l ag reem en tan dth e co n tri b u t io n ag reem en t were t h e d ev el o p m en to f wat er s t o rag e o n th e p ro p ert y aft er Bran nan San d
co m p l et edi t s m i n i n g act i vi t i es . Atth e t i m e o f t h e s al e Bro m l ey was p lan n i n g t o
co n st ru cta n onp o t ab l e p i p el i n e fro m th e p u rch as edp ro p erty t o a p o i nts o u th o f Barr Lak e. Bro m l ey

ag reedt o co ns tru cts l u rry wal l s i n a m an n er t o al l o w m i n i n g i n the No rt h an dSo u th Cel l s s ep arat el y s o th atth e t wo cel ls co u l db e co m p l et edas two i s o l at edwat er s t orag e res erv o i rs . Th e wat er s t o rag e t h at wo u l d b e av ai l ab l e i n th e So ut h Cel l was es t im at edt o b e 1 ,9 0 0 acre-feet , an dth e wat er s t o rag e th at
wo u l db e av ai lab l e i n th e No rt h Cel l was es t i m at edt o b e 3 ,1 9 6 acre-feet
. Bran n an San d ag reedt o co n v ey t o Bro m l ey

an o p t i on t o p urch as e an ad d it i o n al u n d iv i d edi n t eres ti n th e res erv edwat er s t orag e s p ace an d wat er s t o rag e ri gh t eas em en tas th e s p ace b ecam e p h y s i cal l y av ai l ab l e. In th e co n tri bu t i o n ag reem en tBro m l ey

al s o ag reedt o p urch as e fro m Bran n an San da co n di t i o n al ri g h t t o “ Tak ed o wnB Pro p ert y ” an d“ Tak ed o wn C Pro p erty ”. Tak ed o wn B Pro p ert y
co n si s t edo f an u n d i v i d edi nt eres ti n th e res erv edW at er St o rag e Eas em en t, wh i ch
en t i t l edBro m l ey to “ no l es s th an 1 ,0 0 0 acre-feet o f wat er s t o rag e s p ace i n , o v er,- 5
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[* 5 ] acro s s , o n , an du n d er t h e Pro p ert y fo r th e s t o rag e o f wat er.” Tak ed own C Pro p erty co n s i s tedo f anad di t i o n al 8 3 3 acre-feet fo r t h e s t o rag e o f wat er. If Bro m l ey d i dn o t co m

p l et e t h e acqu i s i t i o n o f t h e Tak ed o wnB Pro p ert y o r fai l ed
s at i s fact o ri l y

t o co m pl et e t h e Tak ed own B Pro p ert y req u i rem en t s s peci fi edi n th e b u y an ds el l ag reem en t , Bran n anSan dwas rel iev edo f an y o b li g at i o n t o co n tri b u t e
an y wat er s t orag e eas em en t ri g h t s t o th e Di s tri ct . If Bro m l ey fu ll y p erfo rm edi t s
o b l i g at i o ns rel at edt o th e Tak ed o wnB Pro p ert y b u t fai l edt o cl o se o n th e Tak ed o wnC Pro p ert y , th enBran n an wo u l db e rel i ev ed o f i t s wat er s t o rag e
eas em en tco n tri bu t i o n o b l i g at i o n rel at edt o th e Tak ed own C Pro p ert y o nl y . Bran n an San d ag reedt o co n tri b u t e t o th e Di s tri ctan u n d iv i d edi n t eres t equ iv al en tt o 2 0 % o f t h e wat er s t o rag e eas em en tp u rch as edb y Bro m l ey i n
co n si d erat io n o f t h e ag reem en tth atBro m l ey wo u l d d on at e atl eas t $ 1 0 ,0 0 0 i n wat er, wat er ri g h t s , o r o th er as s et s t o th e Di s tri ct . Th e Di s tri ctwo u l db e en t i t l ed t o u s e t h i s s p ace i n , o v er, acro s s , o n , an d u n d er t h e Pro p ert y fo r wat er s t orag e. Bran n an San d wo u l db e o b l i g at edt o d el i v er p o s s es s io n o f th e wat er s to rag e s p ace atthe s am e t i m e i twas req u i redt o d el i ver p os s es si o n o f t h e rel at edTak ed o wnB
an d Tak ed o wnC Pro p ert i es t o Bro m l ey . OnNo vem

b er 2 4, 2 0 0 4 , Bran n an San dan d Bro m l ey en t eredi n t o th e Fi rs t Am en d m en tt o th e Ag reem en tt o Bu y an dSel l Real Es t at e an dOp ti o n , wh ich- 6
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[* 6 ] am en d edth e o ri g in al b u y an ds el l ag reem en t . Bran n anSan d , Bro m l ey , an d th e Di s tri cten t ered i n t o th e Fi rs tAm en d m en tt o th e Co n tri b u ti o n Ag reem en tth at
am en d edthe o ri g in al co n tri b u t i o n ag reem en t . Bran n an San dwas s up p o s edt o d el i v er p o s s es si o n o f t h e So u th Cel l o n Oct o b er 1 5 , 2 0 0 6 , an d th e No rt h Cel l o n Decem b er 3 1 , 2 0 12 . Bran n an San d , Bro m l ey , an d t h e Di s tri ct h ades t i m at edth at th e av ai l ab l e wat er s t o rag e wo ul db e 1 ,9 0 0 acre-feet i n t h e So u th Cel l an d3 ,1 9 6 acre-feet i n th e No rt h Cel l . Th e p art i es ag reedth at an y d el ay i n d el i v ery o f p o s s es s i o n was s ub

jectt o a p en al ty

o f $ 1 00 p er d ay

fro m the s p eci fi edd el i v ery d at es t o t h e d at es o f act u al d el i v ery . Th e eco n om i c d o wn tu rn i n 2 0 0 8 an d2 0 0 9
es p eci al ly affect edth e co ns tru ct i on i n du s try . Bran n an San dd i dn o td el i v er t h e cel l s as ag reed
. Bran n an San d co m

p l et edth e So ut h Cel l wi th an actu al wat er s t o rag e cap aci ty o f 1 ,0 9 8 acre-feet an d d el i vered i tt o Bro m l ey o n Sep t em

b er 1 , 2 0 1 0 . As
o f Oct o b er 2 0 10 th e es t i m at ed wat er s t o rag e cap aci ty o f t h e No rt h Cel l was
rev i s edd o wnt o 2 ,0 8 2 acre-feet , an dBran n an San d s h adn ei th er co m p let edn o r d el i v eredp o s s es s io n o f i t t o Bro m l ey . Bro m l ey cl ai m edthati th ads u st ai ned d am ag es ex ceed i n g $ 1 m i l l i o n as a res u lto f th e d el ay an dth atBran n an San dh ad b en efi t edfi n an ci al l y b y atl eas t $ 4 9 0,0 0 0 fro m Bro m l ey ’ s d eci s i o n t o en l arg e t h e So u th Cel l wi th co n s tru ct i o n o f d am s . Bran n an San dd is ag reedwi th th es e- 7
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[* 7 ] as s ert i o n s an d cl ai m edth atth e p art n ers h i p h adn o tm at eri al l y b en efi t edfro m Bro m l ey ’ s d eci s i o n t o en l arg e t h e So u th Cel l an dth atBro m l ey was p art i al ly
res p o n s i b l e fo r the d el ay

i n co m p l et i ng th e So u th Cel l. (Th e reco rdi s s i len t reg ard i n g wh et h er Bro m l ey ’ s en l arg em en to f t h e So ut h Cel l i m p act edth e act u al wat er s t o rag e cap aci ty .) Th e p art i es d es i red t o res o l v e t h e i s s u es th ataro s e fro m the l at e d el i v ery

o f th e So ut h Cel l. Ina M em o ran du m o f Un ders t an d in g Reg ard i ng Pi t2 9 (M OU) d at edOct o b er 2 6 , 2 0 1 0, Bran n an San dag reedt o s el l t o Bro m l ey an ad di t i o n al
u n d i v i d edi n t eres ti n th e wat er s t o rag e eas em en tth atal l owedan ad d i t i o n al 2 5 0 acre-feet o f wat er s to rag e i n t h e No rt h Cel l
. Bro m l ey ag reedt o p ay

$ 4 8 0,0 0 0 fo r th e ad d i t i o n al wat er s t o rag e eas em en t . Al s o i n th e M OU, Bran n anSan d ag reed t o
co n tri b u t e t o th e Di s tri ctan ad d i t i on al u n di v i d edi n t eres ti n the wat er s to rag e
eas em en tth atwo u l d al l o w fo r an ad d i t i o n al 5 0 acre-feet o f wat er s to rag e i n th e No rt h Cel l . Bran nan San d an dBro m l ey ag reedt o cl o s e o n t h e d eal fo r t h e ad d it i o n al u n d iv i d edi n t eres ti n th e wat er s t o rag e eas em en twi th i n 3 0 d ay s an dth at Bran n an San d wo u l dd el i v er p o s s es s i o n o f t he No rt h Cel l n o l at er t h an J u n e 3 0, 2 0 1 3
.- 8
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[* 8 ] Th e 2 0 1 0 Part n ers h i p Retu rn OnSep t em

b er 1 9 , 2 0 1 1 , Bran n an San dfi l ed a Fo rm 1 06 5 , U.S. Retu rn o f Part ners h i p In co m e, fo r 2 0 10 . Fo rm 8 28 3 , No ncas h Ch ari t ab l e Co n tri b u t i o n s , was at t ach edwi tho u t“ Pag e 1 ” b u ti n cl u d ed tw o “ Pag e 2 ” p ag es . Th e s eco n d“ Pag e 2 ” i n cl u d es a h an dwri t t en n o t e t o “ s ee at t ach ed ap p rai s al ” u n d er p artIII, d ecl arat i o n
o f ap p rai s er, an d an u n d at edd o n ee s i g natu re u n d er p artIV, d o n ee ack n owl ed gm en t . Th e t wo co p i es o f “ Pag e 2 ” are o th erwi se i d en t i cal . Bran n an San d cl ai m eda $ 2 0 0 ,0 0 0 ch ari t ab l e co n tri b u t i on d edu ct i o n . Th e Fo rm 8 2 8 3 rep o rt edth atth e “ [d ] o n o r’ s co sto r ad ju st edb as i s ”was “N o n e”, t h at$ 2 0 0 ,0 0 0 was th e ap p rai s edfai r m ark etv al u e, an d th atth e d o n or p u rch as edth e p ro p erty . Th e rep o rt ed“ [d ] es cri p t i o n o f d o nat edp ro p ert y ” was “ Si lv er Peak s Pro p ert y ”. Th e Fo rm 8 2 8 3 rep o rt ed“ VAR” fo r t he d at e acq u ired an d l eftb l an k wh et h er th e ch ari t ab le co n tri b u t i on was m ad e b y m ean s o f a b arg ai n s al e. In p artIII, d ecl arat i o n o f ap prai s er, t h e s i g natu re, t it l e, d at e, i d en t ify i n g
n u m b er, ci ty , St at e, an dZIP Co d e s paces were l eftb l an k , b u t“ See at t ach ed ap p rai s al ” was i n sert ed un d er t h e b u s i n es s ad dres s s ect i o n . Inp artIV, d o n ee ack n owl ed gm en t , th e em p l o y er i d en t i fi cat io n n um b er, au th ori zeds i gn atu re, an d d at e s p aces were l eftb l an k . Ho wev er, t h ere i s a s i g natu re i n th e “ [t ] i t l e”s pace.- 9
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[* 9 ] Two p ag es at t ach edt o th e Fo rm 8 2 8 3 are a l et t er d at ed Au g u s t3 0 , 2 0 1 1 , s i gn edb y Ti m o th y J . Fl an ag an . Fl an ag an ex pl ai n s i n th i s l et ter t h atp et i ti o n er’ s at t o rn ey h adas k edh i m to up dat e h i s p ri or v al u at i o n o p i ni o n s o f Sep t em b er 7 , 2 0 0 5 , an dJ an u ary

9 , 2 0 08 . Fl an g an s t at es th ath i s 2 0 1 1 l et ter h as t o b e read wi t h p ri o r v al u at i o n o p i ni on s i n 2 0 0 5 an d 2 00 8 , n ei ther o f wh i ch was at t ach edt o th e Fo rm 8 2 8 3 . Fl an ag an m en ti o n s b u td o es n o to th erwi s e d es cri b e i n h i s 2 0 1 1 l et t er a t ran sact i o n reg ard i n g u n rel at edp art i es i n wh ich wat er s t o rag e acre-feet were p ri cedi n ex ces s o f $ 3 ,6 5 0 p er acre-fo o t. Th e l et ter s t at es th atFl an ag an i s “ qu i t e
co m fo rt ab l e” wi th th e o p i n i o n th atth e “ Bran nan Pi t” wo u l db e wo rt h b et ween $ 3 ,5 0 0 an d$ 4 ,0 00 p er acre-fo o t . Fl an ag an co n cl u d es th atd es p i t e th e eco n o m i c d o wn tu rn , i ti s h i s “ v i ew t h at5 0 acre-feet o f s t o rag e atth i s l o cat i o n , i f s o l do n the
o p en m ark ett o a kn o w l ed g eab le p u rch as er fo r i m m ed iat e d el i v ery

wo u l db e wo rt h atl eas t $ 4 ,0 00 p er acre-fo o t or $ 2 0 0 ,0 0 0 fo r t h e 5 0 -acre t ran s act i o n . ” In h i s Sep t em

b er 7 , 2 0 05 , l et t er Fl an ag an s t at ed : “ I am n ota l icen s edreal
es t at e ap p rai s er u n d er ei th er Co l o rad o o r Fed eral l aw. I h o l dn o real es tat e n o r ap p rai s al d es i g n at i o n s b u tam fam i l i ar wi th m an y g rav el m i nes th ath av e b een
co n vert edi n t o wat er s t o rag e v es s el s b ecau s e o f m y rep res en tat i o n s o f a nu m b er o f
co m p an i es i n th e ag g reg at e i n du s try .” Fl an ag an b as edh i s o p i n io n o n h i s- 1 0 -

[* 1 0 ] ex peri en ce as a l i t i g at o r an dth ath e was “ aware” o f a n um b er o f p ro p ert i es wi th as k in g p ri ces i n d i cat i n g a p ri ce p er acre-fo oto f $ 3 ,5 0 0 t o $ 4 ,0 0 0
. M i s s i n g fro m

th e 2 01 1 Fl an ag an l et ter was th e m et h o do f v al u at i o n o r t h e
s p eci fi c b as i s fo r d et erm i n i n g t h e fai r m ark etv al u e o f t h e p ro p ert y , th e p h y s i cal
co n di t i o n o f t h e p ro p ert y , o r a s t at em en tth atth e p urp o rt ed ap prai s al was p rep ared fo r Fed eral i n co m e t ax p u rp o s es . Th ere was n o ex p lan at i o n co m p ari n g th e tran s act io n s th ath e o b s erv edwi t h th e p ro p ert y i n th e Bran n an San d s tran s act i o n s . Fl an ag ang av e n o i n d i cat i o n t h ath e was fam i li ar wi th th e t erm s o f t h e p u rch as e ag reem en t , the co n tri b u t i on ag reem en t , o r th e M OU en t eredi n t o b y th e d o n o r, th e d o n ee, an d Bro m l ey

rel at i n g t o th e co nv ey an ce o f t h e p ro p ert y co n tri b u t ed . Th ere
was n o co m

p ari s o n t o th e al l eg ed co m p arab l es o r ex p l an at i on o f wh et h er t h ey i n v o l v ed a wi ll i ng b u y er an d a wi l l i n g s el ler o r were s i m p l y a way t o res o l v e l i ti g at edd i s p u t es . Th ere was n o ju s t i fi cat i o n fo r ch o o s i n g th e h i g h en do f t h e
ran g e t h atFl an ag an i d en t i fi ed
. Th e p art n ers h i p return s fo r 2 0 1 0 an d 2 0 1 1 were ex am i n edb y th e In t ern al Rev enu e Serv i ce. A s ep arat e n o t i ce o f fi n al p art n ers h i p ad m i n i s trat i v e ad j u s t m en t (FPAA) fo r each y ear was s en to n Sep t em b er 2 0 , 2 0 1 6 . Inad d i t i o n t o ad ju s t m en t s
n o w res o l v edb y

a s t ip u l at i o n o f s et t l edi s su es , th e FPAA fo r 2 0 1 0 d et erm i n edthat th e $ 2 00 ,0 0 0 ch ari t ab l e co n tri b u t i o n d edu ct i o n cl ai m edo n th e 2 0 1 0 retu rnfai l ed- 1 1 -

[* 1 1 ] t o qu al ify

as an al l o wab l e d edu ct i o n u n d er s ect i o n 1 7 0 o r an y o th er s ect i o n
o f t h e In t ern al Rev enu e Co d e. Di s cu ss i o n Bran n an San ds h as th e b u rd en o f p ro v i n g th ati t s at i s fi es al l req u i rem en t s fo r t h e d educt i o n cl ai m ed
. See Ru l e 1 4 2 (a); INDOPCO, In c. v . Co m m i s s i o n er, 5 0 3 U.S. 7 9 , 8 4 (1 9 9 2 ); New Co l o n i al Ice Co . v . Hel v eri n g , 2 9 2 U.S. 4 3 5 , 4 4 0 (1 9 3 4). Th e m o s ti m

po rt an tfactreg ard i ng a ch ari tab l e co n tri b u ti o n o f p ro p ert y i s 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 t h e co n tri b u t i o n . Sec. 1 .1 7 0 A1 (c)(1 ), In co m e Tax Reg s . No t ab l y m i ss i n g fro m

th e s t i p u l at edfact s i s an y rel i ab l e ev i d en ce th atth e wat er s t o rag e eas em en tth atBran n an San d s co n tri b u t edt o t h e Di s tri ct h ada fai r
m ark etv al u e o f $ 2 00 ,0 0 0 o r an yth i ng n ear t h atam o un tas o f th e d at e o f th e
co n tri b u t i o n . Th e 2 0 1 1 Fl an ag an l et ter i s o n l y i n ev i den ce as an at t ach m en tt o t h e retu rn . W e can n o tco n s i d er o p i n i o n s , ev eno f a qu al i fi edap p rai s er, t h at are n o t recei v edi n ev id en ce as p ro o f o f fai r m ark etv al u e. See Van Der Aa In v s . , In c. v . Co m m i s s i o n er, 1 2 5 T.C. 1 , 6 -7 (2 0 0 5 ) (i n d i cat i n g t h an an ap p rai s al rep o rtwo u l d b e i n ad m i s s i b l e as ev i den ce o f fai r m ark et v al ue i f t h e au th o r d i dn o tt es t i fy an d
m ak e h i m s el f av ai l ab l e fo r cro s s -ex am i n at i o n ); Ev an s v . Co m m i s s i o n er, T.C. M em o. 2 0 1 0 -2 0 7 (an dcas es ci t edth erei n ). Th e Co u rtth erefo re i ss uedan o rd er- 1 2 -

[* 1 2 ] ci t i n g Ru l e 1 2 2 (b ) (s ub m i s s i o n o f a cas e u n der Ru l e 1 2 2 d o es n o t al t er t h e b u rd eno f p ro of o r th e effect o f fai l u re o f p ro o f) an dRu l e 1 4 9 (b ) (fai l u re t o p ro duce ev i d en ce i n s up po rto f an i s s u e o f fact as t o wh i ch a p arty h as th e b u rd en
o f p ro o f m ay

b e g ro u n d fo r d et erm i n at i o n o f t h ati ss u e ag ai n s tth atp art y ). Bran n an San ds d o es n o t d i s p u te t h ati th as th e b u rd en o f p ro o f b u t i g n o res th e ab s en ce o f ex p ertt es t i m o n y i n th e reco rd . In st ead , i targ ues th atth e

“ co m p arab l e s al e” o f an ad d i t i o n al u n d i vi d ed i nt eres t i n the wat er s t o rag e
eas em en tth aten t it l edBro m l ey t o s t o re an ad d i t i o n al 2 5 0 acre-feet o f wat er i n th e No rt h Cel l wh enco m

p l et edfo r $ 4 8 0 , 0 0 0, o r $ 1,9 20 p er acre-fo o t , ju s t ifi es , ata
m i n i m u m , a v al ue o f $ 9 6,0 0 0 . Of co u rs e t h ere i s n o ex pl an at i o n o f t he d i s crep an cy

b et ween th i s am o un tan dth e am ou n t cl ai m edo n th e 2 0 1 0 p art n ers h i p retu rn . Th atd is crep an cy h i g h l i g h t s th e l acko f cred ib i li ty o f t h e cl ai m ed d educt i o n . Th e p art i es ’ b ri efs , h o wev er, fo cu s o n th e s peci fi c req u i rem en t s ap p l i cab l e t o the al lo wan ce o f a d educt i o n fo r a ch ari t ab l e co n tri b u t i o n o f p ro p ert y an d wh et h er Bran n an San d s p ro p erl y s ub s t an t i at edth e d edu ct io n reg ard l es s o f v al u e. Th o se req u i rem en t s h av e b een d es cri b edi n n u m ero u s o p i ni o n s , i n cl ud i n g recen t l y i n Oakh i l l W o od s , LLC v
. Co m m i s s i o n er, T.C. M em o. 2 0 2 0 -2 4, at* 1 1 , as fo l l o w s :- 1 3 -

[* 1 3 ] 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 ed s ecu ri t i es ) i s v al uedi n ex ces s o f $ 5 , 0 00 , th e t ax p ay er m u s t “ o b t ai n[] a qu al ifi edap p rai s al o f s u ch p ro p ert y an dat t ach [] t o th e ret u rn* * * s u ch i nfo rm at i o n reg ard in g s u ch p ro p ert y an ds u ch 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 i red i n fo rm at io n i n cl u d es “ an ap p rai s al s u m m ary ” t h at m

u s tb e at t ach ed“ t o the ret u rn o n wh i ch s uch 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 .” Defi ci tRedu ct i o n Acto f 1 9 8 4 (DEFRA), Pub . L. No . 9 8 -3 69 , s ec. 1 5 5 (a)(1 ), 9 8 St at . at6 9 1 ; s ee s ec. 1
. 1 7 0 A-1 3 (c)(2 ), In co m e Tax Reg s . Th e IRS h as p res cri b edFo rm 8 2 8 3 t o b e u s edas th e “ ap p rai s al s u m m ary .” J o rg en so n v . Co m m i s s i o n er, T.C. M em o . 2 0 0 0 -3 8, 7 9 T.C.M . (CCH) 1 4 4 4 , 1 4 50 . Fai lu re t o co m p l y wi th th i s req ui rem en t g en eral l y p recl u d es a d edu ct i o n . See s ec. 1 7 0(a)(1 ) (“ A ch ari t ab l e co n tri b u t i o n s hal l b e al l o wab l e as a d edu ct i o n o n l y i f v eri fi edu nd er reg u lat i o n s p res cri b edb y th e Secret ary .”). [Al t erat i o n s i n o ri g i n al .] In b o th Oakh i l l W o o d s an di t s s i m i l ar p red eces so r, Bel ai r W o o d s , LLC v
. Co m m i s s i o n er, T.C. M em o . 2 0 1 8 -1 5 9 , p art ial s u m m ary ju dg m en t was g ran t edi n fav o r o f t h e Co m

m i s si o ner b ecau s e o f a s i n g l e o m i s s io n fro m th e Fo rm 8 2 8 3 ap p rai s al s u m

m ary , thati s, th e d o n o r’ s b as i s i n the p ro p ert y . In th i s cas e
res p o n d en t i d en t i fi es , as s h o wn i n th e s t i p u lat edex h i bi t s , m u l t i p l e o m is si o n s i n th e p u rp o rt edap p rai s al an di n t h e Fo rm 8 2 8 3
. Sect io n 1 .1 7 0 A-1 3 (c)(3 )(i i ), In co m e Tax Reg s ., requ i res a qu al i fi ed ap p rai s al t o i ncl u d e t h e fo l l o wi n g i n fo rm at i o n:

(A) A d es cri p t i o n o f t h e p ro pert y i n s u ffi ci en t d et ai l fo r a p ers on wh o i s n o t g 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 t h atth e p ro pert y th atwas ap p rai s edi s th e p ro p ert y thatwas (o r wi l l b e) co n tri b u t ed ;- 1 4 -

[* 1 4 ] (B) In th e cas e o f t an g i bl e p ro p erty , th e p h y si cal co n d i t i o n o f th e p ro p ert y ; (C) Th e d at e (o r ex p ect ed d at e) o f co n tri b u t i o n t o th e d o n ee; (D) Th e t erm s o f an y

ag reem en t o r u n d ers t an d i n g en t eredi n t o (o r ex pect ed t o b e en t eredi n t o ) b y o r o n b eh al f o f t h e d o n o r o r d o n ee th atrel at es t o th e u s e, s al e, o r o th er d i s p o s i t i o n o f t h e p ro p ert y co n tri b u t ed* * *

* * * * * * * (E) Th e n am e, ad dres s, an d * * * i d en t i fy in g n um b er o f t he qu al ifi edap p rai s er * * * (F) Th e qu al i fi cat io n s o f t h e qual i fi edap p rai s er wh o s i g ns th e ap p rai s al , i n cl u d i n g th e ap p rai s er’ s b ack g ro un d , ex p eri en ce, edu cat i on , an dm em

b ers h i p , i f an y , i n p ro fes si o n al ap prai s al as s o ci at i o ns ; (G) A s t at em en t th atth e ap p rai sal was p rep aredfo r i n co m e t ax p u rp o s es ; (H) Th e d at e (o r d at es ) o n wh ich th e p ro p erty was ap p rai s ed ; (I) Th e ap p rai s edfai r m ark etv al u e (wi th in the m ean i n g o f § 1 .1 7 0 A-1 (c)(2 )) o f t h e p ro p ert y o n t h e d at e (o r ex p ect edd at e) o f co n tri b u t i o n ; (J ) Th e m eth o d of v al u at i o n u s edt o d et erm i n e t h e fai r m ark et v al u e, s uch as th e i n co m e ap p ro ach , th e m ark et -d at a ap p ro ach , an d th e rep l acem en t -co s t -l es s -d ep reci at i on ap p ro ach ; an d (K) Th e s p eci fi c b as i s fo r t h e v al u at io n , s u ch as s p eci fi c co m p arab l e s al es tran s act i o n s o r s t at i s t i cal s am pl i n g , i n cl ud i n g a ju s t i fi cat i o n fo r u s i ng s am p l i ng an dan ex pl an at i o n o f t he s am p l i n g p ro cedu re em

pl oy ed
.- 1 5 -

[* 1 5 ] Th i s Co u rth as h el d t h atn o d edu ct i o n i s al lo wed fo r n o ncas h ch ari t ab l e
co n tri b u t i o n s g reat er t h an $ 5 ,0 0 0 u n l es s th e req u i rem en t s o f a qu al i fi edap p rai s al
are m et . See, e.g ., Hewi ttv . Co m m is s i o n er, 1 0 9 T.C. 2 58 , 2 65 -2 6 6 (1 9 9 7 ), aff’ d wi th o u tp ub l i s hedo p i n i o n , 1 6 6 F.3 d 3 32 (4 th Ci r. 1 9 9 8 ). Sect i o n 1
. 1 7 0 A1 3 (c)(3 )(i )(B), In co m e Tax Reg s ., d efi nes th e t erm “ qu al i fi edap p rai s al ” as a d o cu m en tth ati s p rep ared , s i gn ed , an dd at edb y a qu al ifi edap p rai ser wi th in th e
m ean i n g o f s ect i o n 1 .1 7 0A-1 3 (c)(5 ) In co m e Tax Reg s . Sect io n 1
. 1 7 0 A1 3 (c)(5 )(i )(A) an d(B), In co m e Tax Reg s ., s t at es th at a qu al i fi edap p rai s er i s
s o m eo n e wh o ei th er h ol d s h i m s el f o r h ers el f o u tt o t h e p ubl i c as an ap p rai s er o r p erfo rm s ap p rai s al s reg u l arl y , an d b ecau se o f t h e ap prai s er’ s qu al i fi cat i o n s as d es cri b edi n th e ap p rai s al , the ap p rai s er i s qu al i fi edt o m ak e ap p rai sal s o f t h e t y p e
o f p ro p ert y

v al u ed . Fai l u re t o co m

p l y wi th th es e req u i rem en t s g en eral l y res u l t s i n
n o d edu ct i o n ’ s b ei n g al l o wedfo r t h e co nt ri bu t i o n . Sec. 1 70 (a)(1 ); s ec. 1 .1 7 0 A1 3 (c)(1 )(i ), In co m e Tax Reg s . (“No d edu ct i o n u n d er s ect i on 1 7 0 s hal l b e al l o wed
* * * u n l es s th e s ub s tan t i at i o n req u irem en ts d es cri bed i n p arag rap h (c)(2 ) o f t h i s
s ect i on are m et .”). Res p o n d en tco n t en d s th atFl an ag an ’ s s tat em en ti n h i s 2 0 0 5 l et t er s h o ws th at h e n ei th er h o l d s h im s el f o u tt o th e p ub l i c as an ap p rai s er n o r p erfo rm s ap p rai s al s reg u l arl y . W e ag ree. M o reo v er, ev en i f Fl an ag an were q u al i fi edwi th res p ectt o- 1 6 -

[* 1 6 ] v al u at i o n o f wat er s t o rag e ri g h t s , h i s p u rp o rt edap p rai s al wo u l dn o tb e rel i ab l e b ecau s e o f t h e m an y o m i t t edp i eces o f i n fo rm at i o n req u i redi n a qu al i fi ed ap p rai s al . Ex p erto p i n i o n s t h atd i s reg ardrel ev an tfact s affect in g v al uat i o n are reject ed . See Bo l tar, L.L.C. v . Co m m i s s i o ner, 1 3 6 T.C. 3 26 , 3 3 5 (2 0 11 ); Es t at e o f Newh o us e v . Co m

m i s s i on er, 9 4 T.C. 1 9 3 , 2 4 4 (1 99 0 ); Es t at e o f Hal l v
. Co m m i s s i o n er, 9 2 T.C. 3 12 , 3 3 8 (1 9 8 9 ). Perh ap s Fl an ag an co u l d h av e b een qu al i fi edt o g i v e an o p i n i on o f v al u e i f h e h ad ex pl ai n edh o w h i s ex p eri en ce i n l i ti g at i o n rel at edt o ag reedv al u es b et w een a wi l l i n g b u y er an d a wi l l i n g s el l er an d
co m p aredth e t h ree-p art y ci rcu m s t an ces u n der wh i ch th e t ran s fer t o the Di s tri ct
o ccu rredi n th i s cas e, b u th e d i d n ot . He d es cri bedas k i n g p ri ces b u td i dn o t d es cri b e co m

p l et edtran sact i o n s . Th e p u rp o rt edap p rai sal i s n o tqu al ifi ed reg ard l es s o f Fl an ag an ’ s qu al i fi cat i on s . W i th res p ect t o th e req u irem en t s o f Fo rm 8 28 3 , res p o n d en tp o i n t s o u tth at th e p art n ers h i p retu rni n cl u dedo n l y th e s eco n d p ag e o f t he p res cri bedfo rm an d th atth e i t em s l eftb l an k o r n o tad equat el y ex p l ai n edwere: (1 ) a d es cri p t i o n o f t h e d o n at ed p ro pert y ; (2 ) th e d at e acqu i red b y th e d o n or (m o nt h an dy ear); (3 ) t h e d o n o r’ s co s t o r ad

ju s t ed b as i s ; (4 ) wh et h er t h e ch ari t ab l e co n tri b u t io n was m ad e b y m ean s o f a b arg ai n s al e, (5 ) p artIII, d ecl arat io n o f th e ap p rai ser; (6 ) t h e t ax p ay er i d en t i fi cat i o n n u m b er o f t h e d o n ee (em

pl o y er i den t i fi cat i on n u m b er o f- 1 7 -

[* 1 7 ] th e Di s tri ct ); an d(7 ) th e d o n ee rep res en t at i v e’ s t i t le an d t h e d at e s i g ned
. Al th o u g h th e p art i es d i s pu t e wh et h er t h e i n s ert i o n o f “ n o n e” fo r b as i s was equ iv al en tt o th e o m i s s i o n o f b as i s al t o g et her i n Oakh i l l W o o ds an d Bel ai r W o o d s , th e m u l t i pl e o m i s s i o n s i n Bran n an San ds ’ Fo rm 8 2 8 3 m ak e i tu n n eces s ary t o
res o l ve t h ats i n g l e d i sp u t e. Bran n an San d s d i d n o ts tri ct l y co m p l y wi th th e reg u l at i o n . Bran n an San ds s eek s rel i ef fro m i t s fai l u re t o co m

p l y s tri ct l y wi th the reg u l at i o n ’ s req u i rem en t s fo r a qu al i fi edap p rai s al u n d er t h e d o ct ri n e o f s ub s t an t i al
co m p l ian ce. As recen t l y

s etfo rt h i n Oakh i l l W o o d s , LLC v . Co m m i ss i o n er, at* 1 5 -* 1 6 : In Bo n dv . Co m m i s s io n er, 1 0 0 T.C. 3 2 , 4 1 (1 9 9 3 ), we h el dth at s o m e o f t h e rep o rt i ng req u i rem en t s i n s ect i o n 1 .1 7 0 A-1 3 , In co m e Tax Reg s ., wh il e “ h el p fu l t o res p o n d en ti n th e p ro ces si n g an d au d i t in g o f retu rn s ,” are “ di rect o ry

an dn o tm an d at o ry . ” Th u s, i n ap p ro p ri at e ci rcu m s t an ces , th es e req u i rem en t s can b e s at i sfi edb y s ub s tan t i al , rat h er t h an b y

l i teral , co m

p l i an ce. Bo n d , 1 0 0 T.C. at 4 2
. “ Th e d o ct ri n e o f s ub s t an ti al co m p l i an ce i s d es i g n edt o av o i dh ard s h ip i n cas es wh ere a t ax p ay er d o es al l thati s reas o n ab l y p o s s i b l e, b ut n o n et h el es s fai l s t o co m

p l y wi th the s p eci fi c req ui rem en t s o f a p ro v i s i o n . ” Du rd env . Co m m i s s i o n er, T.C. M em o . 2 01 2 -1 4 0, 1 0 3 T.C.M . (CCH) 1 7 6 2 , 1 7 63
. Sub s t an t i al co m

pl i an ce m ay

b e s h o wnwh ere t h e t ax p ay er “p ro v i d edm o s to f t h e i n fo rm at i o n req u i red ” o r m ad e o m i s s io n s “ s o l el y th ro u gh i n ad v ert en ce.” Hewi t tv . Co m m i s si o n er, 1 0 9 T.C. 2 5 8 , 2 6 5 n .1 0 (1 9 97 ), aff’ dwi tho u tp ub l i s h edo p i n i o n , 1 6 6 F.3 d3 3 2 (4 th Ci r. 1 9 9 8 ). Bu t i n o rd er t o s ub s tan t i al l y co m pl y , th e t ax pay er- 1 8 -

[* 1 8 ] m u s ts at i s fy

al l rep o rt i n g req u i rem en t s th at “ rel at e ‘ t o th e s ub s t an ce o r es s en ce o f t h e s t atu t e.’ ” Bo n d , 1 0 0 T.C. at4 1 (q u o t i n g Tay l o r v . Co m m is s i o n er, 6 7 T.C. 1 0 7 1 , 1 0 7 7 (1 9 77 )); s ee Es t at e o f Ev en ch i k v
. Co m m is s i o n er, T.C. M em o . 2 0 13 -3 4 , 1 0 5 T.C.M . (CCH) 1 2 3 1 , 1 2 3 4 (d ecl i n i n g t o ex cu s e rep o rt i n g erro rs th at g o t o th e “ es s en t i al req u irem en ts o f t h e g o v ern in g s t atu t e” (q u o t i n g Es t at e o f Cl au se v . Co m m is s i o n er, 1 2 2 T.C. 1 1 5 , 1 2 2 (2 0 0 4))). * * * Here t h ere are s i m

p l y t o o m an y o m i s s i o n s t o o v erl o o ko r t o cat eg o ri ze as i n ad v ert en t . Bran n an San d s h as n o tes t ab l i s h eds ubs t an ti al co m p l i an ce. It s
co m p l ian ce can b es tb e d es cri b edas s l ip s h od
. Res p o n d en tal s o arg u es th ata ch ari t ab le co nt ri b u ti o n d edu ct i o n can n o tb e al l o wed becau s e t h e tran s fer o f t h e wat er s t orag e eas em en tt o t h e Di s tri ctwas n o t a g i ft b u twas p arto f a qu idp ro qu o tran s act i o n t o res o lv e a d i s p ut e wi th Bro m l ey . Pet i t io n er res p on d s wi th an arg u m en tth atth e d edu ct io n s h o u ldb e al l o wedas p art
o f a b arg ai n s al e (wh i ch , o f co u rs e, was n o ts h o wni n th e s p ace fo r s u ch i n fo rm at i o n o n th e Fo rm

8 2 8 3 ). Becau se t h ere i s n o rel i ab le ev id en ce o f t h e act u al fai r m ark etv al u e o f t h e wat er s t o rag e eas em en ttran s ferredt o th e Di s tri ct , th i s l at t er arg u m en tm

u s t b e reject edb ecau s e o f Bran n an San d ’ s fai l u re t o p ro vi d e p ro o f. Inan y

ev en twe h av e co n s i d eredthes e an do ther arg u m en t s o f t h e p art i es
an d n eedn ot ad dres s th em . W e h o l dth at th e cl ai m edch ari t ab l e co n tri b u t i o n d educt i o n i s d i s al l o wedfo r l acko f s ub s t an ti at i o n as req u i redb y s ect i o n 1 7 0 an d
s ect i on 1 .1 7 0 A-1 3 , In co m e Tax Reg s .- 1 9 -

[* 1 9 ] To acco u n tfo r the s t i p u l at i o n o f s et tl edi ss u es , Deci s i o n wi ll b e en t eredu n d er Ru l e 1 5 5
.