T.C. M em o . 2 0 2 0 -1 0 3

UNITED STATES TAX COURT
RIVERSIDE PLACE, LLC, EFFINGHAM M ANAGERS, LLC,

TAX M ATTERS PARTNER, Pet it i on er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 1 5 4-1 8. Fi l edJ u l y 9 , 2 0 2 0.

An s o n H. As bu ry , Eth an J . Vern o n, an d Gi lb ertL. Carey , J r., fo r p et i t i o n er. Ch ri st o p h er D. Brad l ey , J as o n P. Op p en h ei m , J o h n W . Sh effi el d III, an d J o h n T. Arth u r, fo r res p on d en t.

M EM ORANDUM OPINION LAUBER, J u d g e: Th i s i s o n e o f m an y cas es i n thi s Co u rti n v o l v i n g ch ari
t ab l e co n tri b u t i o n d educt i o n s fo r co ns erv at i on eas em en ts . Cu rren t ly b efo re th e Co u rtare cro s s -m o t i on s fo r p art i al s u m m ary ju dg m en t fi l edb y

th e In t ern al Rev e-- 2
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[* 2 ] n u e Serv i ce (IRS o r res p o n d en t ) an db y p et it i on er. Th e qu es ti o n s p res en t ed b y th es e m o t i o n s are s ub s t an t i al l y i d en t i cal t o th o s e d eci d edad v ers el y t o the t ax p ay ers i n PBBM -Ro s e Hi ll , Lt d . v . Co m m i s s i on er, 9 0 0 F.3 d 1 9 3 (5 th Ci r. 2 0 1 8 ); Oak

b ro o k Lan dHo l d i n gs , LLC v
. Co m m i s s io n er, 1 5 4 T.C. _

_ (M ay 1 2 , 2 0 2 0 ); Co al Pro p. Ho l di n g s , LLC v . Co m m i s s i o ner, 1 5 3 T.C. 1 2 6 (2 0 1 9 ); Oakh i l l W o o d s , LLC v . Co m

m i s s io n er, T.C. M em o . 2 02 0 -2 4 ; an dBel 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 . Fo l l o wi n g th e an al y s es i n th o s e o p i n i o n s we wi l l g ran tres p o nd en t ’ s m o ti o n an dd en y p et it i o n er’ s cro s s-m ot i o n. Back gro u n d Th ere i s n o d i s p u t e as t o th e fo l l o wi n g fact s , wh i ch are d rawn fro m th e p et i t i o n , th e p art i es ’ m o ti o n p ap ers , an dth e at t ach ed d ecl arat i o n s an dex h i b i t s . Ri v ers i d e Pl ace, LLC (Ri v ers i d e), i s a Geo rg i a l i m i t ed l i ab i l it y co m pan y (LLC) th ath as o p erat edatal l t i m es as a p art n ers hi p fo r Fed eral i nco m e t ax p urp o s es . Ri v ers i d e h adi t s p ri n ci p al p lace o f b u s i n es s i n Geo rg i a wh en i t s p et i ti o n was fi l ed
. In Decem b er 2 0 08 Ri v ers i d e acq ui red , b y co n tri b u t i o n fro m

HRH In v es t m en t s , LLC (HRH), a 1 1 9 -acre t ract o f l an di n Effi n g h am Co u n ty , Geo rg i a. On Decem b er 3 0 , 2 0 09 , s l i gh tl y

m o re t h an o n e y ear l at er, Ri v ers i d e d o n at eda co n s erv at i o n eas em en to v er 1 1 4 acres o f t h at tract t o t h e Geo rg i a Lan dTru st (GLT o r- 3
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[* 3 ] g ran t ee), a “ qu al i fi edo rg an i zat i on ” fo r p u rp o s es o f s ect i o n 1 70 (h )(3 ). 1 W e wi l l refer t o th i s 1 1 4-acre t ract as th e co n s erv ed area o r t h e Pro pert y . Th e d eedo f
eas em en twas reco rd edth e n ex td ay . 2 Th e eas em en td eedreci tes th e co n serv at i o n p u rp o ses an dg en eral l y p ro h i b i t s
co m m erci al o r res i d en ti al d ev el o p m en t . Bu ti tres erv es cert ai n ri g h ts t o Ri v ers i d e
as g ran t o r, i n cl u d i n g th e ri g h t s t o co n du ctco m m erci al ag ri cu l tu ral an dt im b erh arv es t i ng act iv i t i es wi th in th e co n s erv ed area. Ri v ers i d e al s o res erv ed th e ri g h t t o co n st ru ctwi thi n th e co ns erv edarea “ a l im i t edn u m ber o f n ew i m

pro v em en t s .” Th es e i m p ro v em en t s co u ld i n cl u d e t h e d ev el op m en t o f “ wo o d s ro ad s ” fo r p erm it
t edag ri cu l tu ral an d fo res try act i v i t i es , an i rri gat i o n s y s t em cap ab l e o f i rri g at i n g up t o 2 0 acres , m ai n t en an ce o r i m p ro v em en t o f ex is t in g ro ad s, an dth e co n s tru ct i o n o f

1 Al l s t atut o ry

referen ces are t o th e In t ern al Rev en u e Co de (Co d e) i n effect fo r t h e y ear at i ss ue, an dal l Ru l e referen ces are t o t h e Tax Co u rt Ru l es o f Pract i ce an d Pro cedu re. W e ro u ndm o n et ary am o u n t s t o th e n eares td ol l ar. 2 HRH o r i t s affi l i at es co n tri b u t edo th er t ract s o f l an di n Effi n g h am Co u n t y t o o th er LLCs , an dEffi n g ham M an ag ers , LLC, p et i t io n er i n th i s cas e, s erv edas t ax m at t ers p art n er fo r m o s to f t h es e LLCs . Each LLC g ran t eda co n s erv at i o n eas em en tt o GLT. Th e IRS h as ch al l en g edthe ch ari tab l e co n tri b u ti o n d edu ct i o n s cl ai m edb y

the LLCs fo r t h o s e o th er d o n at io n s . See En g l ewo o d Pl ace, LLC v
. Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -1 0 5 ; M ap l e Lan d i n g, LLC v . Co m m i s si o n er, T.C. M em o . 2 02 0 -1 0 4 ; Vi l l ag e atEffi n g h am , LLC v
. Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -1 0 2 ; Oakh i l l W o o d s, LLC v . Co m m i s s io n er, T.C. M em o . 2 0 2 0 -2 4 ; Bel ai r W o o d s , LLC v . Co m

m i s s io n er, T.C. M em o . 2 01 8 -1 5 9 ; RedOakEs t at es , LLC v
. Co m m i s s i o n er, T.C. Dkt. No
. 1 3 6 5 9 -1 7 ; Co t t o n wo o dPl ace, LLC v
. Co m m i s s i on er, T.C. Dkt . No
. 1 4 0 76 -1 7
.- 4
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[* 4 ] a res i d en t i al dri vewayan du t i l i t i es (i n cl u d i n g wat er, s ep t i c, an dp o wer l i n es ) t o s erv e an ad

jacen t fi v e-acre res i d en t i al p arcel o wn edb y Ri vers i de. Th e d eedreco gn i zes the p o s s i b i li ty th atth e eas em en tm i g h tb e ex t i n g u i s h ed ats o m e fu tu re d at e. In th e ev en tth e Pro p ert y were s o l dfo l l o wi n g ju di ci al ex t i n g u i s h m en to f the eas em en t , p arag rap h 1 7 o f t h e d eedp ro v i d ed th at“ [t ] h e am o u n t
o f t h e p ro ceed s t o wh i ch Gran t ee s h al l b e en t i tl ed , aft er t h e s at i s fact i o n o f an y an d al l p ri o r cl ai m s, s hal l b e d et erm i n ed , u n les s o th erwi s e p ro v i dedb y Geo rg i a l aw at th e t i m e, i n acco rd an ce wi th th e Pro ceed s p arag rap h .” (Nei th er p art y co n t en d s th atGeo rg i a l aw “ o th erwi s e p ro v i d e[s ]
. ”) Parag rap h 1 9 , cap ti o n ed“ Pro ceed s ,”
s p eci fi edth atth e g ran t ee’ s s h are o f an y fu tu re p ro ceed s wo u ldb e d et erm i n ed b y m u l t ip ly i n g th e fai r m ark etv al u e o f t h e Pro p ert y u nen cu m b eredb y th i s Co n s erv at i o n Eas em en t(m in u s an y i n creas e i n v al u e aft er t h e d at e o f th is Co n s erv at i o n Eas em en tat tri b u t ab l e t o i m p ro v em en t s) b y th e rat i o o f t h e v al u e o f t h e Co n s erv at i o n Eas em en tatthe t i m e o f t h i s co n v ey an ce t o t h e v al u e o f t h e Pro p ert y atth e t i m e o f t h i s co n v ey an ce wi th ou td edu ct i o n fo r t h e v al u e o f t he Co n s erv at i o n Eas em en t . Ri v ers i de t i m el y

fi l edFo rm

1 0 6 5 , U.S. Retu rn o f Part n ers h i p In co m e, fo r i t s t ax ab l e y ear b eg i n n i ng Sep t em b er 5 , 2 0 09 , an den d i n g Decem ber 3 1, 2 0 0 9 . On th atretu rn i tcl ai m eda ch ari t ab l e co n tri b ut i o n d edu ct io n o f $ 4 ,0 7 1 ,0 0 0 fo r i t s d o n at i o n o f t h e eas em en t . Ri v ers i de rel i edo n an ap prai s al b y Dav i d R. Ro b ert s ,- 5
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[* 5 ] wh o u s edthe “ b efo re an daft er m et h o d ” t o d et erm i n e t h e eas em en t ’ s fai r
m ark etv al u e (FM V). 3 Ri v ers i de i n cl ud edwi th i t s return a Fo rm 8 2 8 3, No n cas h Ch ari t ab le Co n t ri
b u t i o n s , ex ecu t edb y M r. Ro b ert s an dGLT. W h en a t ax p ay er d o n at es p ro p ert y (o th er t h an p ub l i cl y

trad eds ecu ri t i es ) v al u ed i n ex ces s o f $ 5 ,0 0 0 , th e t ax pay er
m u stp ro vi d e o n Fo rm 8 2 8 3 s p eci fi edi n fo rm at i on ab o u tth e d o n at edp ro p ert y , i n cl u d i n g th e d at e an dm et h o do f acq ui s it i on an dth e d o n o r’ s “ co s to r ad ju s t ed b as i s .” In th e rel ev an tb o xes o n Fo rm 8 2 8 3 Ri vers i d e wro t e “ s ee at t ach m en t ” o r

“ SA” an dap p en d eda fo u r-p ag e at t ach m en t . Th e at t ach m en t s tat ed th atth e Pro p erty h adb een “ acq u i redb y

d o n o r” o n Au g u s t 1 , 2 0 0 7 , b y “p u rch as e/
ex ch an g e.” W i th res pect t o “ co s to r ad ju s t edb as is ” Ri v ers i d e s t at ed : A d ecl arat i o n o f t h e t ax pay er’ s b as is i n th e p ro p erty i s n o t i n cl ud edi n * * * th e at t ach edFo rm

8 2 8 3 b ecau s e o f t h e fact th atth e b as i s o f t he p ro p ert y i s n o t t ak en i n to co n si d erat i o n wh en co m p u t i ng th e am o u n t o f t h e d edu ct i o n .

3 Pet i t i on er rep res en t s th atRi v ers i d e’ s co s t b as i s fo r t he 1 1 9-acre t ract was $ 2 0 3 ,3 5 8 . As su m i n g th att o b e tru e, M r. Ro b ert s ’ v al u at i o n s up p o s edth atth e Pro p erty h adap p reci at edi n v al u e b y m o re t h an 2 ,0 0 0 % duri n g o ne o f t he wo rs t fi nan ci al cri ses t o h i tthe Un i t edSt at es s in ce t h e Great Dep res s i o n . M r. Ro b ert s was th e o ri g i n al ap p rai s er i n n u m ero us o th er co n serv at i o n eas em en t cas es th atth i s Co u rth as d eci d ed . See, e.g ., Pl at eau Ho l d i n gs , LLC. v . Co m m i s s i o n er, T.C. M em o. 2 0 2 0 -9 3 ; W o o dl an dPro p . Ho l d i n gs , LLC v . Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -5 5 ; Oakh i l l W o o d s , LLC v . Co m m i s s i o n er, T.C. M em o. 2 0 2 0 -2 4
.- 6
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[* 6 ] Th e IRS s el ect edRi v ers i d e’ s 2 0 0 9 retu rn fo r ex am i n at i o n . OnOct o b er 3 0 , 2 0 1 7 , th e IRS i s s u edRi v ers i d e a t i m el y n o t i ce o f fi nal p art n ers h ip ad m i n i s trat i v e ad ju s t m en t(FPAA) d i s al l o wi n g th e ch ari t ab l e co n tri b u t i o n d edu ct i o n i n fu l l b ecau s e Ri vers i d e h ad no ts h o wnth atth e req u i rem en t s o f s ect i o n 1 7 0 were m et . Th e FPAA al t ern at i v el y

d et erm i n edth at , i f an y d edu ct i o n were al l o wab l e, Ri v ers i d e h ad n o tes t ab l i s h ed th at th e FM V o f t h e eas em en tex ceed ed$ 0
. Th e FPAA d et erm i n ed a 4 0 % “ g ro s s v al u at i o n m i s s t at em en t ” p en al ty u n d er s ect i o n 6 6 62 (h ) an d (i n t h e al t ern at i v e) a 2 0 % accu racy -rel at edp en al ty u n der o th er p ro v i si o n s o f s ect i on 6 6 6 2 (a). Pet i t i o ner t i m el y

p et it i o n edth i s Co u rtfo r read ju s t m en to f t h e p art n ers h i p i t em s , s ee s ec. 6 2 2 6 (f), an dth e p art i es fi l edcro s s -m ot i o n s fo r p art i al s u m m ary ju d g m en t . Res p o n den tco n t en ds th atth e ch ari t ab l e co n tri b u t i on d edu ct i o n was p ro p erl y d i s al l o wedfo r t wo i n dep en d en t l y s u ffi ci en t reas o ns . Fi rs t, h e co n t en d s th atth e co ns erv at i o n p u rp o s e u n d erl y i n g th e eas em en ti s n o t“p ro t ect ed i n p erp etu i ty , ” s ee s ec. 1 70 (h )(5 )(A), b ecau se t he eas em en td eedfai l s t o co m p l y wi th th e reg u l at i o n s g o vern i n g ju d i ci al ex t i n g u i sh m en t , s ee s ec. 1 .1 7 0A-1 4 (g )(6 ), In co m e Tax Reg s . Seco n d , h e co n t en d s th atRi v ers i d e d i d n o t at t ach t o i t s 2 0 0 9 retu rn , as th e reg u l at i o n s req u i re, a fu l l y co m p l et edap p rai s al s u m

m ary o n Fo rm 8 2 8 3 . See
s ec. 1 .7 0 A -1 3 (c)(2 )(i )(B), In co m e Tax Reg s . Pet i t i o ner co n t en d s th atRi v ers i d e- 7
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[* 7 ] co m p li edwi th al l reg u l at ory

req u i rem en t s an d(i f i td i d n o t ) th atth e reg u l at i o n s i m

p os i n g th es e req ui rem en t s are i n v al i d . W e h av e reject ed al l o f p et i t i o n er’ s arg um en t s i n cas es i n v o l v i n g s ub s t an t i al ly s i m i l ar d eed s o f eas em en t , an d we d o s o ag ai n h ere. Di s cu ss i o n A. Su m

m ary J u dg m en tSt an d ard Th e p u rp os e o f s u m

m ary ju d g m en t i s t o ex p ed it e l i t i g at i o n an d av o i dco st l y , u n n eces sary , an dt i m e-co n s u m in g tri al s . See FPL Grp ., In c. & Sub s . v . Co m m i s s i on er, 1 1 6 T.C. 7 3 , 7 4 (2 0 0 1). W e m ay g ran tp art i al s u m

m ary ju dg m en treg ard
i n g an is s u e as t o wh ich there i s n o g en u i n e d is p u t e o f m at eri al fact an da d eci s i o n
m ay b e ren d eredas a m at ter o f l aw. Ru l e 1 2 1 (b ); El ec. Art s , In c. v . Co m m i s s i o n er, 1 1 8 T.C. 2 2 6 , 2 3 8 (2 0 02 ). Pet i t i o n er h as al leg edn o g en u i n e d i s p u t e o f m at eri
al factaffect i n g t h e t wo ques t i on s th atres p o n den th as p ro p o s edfo r s umm ary ad
ju d i cat io n . W e co n cl u d e th atth es e i s s u es m ay ap p ro p ri at el y

b e ad ju d i cat eds u m m ari l y . B. J u d i ci al Ex ti n g u i sh m en t Th e Co d e g en eral l y

res tri ct s a t ax pay er’ s ch ari t ab le co nt ri b u ti o n d edu ct i o n fo r t h e d o n at io n o f “ an i n t eres ti n p ro p ert y wh i ch co n s i s t s o f l es s th an th e t ax p ay er’ s en t i re i n t eres ti n s uch p ro p ert y .” Sec. 1 7 0 (f)(3 )(A). Bu t th ere i s an ex cep t i on- 8
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[* 8 ] fo r a “ qu al i fi edco n serv at io n co n tri b u t io n .” Sec. 1 70 (f)(3 )(B)(i ii ), (h )(1 ). Fo r th e d o nat i o n o f an eas em en tt o b e a “ qu al i fi edco n s erv at i o n co n tri b u t i o n ,” t h e
co n serv at i on p urp o s e m

u s tb e “ p ro t ect edi n p erp etu i ty .” Sec. 1 70 (h )(5 )(A). Th e reg u l at i o n s s etfo rt h d et ai l edru l es fo r d et erm i n i n g wh et h er t h i s “p ro t ect edi n p erp etu i ty ” req u i rem en ti s m et . Of i m p o rt an ce h ere are t h e ru l es g o v ern i n g th e m an d at o ry

d iv is i o n o f p ro ceed s i n th e ev en tth e p ro p ert y i s s o ldfo l l o wi n g a ju d i ci al ex t i ng ui s hm en to f th e eas em en t . See s ec. 1
. 1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s. Th e reg ul at i o ns reco g n i ze t h at“ a s ub s equ en tu n ex p ect edch an g e i n th e co n d i t i o ns s u rro u nd i n g the [d o n at ed ] p ro p ert y * * * can m ak e i m

p o ss i b le o r i m

p ract i
cal th e co n ti n u edu s e o f t h e p ro p ert y fo r co n s erv at i o n p u rp o s es .” Id . s ub d iv . (i ). Des pi t e t h at p o s si b il i ty , “ th e co n s erv at i o n p u rp o s e can n o n et h el es s b e t reat edas p ro t ect edi n p erp etui ty

i f th e res t ri ct i o n s are ex t i n g u i s h edb y ju d i ci al p ro ceed i n g ”
an d th e eas em en t d eed en s u res th atth e ch ari t ab l e d o n ee, fo l l o w i n g s al e o f th e p ro p erty , wi l l recei v e a p ro p ort i o n at e s h are o f th e p ro ceed s an du s e t h o s e p ro ceed s
co n si s t en t l y

wi th th e co n s erv at i o n p u rp o s es u n d erl y in g th e o ri g i n al g i ft . Ib i d . In effect , th e “ p erp etu it y ” req u i rem en ti s d eem eds at is fi ed b ecau s e t h e s al e p ro ceed s rep l ace t he eas em en t as an as s etd ep l o y edb y the d o n ee “ ex cl u s iv el y fo r co n s erv at i on p u rp o s es .” Sec. 1 7 0 (h )(5 )(A).- 9
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[* 9 ] Th e ju d i ci al ex t i n g u i s h m en t p ro v is io n s o f t h e d eedi n th i s cas e are s ub s t an t i al l y s i m i l ar t o t h o se t h atwe co n s i dered i n Co al Pro p . Ho l d i n g s , 1 5 3 T.C. at1 3 0
- 1 3 1 . Fo l l o wi n g o u r reas o n i n g i n thatcas e, we co ncl u d e t h atRi v ers i d e’ s d eedfai l s t o s at i s fy th e “ p ro t ect edi n p erp etu i ty ” req u i rem en tfo r t wo reas o n s . Fi rs t , th e reg u l at o ry

fract i o n u s edi n th e d eedt o d et erm i n e t h e g ran t ee’ s p ro p o rt i on at e s h are o f p o s t -ex t i n g u i s hm en t p ro ceed s i s ap p l i ed , n o tt o th e fu l l s al e p ro ceed s--an am o u n tp res u m ab l y equ i val en tt o t h e FM V o f t h e Pro p ert y atth e t i m e o f s al e--b utt o th e p ro ceed s “ m i n u s an y i n creas e i n v al u e aft er t he d at e o f t h i s Co n s erv at i o n Eas em en tat tri b u t ab le t o i m p ro vem en t s .” Th u s , th e g ran t ee’ s s h are i s i m p ro p erl y redu cedo n acco un to f (1 ) ap preci at i o n i n th e v al ue o f i m pro v em en t s
ex i s t in g wh en th e eas em en twas g ran t edp l u s (2 ) t he FM V o f an y i m p ro v em en t s th atth e d o n o r o r i t s s u cces s o rs s ub s equ en t l y m ak e t o the Pro p erty . By redu ci n g th e g ran t ee’ s s hare i n th i s way , th e d eedv i o l at es th e reg u l at o ry req u i rem en tth at th e d o nee recei v e, i n the ev en tth e Pro p erty i s s o l d fo l lo wi n g ex t i n g ui s h m en to f th e eas em en t , a s h are o f p ro ceed s th ati s “ atl eas tequ al t o th e p ro p o rt i o n at e v al u e th atth e p erp etu al co ns erv at i o n res tri ct i o n atth e t i m e o f th e g ift , b ears t o t h e v al u e- 1 0 -

[* 1 0 ] o f t h e p ro p ert y

as a wh o l e atthatt i m e.” See s ec. 1 .1 70 A-1 4(g )(6 )(i i ), In co m e Tax Reg s . 4 As we h av e n o t edp rev i o u s l y , th e req u irem en t s o f th is reg u l at i o n “ are s tri ct l y co n s tru ed
. ” Carro ll v . Co m m i ss i o n er, 1 4 6 T.C. 1 9 6 , 2 1 2 (2 0 1 6 ). Becau s e t h e g ran t ee i n th i s cas e “ i s n o t ab s o l u t el y en t i t l edt o a p ro p o rt i o n at e s h are o f * * * [t he] p ro ceed s ” up o n a p o s t-ex t i n g u i sh m en ts al e o f t h e Pro p ert y , the co n s erv at i o n p u rp os e u n d erl y i n g th e co n tri b u t i o n i s n o t“p ro tect edi n p erp etu i ty .” Co al Pro p . Ho l di n g s , 1 5 3 T.C. at1 2 7 , 1 3 9 (qu o t i n g Carro l l , 1 4 6 T.C. at2 1 2 ); acco rd , Pl at eau Ho l di n g s , LLC v . Co m

m i s s i o n er, T.C. M em o . 2 0 2 0 -9 3; Oak b ro o kLan d Ho l d i ng s , LLC v . Co m

m i s s i o n er, T.C. M em o . 2 0 2 0-5 4 . Th e U.S. Co u rto f Ap p eal s fo r t h e Fi ft h Ci rcu i th as l ik ewi s e s u s t ai n edth e d i s al l o w an ce o f a ch ari t ab l e co n tri b u t i o n d educt i o n wh ere t h e ju d i ci al ex t i n g u is h m en tp ro v i s i o n o f an eas em en td eed i n cl u d eda carv e-o u tfo r d o n or i m p ro v em en t s s i m i l ar t o th ath ere. See PBBM
Ro s e Hi l l, 9 0 0 F.3 dat2 0 8.

4 Th e p re-co n tri b u ti on i m

p ro v em en t s t o th e co n s erv edarea i n thi s cas e ap p ear t o b e l es s s ub s t an t ial th an i n Co al Pro p . Ho l d i n g s, LLC v . Co m m i s s i o n er, 1 5 3 T.C. 1 2 6 , 1 3 1 (2 0 1 9 ). Bu t th e d eedres erv edt o Ri vers i d e t he ri gh tt o m ak e p o s t -co n tri b u t i o n i m

pro vem en t s t o th e co n s erv edarea, i n cl u d i n g th e ri g h t s (fo r ex am p l e) t o co n s tru ctro ad s , a res i d en t i al dri v eway , i rri g at i o n s y s t em s , an d u t i l i t i es (i n cl u di ng wat er, s ep t i c, an dp o wer l i n es ) t o s erv e th e co ns erv at i o n area an d/o r Ri v ers i d e’ s ad

jacen t res i d en t i al p arcel . Th es e fact u al d i fferen ces h av e l i t t l e i m p acto n o u r an al y s i s b ecau s e th e reg u l at i o n d o es n o tp erm i tan y redu ct io n o f t h e d o n ee’ s s h are o n acco u n t o f s u ch d o n o r i m p ro v em en t s .- 1 1 -

[* 1 1 ] Th e eas em en td eedh ere h as a s eco n dp ro b l em , wh i ch was al s o p res en ti n Co al Pro p. Ho l d i n g s . Th e g ran t ee’ s t en t at i v e s h are o f th e p ro ceed s, as d et erm i n ed
u n d er p arag rap h 1 9 o f t h e d eed , i s ad j u s t edfu rt h er b y

p arag rap h 1 7. Itp ro v i d es th atth e g ran t ee’ s s hare wi l l b e d et erm i n edu n d er t h e Pro ceed s p arag rap h , b u to n l y

“ aft er t h e s at i s fact i o n o f an y an dal l p ri o r cl ai m s . ” Pri or cl ai m s ag ai n s tth e s al e p ro ceed s m i g h tb e h el db y v ari o u s cred i to rs o f Ri v ers i d e o r i t s s u cces s o rs . It is n o tn eces s ari l y

u n reas o n ab l e fo r a d eedt o p ro v i d e t hatp ri o r cl ai m s m ay b e p ai dfro m

s al e p ro ceed s . Wh ati s u nreas on ab l e i s th e req u i rem en t th atal l p ri o r cl ai m s b e p ai do uto f t he g ran t ee’ s s h are o f t h e p ro ceed s , ev en i f t h os e cl ai m s rep res en tl i ab i l i t i es o f Ri v ers i d e o r i t s s u cces s o rs . See Co al Pro p . Ho l d i n g s, 1 5 3 T.C. at1 4 5 n.5 . Becau s e t h e g ran t ee’ s s h are o f th e p ro ceed s i s i m p ro p erl y redu cedb y
carv e-o u t s b ot h fo r d on o r i m p ro v em en t s an dfo r cl ai m s ag ai n stth e d o n o r, th e d eed ’ s ju d i ci al ex ti ng u i s h m en t p ro v i s i o n s d o n o ts at i s fy th e reg u l at o ry

req u i rem en t s . If t h e reg u l at i on i s i n t erp ret ed , as we h av e i n t erp ret edi t , t o m ak e Ri v ers i d e i n el i g i b l e fo r a ch ari tab l e co n tri b u t i o n d edu ct i o n , Ri v ers i d e co n t en ds thatth e reg u l at i o n i s i n v al i d
. Itu rg es th ats ect i o n 1 .1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s . , i s an

“ arb i traryan d cap ri ci o u s” ru le p ro m u l g at edi n v i ol at i o n o f t h e Ad m i n i s trat i v e Pro
cedu re Act . An di tco n t en d s th atth e reg u l at io n i s s ub s t an t iv el y i n v al i du n d er t h e- 1 2 -

[* 1 2 ] t es ts et fo rt h i n Ch ev ro n , U.S.A., In c. v . Nat . Res . Def. Co u n ci l , In c., 4 6 7 U.S. 8 3 7 (1 9 8 4 ). W e co m p reh en s i v el y

ad dres s edan dreject edb o th o f t hes e arg u m en t s i n a recen tCo u rt -rev i ewedOp i n i o n . See Oakb ro o kLan dHo l d i n g s , 1 5 4 T.C. at_

_ (s l ip o p . at 1 5 -3 3 ). W e n eedn o trep eatthatan al y si s h ere. In s u m , we h ol dth atth e co n s erv at i o n p u rp o se u n derl y i n g th e eas em en twas
n o t“p ro t ect edi n p erp etu i ty ” as req u i redb y s ect i o n 1 7 0 (h )(5 )(A). Fo r th atreas o n th e ch ari t ab l e co n tri b u t i o n d edu ct i o n cl ai m edb y Ri v ers id e m

us tb e d en i edi n i t s
en t i ret y . See Co al Pro p . Ho l d in g s , 1 5 3 T.C. at 1 39 . W e wi ll th erefo re g ran t
res p o n d en t’ s m o t i o n fo r p art i al s u m m ary ju d g m en to n h i s fi rs t th eo ry . 5

5 Pet i t i on er d raws o u r at ten t i o n t o Pri v. Ltr. Ru l
. 2 0 0 8 3 6 01 4 (Sep t . 5 , 2 0 0 8 ) (PLR), i n wh i ch th e IRS fo un du n o b ject io n ab l e an eas em en td eedwi th a ju d i ci al ex t i n g u i s h m en tcl au s e res em b li n g th ath ere. Pet i t i o ner co n t en d s th atres p o n d en t ’ s i n t erp ret at io n o f t h e reg ul at i o n as s etfo rt h i n th atPLR i s b in d i n g o n res p o n d en t u n d er Au er v . Ro bb i n s , 5 1 9 U.S. 4 5 2 , 4 6 1 (1 9 9 7 ). Pet i t i o n er’ s arg u m en ti g n o res th e fact th atd et erm in at i o ns em b o d i edi n a PLR “ m ay

n o tb e u sedo r ci t edas p reced en t.” Sec. 6 1 1 0(k )(3 ). Th e t ax p ay er i n PBBM -Ro s e Hi l l b ro ug h t th e s am e PLR t o the Co u rto f Ap p eal s ’ at t en t i o n , b u tth atco u rtp ai dn o h eedt o i t , fi n d in g t h e reg u l at i o n u n am

b i g u ou s o n i t s face. See PBBM -Ro s e Hi l l , Lt d . v . Co m m i s s i o n er, 9 0 0 F.3 d1 9 5, 2 0 7 -2 08 (5 th Ci r. 2 0 1 8 ). W e h av e d o n e t h e s am e. See Co al Pro p . Ho l di n g s , 1 5 3 T.C. at1 4 4 . InOak b ro o kLan d Ho l d i n g s , LLC v . Co m m is si o n er, T.C. M em o . 2 02 0 -5 4 , we d i s m i s s edrel ian ce o n Au er d eferen ce b ecau s e “ th e ‘ t rad i t i o nal t o o l s o f co n s tru ct io n ’ l e[d ] u s t o h o l dth atth e Co m m i s s i o ner’ s co ns tru ct i on o f t he reg u l at io n i s co rrect ev en i f we l o okatth e qu es t i o n d e n o vo .” Id
. at* 2 5 (qu o t i n g Ki s o r v . W i l k ie, 5 88 U.S. _

_ , _

_ , 1 3 9 S. Ct
. 2 4 0 0, 2 4 1 5 (2 0 1 9 )).- 1 3 -

[* 1 3 ] C. Ap p rai s al Su m m ary 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 .” Defi ci t Redu ct i o n Acto f 1 98 4 (DEFRA), Pub . L. No . 9 8 -3 69 , s ec. 1 5 5 (a)(1 )(B), 9 8 St at . at6 9 1 ; s ee s ec. 1 .1 7 0A-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 00 -3 8 , 7 9 T.C.M . (CCH) 1 4 4 4, 1 4 5 0 . Fai lu re t o co m p l y wi th th i s req u i rem en tg en eral l y p recl u d es a d edu ct i o n . See s ec. 1 70 (f)(1 1 )(A) (p ro v i d
i n g th at“ n o d educt i o n s h al l b e al l o wed ” u n l es s a t ax p ay er m eet s th e ap p rai s al
s u m m ary req u irem en t s o f s ect i o n 1 7 0 (f)(1 1 )(C)). In h i s res p on se t o p et i t i o n er’ s cro s s -m o t i o n , res p o n den tco n t en d s th atRi v ers i de’ s d edu ct i o n s h o u l d b e d i s al l o wedb ecau s e i tfai l edt o at t ach t o i t s retu rna p ro p erl y co m p l et edap p rai s al s u m

m ary . Pet i t i o n er co n t en ds th atRi v ers id e s tri ct l y (o r at l eas t s ub s t an t i al l y ) co m p l i edwi th th e ap p l i cab le reg u l at i o n . Inthe al t ern at i ve i tco n t en ds th atth e reg ul at i o n i s i n v al id
.- 1 4 -

[* 1 4 ] Th e reg u l at i o n req u i res th e d o n o r t o “ [a] t t ach a fu l l y co m pl et edap p rai s al
s u m m ary ” t o th e t ax retu rn o n wh i ch th e ch ari t ab l e co n tri b u t i o n d edu ct i o n i s fi rs t cl ai m ed . Sec. 1 .1 7 0 A-1 3 (c)(2 )(i )(B), In co m e Tax Reg s . A fu l l y co m p let edap p rai s al s u m

m ary m u s ti n cl u d e “ [t ] h e m an n er o f acq u is it i on * * * an dth e d at e o f acq u is i t io n o f t h e [d o n at ed ] p ro p ert y b y th e d on o r” as wel l as “ [t ] h e co s to r o th er b as i s o f t h e p ro p ert y .” Id . s ub para. (4 )(i i )(D) an d(E). “ If a t ax p ay er h as
reas on ab l e cau s e fo r b ei n g u n ab l e t o p ro v i d e t h e i n fo rm at i o n req u i red* * * (rel at i n g t o th e m an n er o f acq u i s i t i o n an db as i s o f t h e co n tri bu t edp ro p ert y ), an ap p ro p ri at e ex pl an at io n s h o u l db e at t ach edt o th e ap p rai s al s u m m ary .” Id . s ub d i v . (i v)(C)(1 ). In th e rel ev an tb o xes o n i t s Fo rm 8 2 8 3 Ri v ers id e wro t e “ s ee at t ach m en t ”
an d ap p en d eda fo u r-p ag e at t ach m en t . Th e at tach m en ts ai d th atth e Pro p ert y h ad b een acqui redb y

th e d o no r o n Au g u s t1 , 2 0 0 7 , b y “pu rch as e/ ex ch an ge.” Pet i t i o n er rep res en t s thatRi v ers i d e act u al l y acq u i redth e 1 19 acres i n Decem b er 2 0 0 8 b y
co n tri b u t i o n fro m

HRH. Th e at t ach m en ts ai dth atRi v ers i d e wo u l dn o tp ro v i d e
co s tb as i s i n fo rm at i o n “b ecau s e o f t h e fact th atth 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 .” Th e t ax p ay ers i n Oakh i l l W o o d s , at* 7 -* 8 , an dBel ai r W o o ds , 1 1 6 T.C.M . (CCH) at- 1 5 -

[* 1 5 ] 3 2 6 -3 27 , h adat t ach edth e s am e t ex t , v erb at i m , t o t h e Fo rm s 8 2 8 3 en cl o s ed wi th th ei r retu rn s . W e h o ldth atRi vers i d e d i dn o trep o rti t s co s t b as i s i nfo rm at i o n as th e reg u l at i o n req u i res an das Fo rm 8 2 8 3 d i rect s . Th e ex p l an at io n i tat t ach ed , far fro m
s h o wi n g th ati twas u n ab l e t o p ro v i d e t h i s i n fo rm at i on , s i m p l y as s ert ed th atth e i n fo rm at i o n was n o tn eces s ary . Ineffect Ri v ers i d e as s ert ed th att ax p ay ers are free t o i g n o re t h e req u i rem en tth atth ey rep o rtco stb as i s . “ As sert i n g t h ato n e m ay i g n o re a req u i rem en td o es n o t co n st i tu t e s tri ctco m pl i an ce wi th i t .” Oakh i l l W o o d s , at* 1 3 ; Bel ai r W o o ds , 1 1 6 T.C.M . (CCH) at 3 2 7 -3 2 8. In Bo n dv . Co m

m i s s i o n er, 1 0 0 T.C. 3 2 , 4 1 -4 2 (1 9 9 3), we h el d thats o m e o f th e rep o rt i n g 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 ., can b e s at i s fi edb y s ub s t an t ial , rat her t h an b y l i t eral , co m

p l i an ce. “ Th e d oct ri n e o f s ub s t 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 h i p i n cas es wh ere a t ax p ay er d o es al l th ati s
reas on ab l y

p o s s i b l e, b u t n o n eth el es s fai l s t o co m p l y . ” Du rd en v . Co m

m i ss 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 6 3 . Sub s t an t ial co m p l i an ce
m ay b e s ho wnwh ere t he t ax p ay er “ p ro vi d ed m o s to f t h e i n fo rm at io n req u i red ” o r
m ad e o m i s s i o n s “ s o l el y

th ro u g h i nad v ert en ce.” Hewi ttv . Co m m i s s io n er, 1 0 9 T.C. 2 5 8 , 2 6 5 & n .1 0 (1 99 7 ), aff’ dwi th o 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 ). Bu ti n o rd er t o s ub s tan t i al l y co m pl y , th e t ax p ay er m

us ts at i s fy al l rep o rt i n g- 1 6 -

[* 1 6 ] 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 sen ce o f t he s t atut e.” Bo n d , 1 0 0 T.C. at4 1 (q u o t in 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 )). W e h o ldth atRi vers i d e d i dn o ts ubs t an ti al ly co m p l y b ecau s e i t s fai l u re t o
s up p ly co s tb as i s v i o l at edth e es s en ce o f t he s t atu t e. In en act in g DEFRA’ s h ei gh t en ed rep ort i ng req u i rem en t s, Co n g res s ai m edt o g i v e t h e IRS t o ol s th atwo u l den ab l e i t to i d en t i fy

i n fl at edch ari t ab l e co n tri b u t io n d edu ct i o ns . See RERI Ho l d i n g s I, LLC v . Co m

m i s s io n er, 1 4 9 T.C. 1 , 1 6 -1 7 (2 0 1 7 ), aff’ ds ub n o m . Bl auv . Co m m i s s i o n er, 9 2 4 F.3 d1 2 6 1 (D.C. Ci r. 2 0 1 9 ). Th e req u irem en tt o d i scl o s e co s t b as i s wh en th ati n fo rm at i o n i s reas o nab ly o bt ai nab le i s n eces s ary

t o faci li t at e t h e Co m m i s s i o n er’ s effi ci en ti d en ti fi cat i o n o f o v erv al uedp ro p ert y . Un les s th e t ax p ay er co m

p l i es wi th t h e req u i rem en tth ath e d i s cl o se h i s co s t b as i s an d th e d at e
an d m an n er o f acq u i ri ng th e p ro p erty , th e Co m m i s s i on er wi l l b e d ep ri v ed o f an
es s en t i al t o o l th atCo n g res s i n t en d edh i m t o h av e. See Oak h i l l W o o ds , at* 1 5
-
* 2 2 ; Bel ai r W oo d s , 1 1 6 T.C.M . (CCH) at 3 2 8 -3 30
. 6

6 Pet i t i on er co n t en d s th atRi v ers i de s up p l i ed , el s ewh ere o n i t s t ax retu rn , i n fo rm at i o n fro m

wh ich i t s co s tb as i s co u l db e d eri v ed , e.g ., o n Sch edu l e L, Bal an ce Sh eet s p er Bo ok s . W e h av e reject edth atarg u m en t p rev io u sl y an dreject i tag ai n h ere. See Oak h i l l W oo d s , at * 1 9 -* 2 0 ; Bel ai r W o o d s, 1 16 T.C.M . (CCH) at 3 2 9
. Th e reg u lat i on req u i res th at“ [a] n ap p rai s al s u m m ary s h al l i n cl u d e” i n fo rm at i o n ab o utb as i s . Sec. 1 .1 7 0 A-1 3 (c)(4 )(i i )(E), In co m e Tax Reg s . Th e ex p l i ci t d i s cl os u re o f b as i s o n Fo rm 8 2 8 3 i s es s en ti al i n al ert i n g the Co m m i ss i o n er as t o wh et h er (an dt o wh atex t en t) fu rt h er i n v es t i g at i o n m ay b e n eed ed
. Wh ere t h e

(co n ti n u ed ...)- 1 7 -

[* 1 7 ] No r i s thi s a cas e wh ere t h e t ax p ay er d i d “ al l th ati s reas on ab l y p o s s ib l e,” Du rd en , 1 0 3 T.C.M . (CCH) at 1 7 6 3 , o r o m i t t edi n fo rm at i o n “ s o lel y th ro u g h i n ad
v ert en ce,” Hewi t t , 1 0 9 T.C. at2 6 5 n .1 0
. Ri v ers i de ex p l i ci t l y d ecl i n ed t o rep o rti t s
co s tb as i s i n fo rm at i o n , as sert i n g th atth i s i n fo rm at i o n was u n n eces s ary b ecau s e

“ b as i s * * * i s n ott ak en i nt o co n s id erat i on wh en co m p u t i n g th e am ou n to f t h e d edu ct i o n .” Th i s was n o tan i n s t an ce o f i n ad v ert en to m i s s i o n b u to f a co n s ci o u s el ect io n n o tt o s up p l y

i n fo rm at i o n d am ag i n g t o i t s p o s i t i o n . 7 Fi n al l y , p et i t i o n er i n i t s cro s s -m o t i on co n t en d s thatth e reg u l at i o n req u i ri n g d i s cl os u re o f “ co s to r o th er b as i s ” o n th e ap p rai s al s u m m ary i s i n v al i d
. Acco rd i n g t o p et i ti o n er, t hi s reg u l at i o n d o es n o t“ g i ve effect t o th e u n am b i g u ou s ly ex p res s ed i n t en to f Co n g res s ” an d i s th u s i n v al i d u n der Ch ev ro n, U.S.A., In c., 4 67 U.S. at 8 4 2 -8 4 3 . Th e t ax p ay er i n Oakh i l l W o o ds , at* 2 2 -* 27 , m ad e p reci s el y th e s am e arg u m en tan dwe reject edi t . W e d o s o ag ai n h ere.

6 (...co n t in u ed ) t ax p ay er s t at es o n Fo rm

8 2 83 (as Ri vers i d e d i d ) t h atb as i s i n fo rm at io n wi ll n o tb e p ro v id ed , rev en u e ag en t s can n o tb e req u i redt o s iftth ro ug h h u nd red s o f p ag es o f co m p l ex retu rn s l oo k i n g fo r p o s s i b l e cl u es ab o u t wh atth e t ax p ay er’ s co s tb as i s m i g h tb e.

7 Gi v en o u r d is p os i t i o n , we n eedn o td eci d e wh et h er Ri v ers i d e p ro v i d edi n accu rat e i n fo rm at i o n co ncern i n g “ [t ] h e m an ner o f acqu i s i t i o n * * * an dthe d at e o f acq u is i t io n o f t h e p ro p ert y b y th e d o n or,” s ec. 1 .1 70 A-1 3(c)(4 )(i i)(D), In co m e Tax Reg s., o r (i f i td i d ) wh eth er t h atfai l u re wo u ldh av e s up p l i eds u ffi ci en tg ro u n d s , s t an d i n g al o n e, fo r d i s al l o wan ce o f t h e ch ari t ab l e co n tri b ut i o n d edu ct io n .- 1 8 -

[* 1 8 ] Fo r t h es e reas on s we h o ldth atRi v ers i d e d i d n o t co m p l y , s tri ct l y

o r s ub s t an t i al l y , wi th th e reg u l at o ry rep o rt i n g req u irem en t s . Acco rd , Oakh i l l W o o d s, at* 2 1
-
* 2 2 ; Lo ub e v . Co m

m i s s i o n er, T.C. M em o . 2 0 2 0 -3 , at* 1 5 -* 23 ; Bel ai r W o o d s , 1 1 6 T.C.M . (CCH) at 3 29 -3 3 0 . Th is fai l u re s upp l i edan i n d ep en d en t g ro u n dfo r d en i al
o f i t s ch ari tab l e co n tri b u t i o n d edu ct io n . 8 To refl ectthe fo reg o i n g , Ano rd er wi l l b e i s s u edg ran t i n g
res p o nd en t ’ s m o t i o n fo r p art i al s u m m ary ju dg m en t an dd en y i ng p et i t i o ner’ s cro s s m o t i o n .

8 Sect i o n 1 7 0 (f)(1 1)(A)(i i )(II) p ro v id es th ata ch ari tab l e co n tri b u ti o n d edu ct i on m ay b e al l o wed , n o twi th s t an d i n g th e t ax pay er’ s fai l u re t o co m p l y wi th th e ap p rai s al s u m

m ary req u i rem en t s , “ i f i ti s s h o wnth atthe fai l u re t o m eets u ch req u i rem en t s i s du e t o reas o n ab l e cau s e an dn ott o wi l l fu l n eg l ect .” Pet it i o n er h as n o tad
v an ceda “ reas o n ab l e cau s e” d efen s e u n d er t h i s p ro v i s i on an d h as ad du cedn o fact s t h atwo u ld b e rel ev an ti n d et erm i ni n g i ts av ai l ab i l i ty .