IRS Says Hobby Lobby Charitable Deductions Precluded

THE DAVID AND BARBARA GREEN 1993 DYNASTY TRUST, MART D. GREEN, TRUSTEE, ET AL.,
Petitioners,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.

02/25/22

Memorandum in Support of Motion for Partial Summary Judgment

UNITED STATES TAX COURT

MEMORANDUM OF LAW IN SUPPORT OF RESPONDENT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

RESPONDENT SUBMITS this memorandum of law in support of Respondent's Motion for Partial Summary Judgment (Motion) filed contemporaneously herewith. The issue to be resolved in deciding this Motion is whether the defects, either individually or collectively, in the Noncash Charitable Contributions 1RS Form 8283 (Form 8283), appraisal summary violate § 155(a)(1)(C) of the Deficit Reduction Act of 1984, Pub. L. No. 98-369 (DEFRA) and the requirements prescribed by the Secretary in Treasury Regulations §§ 1.170A-13(c)(4) and 1.170A-13(c)(5)(iii)¹ to preclude the deductibility of Petitioners' respective shares of Hobby Lobby Stores, Inc.'s charitable contribution deduction for the taxable years ending December 31, 2011 and December 31, 2012.

Petitioners are not entitled to the charitable contribution deduction because they did not comply with applicable requirements in the Code and the Regulations. Petitioners failed to complete the 2011 and 2012 Forms 8283 as required by DEFRA § 155(a)(3), Treas. Reg. §§ 1.170A-13(c)(4)(ii) and 1.170A-13(c)(5)(iii). In addition, the HLSI's Form 8283 was defective because it failed to reflect the basis and date of acquisition of each of the donated items in both 2011 and 2012. Additionally, in 2012, HSLI's two additional appraisers contributed to the Appraisal Report that did not sign the Form 8283.

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CONTENTS

PRELIMINARY STATEMENT

STATEMENT OF MATERIAL FACTS

ARGUMENT

TABLE OF AUTHORITIES

Cases

Alli v. Commissioner, T.C. Memo 2014-15

Bond v. Commissioner, 100 T.C. 32 (1993)

Cave Buttes, L.L.C, v. Commissioner 147 T.C. 338 (2016)

Celotex Corp, v. Catrett, 477 U.S. 317 (1986)

Chiarelli v. Commissioner, T.C. Memo. 2021-27

Deputy v. Du Pont, 308 U.S. 488 (1940)

Durden v. Commissioner, T.C. Memo 2012-140

Estate of Chamberlain v. Commissioner, T.C. Memo. 1999-181

Estate of Clause v. Commissioner, 122 T.C. 115 (2004)

Estate of Evenchik v. Commissioner, T.C. Memo. 2013-34

Fla. Peach Corp, v. Commissioner, 90 T.C. 678 (1988)

INDOPCO, Inc, v. Commissioner, 503 U.S. 79 (1992)

Interstate Transit Lines v. Commissioner, 319 U.S. 590 (1943)

Hewitt v. Commissioner, 109 T.C. 258 (1997), aff'd, 166 F.3d 332 (4th Cir. 1998)

Naftel v. Commissioner, 85 T.C. 527 (1985)

New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934)

Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24

RERI Holdings I, LLC v. Commissioner, 149 T.C. 1 (2017), aff'd sub nom. Blau v. Commissioner, 924 F.3d 1261 (D.C. Cir. 2019)

Rothman v. Commissioner, T.C. Memo. 2012-163, opinion vacated in part on reconsideration, T.C. Memo. 2012-218

Taylor v. Commissioner, 67 T.C. 1071 (1977)

Whitesell v. Commissioner, T.C. Memo. 2017-84

Zarlengo v. Commissioner, T.C. Memo. 2014-161

Code Sections

I.R.C. § 170

I.R.C. § 170(a)(1)

I.R.C. § 170(e)(1)(A)

I.R.C. § 170(f)

I.R.C. § 170(f)(11)(B)

I.R.C. § 1222(3)

Treasury Regulations

Treas. Reg. § 1.170A-1(c)(1)

Treas. Reg. § 1.170A-13(b)(3)(i)(A)

Treas. Reg. § 1.170A-13(c)

Treas. Reg. § 1.170A-13(c)(1)(i)

Treas. Reg. § 1.170A-13(c)(2)(i)

Treas. Reg. § 1.170A-13(c)(2)(i)(B)

Treas. Reg. § 1.170A-13(c)(4)(i)(C)

Treas. Reg. § 1.170A-13(c)(4)(ii)(D)

Treas. Reg. § 1.170A-13(c)(4)(ii)(E)

Treas. Reg. § 1.170A-13(c)(4)(ii)(J)

Treas. Reg. § 1.170A-13(c)(4)(ii)(K)

Treas. Reg. § 1.170A-13(c)(4)(ii)(L)

Treas. Reg. § 1.170A-13(c)(4)(iv)(C)

Treas. Reg. § 1.170A-13(c)(4)(iv)(B)

Treas. Reg. § 1.170A-13(c)(5)(iii)

Treas. Reg. § 1.170A-13(c)(7)(iii)

Miscellaneous

American Jobs Creation Act of2004, Pub. L. No. 108-357, § 883(a), 118 Stat. 1418, 1631 (2004)

Commissioner Egger's Remarks on Abusive Tax Shelters, IRS News Release, IR-81-122, 1981 WL 176410, at 1 (Oct. 6, 1981)

Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 155, 98 Stat. 494, 691 (1984)

H.R. Conf. Rep. No. 98-861

Roscoe L. Egger, Warning: Abusive Tax Shelters Can be Hazardous, 68 A.B.A. J. 1674 (1982)

S. Prt. No. 98-169, Vol. 1, at 444-445 (Comm. Print 1984)

Staff of S. Comm, on Finance, 98th Cong., Deficit Reduction Act of 1984, Explanation of Provisions Approved by the Committee on March 21,1984, vol. I

PRELIMINARY STATEMENT

The issue to be resolved in deciding this Motion is whether the defects, either individually or collectively, in the Form 8283 appraisal summary violate DEFRA § 155(a)(1)(C) and the requirements prescribed by the Secretary in Treasury Regulations §§ 1.170A-13(c)(4) and 1.170A-13(c)(5)(iii) to preclude the deductibility of Petitioners' respective shares of Hobby Lobby Stores, Inc.'s charitable contribution deduction for the taxable years ending December 31, 2011 and December 31, 2012.

STATEMENT OF MATERIAL FACTS

The Parties

1. Hobby Lobby Stores, Inc. (“HLSI”) is an S corporation with its principal place of business in Oklahoma City, Oklahoma. It was formed as an Oklahoma corporation on November 28, 1977. (Stip. ¶¶ 8-9).

2. The Museum of the Bible, Inc. (“MOTB”) is a not-for-profit Oklahoma corporation formed on September 13, 2010. The MOTB was a not-for-profit Oklahoma corporation during tax years 2011 and 2012, and during tax years 2011 and 2012 was exempt from federal income tax under I.R.C. 501(c)(3). (Stip. ¶¶ 11, 13, 14).

3. The Notices of Deficiency, on which these cases are based, are dated August 7, 2019 and were issued to Petitioners the David and Barbara Green 1993 Dynasty Trust (“Dynasty Trust”) (Docket No. 19631-19), the Green StewardshipTrust f/k/a Green Management Trust and Green Family Management Trust (“Management Trust”) (Docket No. 19632-19), the Green Family Delta Trust (“Delta Trust”) (Docket No. 19633-19), Mart D. Green and Diana K. Green (Docket No. 19634-19) Steven T. Green and Jackie D. Green (Docket No. 1963519). (Stip. ¶¶ 1-6; Exhibits 1-J through 5-J).

4. The Dynasty Trust, the Delta Trust, and the Management Trust are collectively referred to herein as the “Trust Shareholders.” (Stip. ¶¶ 15-30).

5. Petitioners Mart D. Green and Diana K. Green and Steven T. Green and Jackie D. Green are collectively referred to herein as the “Individual Shareholders.” (Stip. ¶¶ 31-33).

6. During tax years 2011 and 2012, HLSI's ownership structure (collectively, the “Shareholders”) was:

Shareholder	Ownership %
David and Barbara Green 1993 Dynasty Trust	88.2267%
Green Family Delta Trust	8.1839%
Green Stewardship Trust, formerly known as Green Management Trust and Green Family Management Trust	0.1392%
Steven T. Green Succession Trust	2.0654%
Mart D. Green Succession Trust	1.0323%
Third-Party	0.3525%

(Stip. ¶ 34).

7. Petitioners timely filed petitions in this Court seeking redetermination of the deficiencies in income tax and additions to tax set forth in the Notices, all of which are in dispute.

The Contributions

8. From December 2008 through August 2011, HLSI purchased numerous biblical scrolls, bibles, and manuscripts from various sources. (Stip. ¶¶ 35-38, 53, 58; Exhibit 15-J (IRS_00000643); Exhibit 16-J (IRS 00012867); Exhibit 99-J (IRS_00003315); Exhibit 101-J (IRS_00016126)).

9. HLSI reported a charitable contribution in the combined amount of $23,038,000 on its Form 1120S for tax year 2011 for the transfer of Hebrew scrolls to the MOTB (the “2011 Contribution”). (Stip. ¶ 35). HLSI reported that it had acquired the transferred scrolls during a period from December 2009 through September 2010, at a combined cost or adjusted basis of $1,753,432. (Stip. ¶ 53; Exhibit. 99-J (IRS_00003315)).

10. HLSI reported a charitable contribution in the combined amount of $61,633,000 on its Form 1120S for tax year 2012 for the transfer of Hebrew scrolls and ancient and medieval manuscripts to the MOTB (the “2012 Contribution”). (Stip. ¶ H 37). HLSI reported that it had acquired the transferred scrolls and manuscripts during a period from December 2008 through August 2011, at a combined cost or adjusted basis of $18,749,758. (Stip. ¶ 58; Exhibit. 101-J (IRS 00016126)).

11. For each of tax years 2011 and 2012, HLSI filed a Form 1120S, U.S. Income Tax Return for an S Corporation. HLSI issued Schedules K-l to its Shareholders for tax years 2011 and 2012. (Stip. ¶ 50).

12. HLSI's 2011 Contribution and 2012 Contribution were passed through as separately-stated items to the Shareholders, each of which claimed as deductions a share of HLSI's 2011 and 2012 Contributions. (Stip. ¶ 62).

13. HLSI's Trust Shareholders reported their proportionate share of HLSI's charitable deductions on their Electing Small Business Trust Tax Calculation Forms attached to their 2011 and 2012 Forms 1041. HLSI's Individual Shareholders reported their proportionate share of HLSI's charitable deductions on the Schedules A attached to their 2011 and 2012 Forms 1040. (Stip. ¶ 62).

14. The Dynasty Trust timely filed its 2011 Form 1041 with the IRS. On the Electing Small Business Trust Calculation and Statement 29 filed as part of the return, the Dynasty Trust claimed charitable deductions totaling $187,172,910, of which $109,416,825 were cash contributions and $77,756,085 were non-cash contributions. (Stip. ¶ 63-64; Exhibit 102-J (IRS 00010786-10839; IRS 00010854-10893)).

15. The Dynasty Trust timely filed its 2012 Form 1041 with the IRS. On the Electing Small Business Trust Calculation and Statement 27 filed as part of the return, the Dynasty Trust claimed charitable deductions totaling $249,250,410, of which $158,824,218 were cash contributions and $90,426,192 were non-cash contributions. (Stip. ¶ 65-66; Exhibit 103-J (IRS 00010894 -10946; IRS 00010959-10998)).

16. The Delta Trust timely filed its 2011 Form 1041 with the 1RS. On the Electing Small Business Trust Calculation and Statement 15 filed as part of the return, the Delta Trust claimed charitable deductions totaling $17,594,594, of which $10,381,947 were cash contributions and $7,212,647 were non-cash contributions. (Stip. ¶ 67-68; Exhibit 104-J (IRS 00011484-11541)).

17. The Delta Trust timely filed its 2012 Form 1041 with the 1RS. On the Electing Small Business Trust Calculation and Statement 17 filed as part of the return, the Delta Trust claimed charitable deductions totaling $23,369,423, of which $14,981,499 were cash contributions and $8,387,924 were non-cash contributions. (Stip. ¶ 69-70; Exhibit 105-J (IRS 00011543-11579; IRS_00011592-11609)).

18. The Management Trust timely filed its 2011 Form 1041 with the 1RS. On the Electing Small Business Trust Calculation and Statement 12 filed as part of the return, the Management Trust claimed charitable deductions totaling $299,143, of which $176,463 were cash contributions and $122,680 were non-cash contributions. (Stip. ¶ 71-72; Exhibit 106-J (IRS 00012040-12071; IRS_00012087-12097)).

19. The Management Trust timely filed its 2012 Form 1041 with the 1RS. On the Electing Small Business Trust Calculation and Statement 18 filed as part of the return, the Management Trust claimed charitable deductions totaling $397,358, of which $254,688 were cash contributions and $142,670 were non-cash contributions. (Stip. ¶ 73-74; Exhibit 107-J (PETITIONER 00002194-2241)).

20. Steven T. Green and Jackie D. Green timely filed their 2011 Form 1040 with the 1RS. On Schedule A, Statement 7 and Statement 9 filed as part of the return, Steven T. Green and Jackie Green claimed charitable deductions totaling $4,488,136, of which $2,666,533 were cash contributions and $1,821,603 were non-cash contributions. (Stip. ¶ 75-76; Exhibit 108-J (IRS_00015646-15698; IRS00015708-15742)).

21. Steven T. Green and Jackie D. Green timely filed their 2012 Form 1040 with the 1RS. On Schedule A, Statement 8 and Statement 10 filed as part of the return, Steven T. and Jackie D. Green claimed charitable deductions totaling $5,940,506, of which $3,823,615 were cash contributions and $2,116,891 were non-cash contributions. (Stip. ¶ 77-78; Exhibit 109-J (IRS 00015861-15898; IRS_00015901; IRS_00015909-15951)).

22. Mart D. Green and Diana K. Green timely filed their 2011 Form 1040 with the 1RS. On Schedule A, Statement 8 and Statement 10 filed as part of the return, Mart D. Green and Diana K. Green claimed charitable deductions totaling $2,486,378, of which $1,576,590 were cash contributions and $909,788 were noncash contributions. (Stip. ¶ 79-80; Exhibit 110-J (IRS 00013966-14023; IRS 00014034-14075)).

23. Mart D. Green and Diana K. Green timely filed their 2012 Form 1040 with the 1RS. On Schedule A, Statement 7 and Statement 9 filed as part of the return, Mart D. Green and Diana K. Green claimed charitable deductions totaling $3,228,747, of which $2,170,712 were cash contributions and $1,058,035 were non-cash contributions. (Stip. ¶ 81-82; Exhibit 111-J (PETITIONER 000020782182)).

The Forms 8283 and Appraisal Reports

24. HLSI included a Form 8283 with its 2011 Form 1120S (the “2011 Form 8283”) for donations of biblical scrolls made to the MOTB. (Exhibit 99-J at IRS_00003315). The 2011 Form 8283 reported donations of the 2011 Contribution, described as “431 Manuscript Hebrew Biblical Scrolls: Medieval, Renaissance, Enlightenment, & modem: 15^th Century to 20^th Century. Europe, Africa, and Middle East”, which were acquired during a period from December 2009 to September 2010, with a combined adjusted basis of $1,753,432 and acombined appraised fair market value of $23,038,000. The 2011 Form 8283 was signed by Lee Biondi, of BIONDI Rare Books and Manuscripts, on or about July 31, 2012, and it was signed by a representative of the MOTB on or about August 6, 2012. (Stip. ¶ 53; Exhibit 99-J at IRS_00003315).

25. HLSI included a Form 8283 with its 2012 Form 1120S for donations of biblical scrolls and manuscripts made to MOTB (the “2012 Form 8283”). The 2012 Form 8283 reported donations of the 2012 Contribution, described as “Over 800 Ancient & Medieval Biblical Manuscripts in Hebrew, Greek, Latin, and Aramaic, and printed books and Bibles (1455-1782)”, acquired during a period from December 2008 through August 2011, with a combined adjusted basis of $18,749,758 and a combined appraised fair market value of $61,633,000. The 2012 Form 8283 was signed by Lee Biondi, of BIONDI Rare Books and Manuscripts (Mr. Biondi), on or about August 15, 2013, and it was signed by a representative of MOTB on or about August 28, 2013. (Stip. ¶ 158; Exhibit 101-J at IRS_00016126).

26. The 2011 Form 1120S included sections of Mr. Biondi's 2011 Appraisal, as described in Stip. ¶ 40. (Stip. ¶ 54; Exhibits 15-J through 35-J). The 2012 Form 1120S included sections of Mr. Biondi's 2012 Appraisal as described in Stip. ¶ 45. (Stip. ¶ 59; Exhibits 44-J through 90-J).

27. The 2011 Form 8283 and 2012 Form 8283 were included in the 2011 and 2012 income tax returns filed by Petitioners. (Stip. ¶¶ 55, 60).

28. The 2011 Form 8283 states, in Section 5(b) as a summary of the overall physical condition of the property at the time of the gift, a “Full USPAP-compliant Self-Contained Appraisal Report attached, with individual descriptions, photos, condition reports, and FMV appraised values of each of the scrolls.” (Exhibit 99-J at IRS_00003315).

29. The 2012 Form 8283 states, in Section 5(b) as a summary of the overall physical condition of the property at the time of the gift, “full descriptions, photographs, and market comparables in the attached USPAP-compliant self-contained Appraisal Report.” (Exhibit 101-J at IRS_00016126).

30. The 2011 Form 8283 also reported the bulk donation to the MOTB as having a collective value of $23,038,000. Exhibit 99-J. Attached to the 2011 Form 8283 were portions of Biondi's Appraisal Report (“2011 Biondi Appraisal”) which separately identified each scroll at its estimated fair market value. (Exhibits 15-J through 35-J).

31. The 2011 Form 8283 provided that all 431 biblical scrolls contributed in bulk to the MOTB as part of the 2011 Contribution had a collective basis of $1,753,432. (Stip. ¶ H 53; Exhibit 99-J at IRS 00003315). And while the 2011 Form 8283 provided an aggregate basis amount, neither the 2011 Form 8283 northe portions of the 2011 Biondi Appraisal attached thereto included any information regarding the purchase, purchase price, or date of acquisition of the individual 431 donated scrolls, sufficient to establish the cost or adjusted basis of each of the individually contributed items. (Exhibits 15-J through 35-J).

32. The Limiting Conditions and Assumptions section of the 2011 Biondi Appraisal states that the appraisal “neither researched nor confirmed” title or ownership. (Exhibit 17-J at IRS 00019581).

33. The Limiting Conditions and Assumptions section of the 2011 Biondi Appraisal further provides “Information utilized in the preparation of this report was obtained from a variety of sources (all states herein where appropriate). These sources are each and all known to me to have reliable in the past and are herein assumed to be reliable and accurate; this appraiser assumes no responsibility for errors or omissions by these sources.” (Exhibit 17-J, at JRS 00019581-19582). One such source was a print-out of the Wikipedia page on Sefer Torah (Exhibit 17J at IRS_00019587-19591).

34. The Limiting Conditions and Assumptions section of the 2011 Biondi Appraisal further disclaims that “This appraisal makes no warranty as to the authenticity of the property appraised and relies on the established expertise of the professional scholars of Hebrew, the certified Rabbinical experts, and Hebrew script paleographers hired to professionally analyze and describe the scrolls.” (Exhibit 17-J at IRS_00019582).

35. The Certification page of the 2011 Biondi Appraisal states “The Hebrew Torah manuscripts and the other Hebrew manuscripts in this Self-Contained Appraisal Report were inspected in early 2012 in Oklahoma City, OK by this appraiser, and in late 2011 in Oklahoma City, OK by expert certified Sofer STaM Rabbis — that is, Rabbis certified to analyze, describe, scribe and repair manuscript Torahs and Megillot and other ritual Hebrew manuscripts.” (Exhibit 17-J IRS_00019583).

36. The specific names, qualifications, expert reports, or any other identifying information of these “professional scholars of Hebrew, certified Rabbinical experts, Hebrew script paleographers” or “Sofer STaM Rabbis” were not included in Biondi's 2011 Appraisal.

37. The 2012 Form 8283 also reported the bulk donation to the MOTB as having a collective value of $61,633,000. Exhibit 101-J. Attached to the 2012 Form 8283 were portions of Biondi's 2012 Appraisal Report (“2012 Biondi Appraisal”) which separately identified and described 835 scrolls and 29 manuscripts. (Stip. ¶ 59; Exhibits 44-J through 90-J).

38. The 29 manuscripts included as part of the “over 800 artifacts” are comprised of unique items of various age and origin, that are only identified in the attached appraisal and not on the 2012 Form 8283, including:

39. The 2012 Form 8283 provided that all items included in 2012 Contribution, which was identified as over 800 Ancient & Medieval Biblical manuscripts, and printed books and bibles, collectively had a basis of $18,749,758. (Exhibit 101-J, at IRS 00016126). And as with the 2011 Contribution, while an aggregate basis amount was shown on the 2012 Form 8283, neither the 2012 Form 8283 itself nor the portions of 2012 Biondi Appraisal attached thereto included any information regarding the purchase, purchase price, or date of acquisition of the individual items comprising the 2012 donation, sufficient to establish the cost or adjusted basis of each of the individually contributed artifacts.

40. Section 16 of the 2012 Appraisal includes the description and fair market value determination of 12 different printed books, fragments, or leaves. (Stip. ¶ 45.m). Michael Thompson and Carol Sandberg signed an appraisal report and determined the value of the following 11 artifacts:

41. Michael Thompson and Carol Sandberg appraised the fair market value of 11 of the 29 books and manuscripts contributed to MOTB in 2012 but did not sign the 2012 appraisal summary. Exhibits 90-J, and 101-J.

42. Michael Thompson and Carol Sandberg were responsible for valuing $6,050,000 of the total claimed fair market value of artifacts contributed to MOTB but did not sign the 2012 appraisal summary. Exhibits 90-J, and 101-J.

43. As with Biondi's 2011 Appraisal, Biondi's 2012 Appraisal Report contains similar attestations in the Limiting Conditions and Assumptions section. (Exhibit 44-J at IRS 00021142-21143, disclaiming warranty as to ownership, and authenticity).

44. In the 2012 Appraisal, Biondi similarly attests that he relied on “a variety of sources . . . assumed to be reliable and accurate;”² “Expert Reports of highly qualified Hebrew scholars, the certified Rabbinical experts, and Hebrew script paleographers hired to professionally analyze and describe the scrolls;” and “Expert Reports of highly qualified professional papyrologists and their submitted papyrological reports.” (Exhibit 44-J at IRS_00021143).

45. In the Certification of the 2012 Appraisal, Biondi again states he relies on “expert certified Sofer STaM Rabbis.” (Exhibit 44-J at IRS 00021145).

46. The 2012 Certification further provides that “other manuscripts and the Martin Luther letter and the printed books were studied and inspected by me in November 2012 and again in April 2013 (in the company of Michael Thompson and Carol Sandberg of Michael R. Thompson Booksellers of Los Angeles, CA.)” (Exhibit 44-J at IRS 00021145).

47. The 2012 Certification also provides that “Neither the Rabbis nor anyone else provided any valuation opinions or assistance to me in concluding my FMV opinions on this material.” When in fact, appraisers Michael R. Thompson and Carol Sandberg provided Biondi with Fair Market Value appraisal reports, both of which were incorporated into the report prepared by Mr. Biondi and adopted as his own valuations. (Exhibit 86-J at IRS_00024616-24916) and Exhibit 90-J at IRS 00025598-25942). Neither Michael R. Thompson nor Carol Sandberg signed the 2012 Form 8283.

ARGUMENT

I. Summary Judgment Standard

48. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp, v. Commissioner, 90 T.C. 678, 681 (1988); Whitesell v. Commissioner, T.C. Memo. 2017-84, at *5. Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). A decision shall be rendered if the pleadings and other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law, and partial summary adjudication may be made which does not dispose of all issues in the case. See Rule 121(b); Naftel v. Commissioner, 85 T.C. 527, 529 (1985).

49. The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences are drawn in a manner most favorable to the party opposing summary judgment. Naftel, 85 T.C. at 529; Whitesell, T.C. Memo. 2017-84, at *5-6. The party opposing summary judgment, however, may not simply rest upon the mere allegations or denials of his pleadings; the adverse party must set forth specific facts, in affidavits or otherwise, showing the existence of a genuine issue for trial. Rule 121(d); Celotex Corp, v. Catrett, 477 U.S. 317, 322 (1986); Whitesell, T.C. Memo. 2017-84, at *6.

50. Petitioners are not entitled to the charitable contribution deduction because they did not comply with applicable requirements in the Code and the Regulations. This Court has noted the “familiar rule” that “an income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer.” INDQPCQ, Inc, v. Commissioner, 503 U.S. 79, 84 (1992); Interstate Transit Lines v. Commissioner, 319 U.S. 590, 593 (1943); Deputy v. Du Pont, 308 U.S. 488,493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Petitioners failed to complete the 2011 and 2012 Forms 8283 as required by DEFRA Section 155(a)(3), Treas. Reg. §§ 1.170A-13(c)(4)(ii) and 1.170A-13(c)(5)(iii).

II. Appraisal Summary Requirements

51. In general, a deduction is allowed for any charitable contribution made during the taxable year, but “only if verified under regulations prescribed by the Secretary.” I.R.C. § 170(a)(1). The amount allowable as a deduction for a non-cash charitable contribution is the fair market value of the property at the time of the contribution, reduced by the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value at the time of the contribution. I.R.C. § 170(e)(1)(A); Treas. Reg. § 1.170A-1(c)(1). Long-term capital gain is the gain from the sale or exchange of a capital asset held for more than one year. I.R.C. § 1222(3). Thus, to determine the amount of the deduction allowable under I.R.C. § 170(a), in addition to the fair market value of the property, one must know its basis, which bears on the gain and potential reduction under I.R.C. § 170(e)(1)(A), as well as the acquisition date, which bears on the holding period.

52. The ability to obtain a deduction at fair market value while simultaneously avoiding the taxation of appreciated property provides a strong incentive to overvalue contributed property. The 1RS experienced a serious administrative burden with the increased prevalence of tax shelters in the 1970s and 1980s, one type of which involved the overvaluation of charitable contributions.

53. These concerns were repeatedly voiced at the time by IRS Commissioner Roscoe Egger, who specifically addressed the overvaluation of charitable contributions. See, e.g„ Commissioner Egger's Remarks on Abusive Tax Shelters, IRS News Release, IR-81-122, 1981 WL 176410, at 1 (Oct. 6,1981) (“[A] taxpayer may buy $10,000 worth of bibles 'wholesale' from a promoter. The taxpayer holds them for one year to qualify as an appreciated capital gain and then donates them to a religious group. Come tax time, the taxpayer deducts $40,000 as the so-called fair-market value of his charitable donation.”); Roscoe L. Egger, Warning: Abusive Tax Shelters Can be Hazardous, 68 A.B.A. J. 1674,1676 (1982) (“A promoter may provide an appraisal of four or five times the amount paid by the investor for the art work, thus creating a 100 per cent or greater return on investment for a taxpayer in a 50 per cent tax bracket when the object is subsequently donated.”).

54. To curb abuses by taxpayers claiming excessive deductions based on “overvaluations” of donated property, Congress, in 1984, directed the Secretary of the Treasury to prescribe regulations imposing heightened substantiation requirements for charitable contributions. Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 155, 98 Stat. 494, 691 (1984).

55. Congress instructed the Secretary that, in the case of donated property with a claimed value exceeding $5,000, the new regulations shall require taxpayers to obtain a “qualified appraisal,” to attach an “appraisal summary” to the taxpayer's return on which the deduction is first claimed, and to include additional information on the return as prescribed by the Secretary “including the cost basis and acquisition date of the contributed property.” Deficit Reduction Act, § 155(a)³. DEFRA § 155(a) provides in relevant part:

SEC. 155. SUBSTANTIATION OF CHARITABLE CONTRIBUTIONS; MODIFICATIONS OF INCORRECT VALUATION PENALTY.

(a) Substantiation of Contributions of Property. —

(1) In general. — Not later than December 31, 1984, the Secretary shall prescribe regulations under section 170(a)(1) of the Internal Revenue Code of 1954, which require any individual, closely held corporation, or personal service corporation claiming a deduction under section 170 of such Code for a contribution described in paragraph (2) —

(A) to obtain a qualified appraisal for the property contributed,

(B) to attach an appraisal summary to the return on which such deduction is first claimed for such contribution, and

(C) to include on such return such additional information (including the cost basis and acquisition date of the contributed property) as the Secretary may prescribe in such regulations.

Such regulations shall require the taxpayer to retain any qualified appraisal.

(2) Contributions to which paragraph (1) applies. — For purposes of paragraph (1), a contribution is described in this paragraph —

(A) if such contribution is of property (other than publicly traded securities), and

(B) if the claimed value of such property (plus the claimed value of all similar items of property donated to 1 or more donees) exceeds $5,000. In the case of any property which is nonpublicly traded stock, subparagraph

(B) shall be applied by substituting “$10,000” for “$5,000”.

(3) Appraisal summary. — For purposes of this subsection, the appraisal summary shall be in such form and include such information as the Secretary prescribes by regulations. Such summary shall be signed by the qualified appraiser preparing the qualified appraisal and shall contain the TIN of such appraiser. Such summary shall be acknowledged by the donee of the property appraised in such manner as the Secretary prescribes in such regulations.

DEFRA § 155(a)(1)-(3), 98 Stat, at 691.

56. While the requirements of DEFRA § 155(a) were not codified in I.R.C. § 170, Congress intended these requirements to deter taxpayers from claiming excessive deductions for charitable contributions by requiring them to disclose on their return information that would alert the Commissioner to a potential overvaluation. S. Prt. No. 98-169, Vol. 1, at 444-445 (Comm. Print 1984); Staff of S. Comm, on Finance, 98th Cong., Deficit Reduction Act of 1984, Explanation of Provisions Approved by the Committee on March 21, 1984, vol. I, at 444; Hewitt v. Commissioner, 109 T.C. 258, 264, 265 (1997), affd, 166 F.3d 332 (4th Cir. 1998) (per curiam).

57. The Senate Finance Committee, which first proposed the stricter substantiation requirements, explained that “it is not possible to detect all or even most instances of excessive deductions” by relying solely on the IRS's audit program. S. Prt. No. 98-169, at 444. The committee expressed concerns that, given the “subjective nature of valuation,” taxpayers would “continue to play the 'audit lottery' and claim excessive charitable contributions” in the hope that their returns would not be selected for audit by the 1RS. Id. The committee believed that the heightened requirements would be effective in “deterring” incorrect valuations by taxpayers and would also assist the 1RS in administering the law. Id. at 445.

58. Further, Congress intended that the failure to comply with the substantiation requirements it mandated would result in the disallowance of the claimed deduction. Id. (“[PJresent law (sec. 170(a)(1)) . . . expressly allows a charitable deduction only if the contribution is verified in the manner specified by Treasury regulations”).

59. The importance of the disclosure of the basis and acquisition date is highlighted by the specificity with which Congress addressed these categories of information. DEFRA § 155(a)(1)(C) specifically requires the inclusion of “the cost basis and acquisition date of the contributed property”, as opposed to the more generic mandate of “such additional information . . . as the Secretary may prescribe in such regulations.”

60. Like the language included in DEFRA § 155(a), the House Conference Report specifically identifies the requirement to include “the cost basis and the acquisition date of the donated property,” as opposed to “any other information to the extent required by Treasury regulations.” H.R. Conf. Rep. No. 98-861, at 997.

61. The House Conference Report accorded special treatment to these requirements, providing for the inclusion of an explanatory statement if there was reasonable cause why the donor did not have the information on the cost basis or acquisition date. Id.

62. The IRS complied with Congress's mandate by promulgating regulations pursuant to DEFRA § 155(a). Treas. Reg. § 1.170A-13(c)(1)(i) reiterates Congress's understanding that “No deduction under section 170 shall be allowed with respect to a charitable contribution to which this paragraph applies unless the substantiation requirements described in paragraph (c)(2) of this section are met.”

63. Treas. Reg. § 1.170A-13(c)(1)(i) applies to “any charitable contribution made after December 31, 1984, by an individual, closely held corporation, personal service corporation, partnership, or S corporation of an item of property (other than money and publicly traded securities to which 1.170-13(c)(7)(xi)(B) does not apply) if the amount claimed or reported as a deduction under section 170 with respect to such item exceeds $5,000.”

64. The regulation requires a “fully completed appraisal summary” to be attached to the return. Treas. Reg. § 1.170A-13(c)(2)(i). The information required to be included in the appraisal summary includes the “manner of acquisition (e.g., purchase, exchange, gift, or bequest) and the date of acquisition of the property by the donor” and the “cost or other basis of the property adjusted as provided by section 1016,” in addition to other information not specifically mandated by DEFRA § 155(a). Treas. Reg. § 1.170A-13(c)(4)(ii); RERI Holdings I, LLC v. Commissioner, 149 T.C. 1, 15 (2017), aff'd sub nom. Blau v. Commissioner, 924 F.3d 1261 (D.C. Cir. 2019).

65. Although not included in the text of DEFRA § 155(a), the IRS also incorporated the House Conference Report's provision allowing for an appropriate explanation to be attached to the appraisal summary if there is reasonable cause for being unable to provide the manner of acquisition, acquisition date, or cost basis information. Treas. Reg. § 1.170A-13(c)(4)(iv)(C).

III. Similar Items of Property and Group Donations

66. Treas. Reg. § 1.170A-13(c)(7)(iii) states that “the phrase 'similar items of property' means property of the same generic category or type, such as stamp collections (including philatelic supplies and books on stamp collecting), coin collections (including numismatic supplies and books on coin collecting), lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver.”

67. The value of the similar group of items is aggregated for the purpose of triggering the monetary threshold for the various substantiation requirements under Treas. Reg. § 1.170A-13(c). The amount claimed or reported as a deduction for an item of property is the aggregate amount claimed or reported as a deduction for a charitable contribution under section 170 for such items of property and all similar items of property (as defined in paragraph (c)(7)(iii) of this section) by the same donor for the same taxable year (whether or not donated to the same donee).”

68. Treas. Reg. § 1.170A-13(c)(4)(iv)(B) states that if a donor contributes items of similar property to the same donee, a single appraisal summary may be attached.⁴ But group donations of items of similar property do not obviate the requirement that the taxpayer include the adjusted basis and date of acquisition of each individual item of contributed property. The regulation is clear that the Form 8283 must still provide the information required by paragraph (c)(4)(ii) “for each item of property,” unless the items aggregate value is appraised at $100 or less — only then are group descriptions appropriate. (Emphasis added).

69. The 2011 and 2012 Forms 8283 did not meet the substantiation requirements under Treas. Reg. § 1.170A-13(c)(4)(ii)(D) and (E) because they failed to provide the adjusted basis and date of acquisition of each item of contributed property.

70. An appraisal summary must include “[t]he appraised fair market value of the property on the date of contribution.” Treas. Reg. § 1.170A-13(c)(4)(ii)(J). The 2011 and 2012 Forms 8283 did not meet the substantiation requirements under the regulation because they failed to provide the fair market value of each item of contributed property.

71. In Chiarelli v. Commissioner, T.C. Memo. 2021-27, the taxpayer included an aggregate basis and aggregate description of the donated items on his Forms 8283. The Court found that the taxpayer failed to (1) meet the information requirements for noncash contributions; (2) maintain written records with a detailed description of the property, including the manner and approximate date of acquisition and the cost or other basis in the property; and (3) state such information in his income tax return as required by the return form or its instructions. See § 170(f)(ll)(B); Treas. Reg. § 1.170A-13(b)(3)(i)(A) and (B).

72. The Court explained:

“For each item or group of items that exceeded the $500 threshold, the Forms 8283 instructed petitioner, inter alia, to state the manner and approximate date of acquisition (month and year) and the cost basis or other basis. For each of the years at issue, rather than listing each item or group of items separately as instructed, petitioner provided a single aggregated line of information for all items donated. Rather than providing a month and year as instructed, petitioner wrote “various” in the box provided for the date of acquisition . . . Additionally, for each year at issue petitioner offered an aggregate basis in the donated property as a whole, without providing credible evidence as to his bases in individual items.”

Chiarelli, T.C. Memo. 2021-27 at *15 (Emphasis added). The Court concluded that the taxpayer neither substantially nor strictly complied with the regulations, and wholly disallowed the taxpayer's claimed charitable deductions.

73. As in Chiarelli, HLSI included only an aggregate basis on the 2011 and 2012 Form 8283. As in Chiarelli, HLSI provided a broad range of dates for the dates of acquisition of the contributed items. Neither the Forms 8283 nor the portions of Biondi's 2011 and 2012 Appraisal attached to the return contained any information regarding the specific purchase, dates of acquisition, cost or other adjusted bases of the individually contributed items.

74. Petitioners here may argue that they eventually provided some of this missing information to the IRS during examination.⁵ In Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24, the taxpayer attempted a similar argument: that it cured its initial omission by ultimately supplying cost basis information during the IRS audit. The Taxpayer pointed to Treas. Reg. Sec. 1.170A-13(c)(4)(iv)(H), which provides that a deduction will not be disallowed for failure to attach an appraisal summary if the donor complies with an IRS request to submit a Form 8283 within 90 days. Id. (providing that a deduction will not be disallowed “[i]f such a request is made [by the IRS] and the donor complies with the request”).

75. Again, the Court was not persuaded. The Court found that the taxpayer supplied the relevant information three years after its return was filed and “only upon learning that the IRS examination might have an unhappy ending.” Oakhill Woods, T.C. Memo. 2020-24, at *15. The Court stated, in relevant part: “The regulation creates a prophylactic rule designed to provide the IRS with information to help it decide whether to commence an examination. This requirement would be meaningless if a taxpayer could cure noncompliance ex post facto, after learning that an examination had begun and was headed toward an adverse outcome.” Id.

76. The Court in Oakhill Woods also reasoned that the IRS reviews millions of returns each year for audit potential, and the disclosure of cost basis on the Form 8283 itself is necessary to make this process manageable. Id. at *21. “[R]evenue agents cannot be required to sift through hundreds of pages of complex returns looking for possible clues about what the taxpayer's cost basis might be.” Id. Here, each petitioner attached an appraisal of over 800 pages to their 2011 tax returns, and an appraisal of over 4,800 pages to their 2012 tax returns. Not only were the Forms 8283 silent on the basis of each contributed item, they also failed to include specifics regarding the date each item was acquired — this is all information required to be included on the appraisal summary under Treas. Reg. § 1.170A-13(c).

77. Petitioners' charitable deductions for tax years 2011 and 2012 should be completely disallowed for failure to include the cost or adjusted basis, and dates of acquisition, of the individually contributed items of property. Following RERI and Chiarelli, the Court should likewise disallow the deductions here for failure to strictly or substantially comply with the essential requirements of DEFRA § 155(a)(1)(c).

IV. Basis and Date of Acquisition Require Strict Compliance

78. Petitioners are not excused from the omission of basis and date of acquisition in their Form 8283 under either the strict compliance standard or the substantial compliance standard. This Court discussed the applicability of these standards in Taylor v. Commissioner, 67 T.C. 1071 (1977), as follows:

The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases. The critical question to be answered is whether the requirements relate to the substance or essence of the statute. If so, strict adherence to all statutory and regulatory requirements is a precondition to an effective election. On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict, compliance. Id. at 1077-78 (internal quotations and citations omitted) (Emphasis added).

79. In Bond v. Commissioner, 100 T.C. 32, 40-41 (1993), the Court determined that the reporting requirements of Treas. Reg. § 1.170A-13, are “directory and not mandatory,” so that a failure to comply strictly with those requirements can be excused if the donor demonstrates “substantial compliance.” The taxpayers in that case attached to the return an appraisal summary on Form 8283 that included all of the required information other than the appraiser's qualifications, which “were promptly furnished to respondent's agent at or near the commencement of his audit” of their return. Id. at 42. The Court concluded that “the denial of a charitable contribution deduction under these circumstances would constitute a sanction which is not warranted or justified,” thus finding that the taxpayers had substantially complied with Treas. Reg. § 1.170A-13 and were entitled to the claimed deduction.

80. Unlike the taxpayers in Bond, HLSI's failure to include the basis or date of acquisition of the individually contributed artifacts on either the Form 8283 or Biondi Appraisals should be evaluated under a strict compliance standard because the requirement goes to the essential Congressional purpose underlying DEFRA § 155(a): “to alert the Commissioner, in advance of audit, of potential overvaluations of contributed property and thereby deter taxpayers from claiming excessive deductions in the hope that they would not be audited.” RERI, 149 T.C. at *9. See also Hewitt v. Commissioner, 109 T.C. 258, 265 (1997) (discussing legislative history); Estate of Chamberlain v. Commissioner, T.C. Memo. 1999181 (“substantial compliance cannot be applied if to do so would defeat the policies of the underlying statutory provisions”).

81. The Court likewise found that the taxpayer in Oakhill Woods did not substantially comply with the Treasury Regulations because cost basis is “one of the essential requirements of the governing statute.” Oakhill Woods, T.C. Memo. 2020-24, at *18 (citing Estate of Evenchik v. Commissioner, T.C. Memo. 2013-34, (quoting Estate of Clause v. Commissioner, 122 T.C. 115,122 (2004))). Basis and date of acquisition are not discretionary categories of information which Respondent chose to require for administrative convenience: they are explicitly required by statute.

V. Missing Appraiser Signatures

82. Under the regulations, a fully completed appraisal summary must be attached to the tax return on which the deduction for a contribution is first claimed. Treas. Reg. § 1.170A-13(c)(2)(i)(B). The appraisal summary must be signed and dated by the qualified appraiser who prepared the qualified appraisal. Treas. Reg. § 1.170A-13(c)(4)(i)(C).

83. Treasury Regulation § 1.170A-13(c)(5)(iii) states that “if the donor uses the appraisal of more than one appraiser, or if two or more appraisers contribute to a single appraisal, each appraiser shall comply with the requirements of this paragraph (c), including signing the qualified appraisal and appraisal summary as required by paragraphs (c)(3)(i)(B) and (c)(4)(i)(C) of this section, respectively.” Treas. Reg. § 1.170A-13(c)(4)(i)(C) requires the qualified appraiser to sign the appraisal summary (the Form 8283).

84. The appraiser's signature is not a discretionary category of information which Respondent chose to require for administrative convenience: it is explicitly required by statute. DEFRA § 155(a)(3). By signing the appraiser's declaration and providing his TIN, the appraiser potentially subjects himself to a penalty under I.R.C. § 6701, thus serving the purpose of DEFRA § 155 by discouraging the overvaluation of charitable contributions.⁶

85. Petitioners' failure to include the signatures and TINs of two contributing appraisers on the 2012 Form 8283 must be evaluated under a strict compliance standard because the requirement goes to the essential Congressional purpose underlying DEFRA § 155(a), which is “to alert the Commissioner, in advance of audit, of potential overvaluations of contributed property and thereby deter taxpayers from claiming excessive deductions in the hope that they would not be audited.” RERI,149 T.C. at 9. See also Hewitt, 109 T.C. at 265 (discussing legislative history of DEFRA § 155); Estate of Chamberlain v. Commissioner, T.C. Memo. 1999-181 (“substantial compliance cannot be applied if to do so would defeat the policies of the underlying statutory provisions”).

86. However, Petitioners' 2012 Form 8283 is also flawed under the substantial compliance doctrine. There is no compliance at all with the explicit and clear requirement under DEFRA § 155(a)(3), §§ 1.170A-13(c)(2)(i)(B), (c)(4)(i)(C), and (c)(4)(ii)(L) that the qualified appraiser(s) sign the declaration in the Form 8283 and provide their identifying information.

87. In Alli v. Commissioner, T.C. Memo 2014-15, at *41, the Court distinguished the Appraisal Summary requirement (the Form 8283) from the Qualified Appraisal requirement, noting that the Appraisal Summary must comply on its own with the requirements of DEFRA and Treasury Regulations. Id. The Court held that petitioners in that case failed to satisfy the regulatory requirements because the Form 8283 did not report the appraiser's name, identifying number, or address, and also failed to include the declaration of appraiser. Id. at *47.

88. The nature of Petitioners' transgression materially distinguishes this case from Bond v. Commissioner, 100 T.C. 32 (1993). Substantial compliance was found to exist in that case where all the regulatory requirements were satisfied with the exception of the appraiser's qualifications, which were omitted. The defect with the Form 8283 in the instant case cannot fairly be excused as trivial as it omits a fundamental statutory requirement of an “Appraisal Summary” under DEFRA, and is in addition to numerous other defects in the Forms 8283 (as described above). See DEFRA § 155(a)(3); Treas. Reg. § 1.170A-13(c)(2), (4).

89. The failure of Petitioners' qualified appraisers to sign the 2012 Form 8283 means that the Form as submitted fails to qualify as an “Appraisal Summary” for purposes of DEFRA, and Treas. Reg. §§ 1.170A-13(c)(2)(i)(B) and 1.170A-13(c)(4)(i)(C), (c)(4)(ii)(K), (c)(ii)(L)(2).

90. Petitioners' 2012 Form 8283 describes the property contributed as over 800 artifacts. The 2012 Appraisal attached to the 2012 Form 8283 values 835 Sefer Torah Scrolls and 29 books and manuscripts. The 2012 Form 8283 is only signed by Lee Biondi.

91. Regardless of whether the 29 manuscripts are considered similar items of property to the 835 Sefer Torah Scrolls contributed in 2012, and thus a singleappraisal summary or Form 8283 would be appropriate,⁷ all the appraisers that determined the fair market value of the contributed items are required to sign the appraisal summary.

92. Here, Michael Thompson and Carol Sandberg determined the value of 11 of the 29 manuscripts contributed to MOTB in 2012, with a value of approximately $6 million, but neither signed the 2012 Form 8283 as required by Treasury Regulation § 1.170A-13(c)(5)(iii).

93. The Court confronted a similar issue in Cave Buttes, L.L.C, v. Commissioner, 147 T.C. 338 (2016). In that case, two appraisers contributed to the appraisal report, and while both signed the appraisal, only one had signed the Form 8283. Id. at 352. The Court found that although the regulation expressly required all contributing appraisers to sign the Form 8283, the Form 8283 Instructions at that time, in 2007, did not specifically address this issue. Id. at 352 (citing regulation subpara. (4)(i)(A)). The Court recognized that the IRS changed the instructions to the Form 8283 in 2012 “to specifically say that if more than one appraiser was used, both are required to sign the appraisal and Part III of Form 8283.” Id.

94. Cave Buttes is readily distinguishable from the facts at issue here. Here, during 2012, the instructions to the Form 8283 specifically provided that if “two or more appraisers contribute to a single appraisal, all the appraisers must sign the appraisal and Part III of Form 8283.” Michael Thompson and Carol Sandberg quantitatively and qualitatively “contributed” to the appraisal — Mr. Biondi acknowledged during examination that “subsumed” in his report was “accurate and acceptable information [from Thompson and Sandberg] written up in a manner . . . without the necessity of rewriting.” Farrior Declaration, Ex. A, at 3. He admitted that he “re-expressed their valuations as my own.” Id. See also Farrior Declaration, Ex. B, at IRS 00012812-12820, stating Michael Thompson and Carol Sandberg “authenticated” various manuscripts and books). Wholesale adoption of another appraiser's valuations and property descriptions clearly constitutes a “contribution” to an appraisal report. See Zarlengo v. Commissioner, T.C. Memo. 2014-161, at *40. Indeed, Mr. Thompson and Ms. Sandberg appraised nearly half of the donated manuscripts and books in 2012, which accounted for approximately $6 million of the total contributions for that year. This was not a de minimis contribution.

95. Like in Alli, Petitioners failed to include a Form 8283 that was signed by Sandberg and Thompson. The portions of the 2012 Biondi Appraisal attached to the 2012 Form 8283 consisted of thousands of pages. Buried in those documents were Michael Thompson and Carol Sandberg's qualifications. Exhibit 44-J at IRS 00021235 and IRS 00021241. Also buried in that voluminous appraisal were Thompson and Sandberg's descriptions and valuations of various manuscripts. Exhibit 90-J at IRS 00025601-25604 (providing a detailed description and valuation of the Gutenberg Bible Leaves and Book of Romans); Exhibit 90-J at IRS 00025648-25650 (providing a detailed description and valuation of the 1462 Fust and Schoeffer Bible of $2 million); Exhibit 90-J at IRS_00025729-25730 (providing a detailed description and valuation of the Thomas Kempis of $200,000); Exhibit 90-J at IRS_00025761-25762 (providing a detailed description and valuation of Josephus of $300,000); Exhibit 90-J at IRS_00025792-25793 (providing a detailed description and valuation of the Koberger Bible of $125,000); Exhibit 90-J at IRS_00025831-25833 (providing a detailed description and valuation of the Complutensian Polyglot Bible of $300,000); and exhibit 90-J at IRS_00025871-25873 (providing a detailed description and valuation of the Martin Luther Bible of $600,000). Biondi “subsumed” these same descriptions and valuations by Thompson and Sandberg into his Appraisal. Effectively hiding the qualifications and signatures of contributing appraisers in a voluminous appraisal report is not a substitute for the signature of the appraiser on the appraisal summary and does not cure the defects of the 2012 Form 8283.

96. The legislative intent behind DEFRA, and purpose of the Form 8283, is to deter taxpayers from claiming excessive deductions for charitable contributions by requiring them to disclose information on their return information that would alert the Commissioner to a potential overvaluation. S. Prt. No. 98-169, Vol. 1, at 444-445 (Comm. Print 1984); Staff of S. Comm, on Finance, 98th Cong., Deficit Reduction Act of 1984, Explanation of Provisions Approved by the Committee on March 21, 1984, vol. I, at 444; Hewitt, 109 T.C. at 264, 265. These requirements recognize the limited resources of the 1RS and the potential difficulty in identifying abusive overvaluations hidden in voluminous records. See also Am. Soc. of Pension Actuaries v. I.R.S., 746 F. Supp. 188, 190 (D.D.C. 1990) (“As [the taxpayer] knows, 1RS resources are limited. The agency cannot review every filed return. The government is forced to rely on the possibility of audit to ensure compliance.”).

97. Unlike the taxpayers in Cave Buttes, the Form 8283 Instructions for 2012 clearly stated that if more than one appraiser contributed to an appraisal, both had to sign the appraisal summary. Farrior Declaration, Ex. C at 6. By failing to have Thompson and Sandberg sign the 2012 Form 8283, Petitioners failed to comply with the requirements of the regulations because the appraisal summary did not adequately apprise the 1RS of the existence, let alone the identity, qualifications, or contributions of the additional appraisers.

98. Taxpayers may attempt to rely on Zarlengo v. Commissioner, T.C. Memo. 2014-161, for the proposition that Thompson and Sandberg were not required to sign the Form 8283. However, the facts in Zarlengo are clearly distinguishable from the facts here and actually support Respondent's position. In that case, the Court found “no indication in the record that any of the figures in the appraisal report were [the other appraiser's']”. Id. at *40. The Court therefore concluded “We do not believe that her assistance has caused Ms. Sandin-Zarlengo to violate section 1.170A-13(c)(3)(i)(B), Income Tax Regs.” Id. Here, Thompson and Sandberg's contributions were more than merely perfunctory or clerical; Mr. Biondi admits to adopting Thompson and Sandberg's descriptions and valuations as his own.

99. There can be no genuine dispute that Thompson and Sandberg “contributed” to the 2012 Biondi Appraisal by supplying descriptions and valuations of the property; that the figures in the 2012 Biondi Appraisal came from Thompson and Sandberg and were wholesale accepted (“subsumed”) by Mr. Biondi in his appraisal; and that Thompson and Sandberg's failure to sign the 2012 Form 8283 violates Treas. Reg. § 1.170A-13(c)(4)(i)(C).

100. Accordingly, the non-cash charitable contribution deduction Petitioners claimed in 2012 must be disallowed in full.

VI. Cumulative Errors Disqualify Appraisal Summary

101. The 2011 Form 8283 describes the contribution of 431 Hebrew Biblical Scrolls. The Form 8283 reported one aggregated basis and one aggregated fair market value; hiding within those 431 scrolls are 27 items alleged to have a fair market value of over $100,000.

102. The 2012 Form 8283 is equally troublesome. Among the list of contributed items, some were determined to have no value; but they were again grouped and reported with one aggregated basis and one aggregated fair market value effectively hiding significant artifacts with purported values of over $8 million dollars among over 800 artifacts. The 2012 Form 8283 also fails to include the signature of the individuals that valued over $6 million dollars-worth of contributed items.

103. The 2011 Form 8283 reports a range of acquisition dates as “12/09-9/10”, failing to specifically identify when and in what manner each of the scrolls were purchased. The 2012 Form 8283 is similarly violative. The acquisition date is listed as “12/08-8/11,” thus also failing to specify when and in what manner each of the scrolls and manuscripts were purchased.

104. Petitioners still have not supplied the IRS with the records and information used to determine the basis of each item, let alone how the aggregated amounts were determined that were reported on the Forms 8283.

105. The Tax Court has held that the doctrine of substantial compliance applies when “the taxpayers had provided most of the information required” or made omissions “solely through inadvertence.” Hewitt, 109 T.C. at 265, n.10. See Durden v. Commissioner, T.C. Memo 2012-140, at *2 (“The doctrine of substantial compliance is designed to avoid hardship in cases where a taxpayer does all that is reasonably possible, but nonetheless fails to comply with the specific requirements of a provision.”).

106. In Rothman v Commissioner, the Court determined that the cumulative effect of the defects included in the appraisal report deprived the IRS of sufficient information to evaluate the deductions claimed as contemplated by Congress. Rothman v. Commissioner, T.C. Memo. 2012-163, opinion vacated in part on reconsideration, T.C. Memo. 2012-218.

107. The same analysis should apply to the multiple defects in the appraisal summary. Rothman contemplated whether an appraisal was a qualified appraisal under Treas. Reg. § 1.170A-13(c)(3) and concluded that cumulative errors precluded a finding that the appraisal was qualified; the effect is the same when there are cumulative errors on an appraisal summary report or Form 8283. The errors on Petitioners' Forms 8283 include failing to list the basis, description, and fair market value of each item separately and additionally in 2012 failing to include the signatures of all the appraisers who participated in valuing the contribution. Biondi's cumbersome appraisals do not cure these defects, because they too omit specific basis and acquisition date information.

108. Alone, the errors deprive the 1RS of the information needed to adequately evaluate the deductions claimed; combined, the errors prohibit a finding that the summary report was either strictly or substantially in compliance with the statute and regulations.

DRITA TONUZI
Deputy Chief Counsel (Operations)
Internal Revenue Service

Date: February 25, 2022

By: VASSILLKI ECONOMIDES FARRIOR
Special Trial Attorney (SL)(OKC)
(Large Business & International)
55 N. Robinson Ave.
Suite 275
Oklahoma City, OK 73102
Telephone: (405) 982-6620
Tax Court Bar No. EV0019
vassiliki.e.farrior@irscounsel.treas.gov

By: KRISTEN I. NYGREN
Senior Attorney (SBZSE)
Tax Court Bar No. NK0041
600 S. Maestri Place
New Orleans, LA 70130-3413
Telephone: (504) 434-6454
kristen.i.nygren@irscounsel.treas.gov

By: WILLIAM F. CASTOR
Senior Counsel (SBZSE)
Tax Court Bar No. CW0627
55 N. Robinson Ave., Suite 275
Oklahoma City, OK 73102-9233
Telephone: (405) 982-6742
william.f.castor@irscounsel.treas.gov

OF COUNSEL:
ROBIN L. GREENHOUSE
Division Counsel
(Large Business & International)
JOHN M. ALTMAN
National Strategic Litigation Counsel
(Large Business & International)
NASEEM J. KHAN
Strategic Litigation Counsel
(Large Business & International)

DECLARATION OF VASSILIKI ECONOMIDES FARRIOR

I, Vassiliki Economides Farrior, hereby declare pursuant to Title 28, United States Code, section 1746, as follows:

I declare under penalty of perjury that the foregoing is true and correct.

February 24, 2022

VASSILIKI ECONOMIDES FARRIOR
Special Trial Attorney (SL)(OKC)
(Large Business & International)