Hobby Lobby Owners Challenge Adjustments to Charitable Deductions

MART D. AND DIANA K. GREEN
Petitioners,
COMMISSIONER OF INTERNAL REVENUE,
Respondent.

UNITED STATES TAX COURT

PETITION

Petitioners hereby petition for a readjustment and redetermination of deficiencies set forth by the Commissioner of Internal Revenue in his Notice of Deficiency, dated August 7, 2019 (the "Notice”). As a basis for their case, Petitioners allege as follows:

1. Petitioners are Mart D. Green and Diana K. Green, husband and wife, and their address is 9825 Stonebridge Drive, Yukon, Oklahoma 73099-3248, and state of legal residence is Oklahoma.

2. Petitioners' Social Security Numbers are listed on the Tax Court Rules of Practice and Procedure Form 4, attached hereto.

3. The joint returns for the periods here involved (the "2011 and 2012 Returns") were timely filed with the Internal Revenue Service Center in Fresno, California.

4. The Notice, dated August 7, 2019 (a copy of which is attached as Exhibit "A") was issued by the Appeals Office of the Internal Revenue Service at Oklahoma City, Oklahoma.

5. The deficiencies as determined by the Commissioner are in income taxes for taxable years 2011 and 2012 as follows, both of which are in dispute:

Tax Years Ended	Tax	IRC 6662 Penalties
December 31, 2011	$83,213.00	$33,285.00
December 31, 2012	$222,618.00	$89,047.00

6. The determination of taxes set forth in the Notice are based upon the following errors:

a. The Commissioner erred in adjusting Petitioners' distributive share of flow-through noncash charitable contributions of Hobby Lobby Stores, Inc., an S corporation ("HLSI").

b. The Commissioner erred in determining that all of the requirements of Section 170 of the Internal Revenue Code have not been satisfied and, thus, in determining that Petitioner is not entitled to a charitable contribution deduction for the noncash contributions made in 2011 and 2012.

c. The Commissioner erred in increasing Petitioners' taxable income in the amounts of $237,752.16 and $636,052.56 for tax years 2011 and 2012, respectively.

d. The Commissioner erred in determining, in the alternative, that the Petitioners' total allowable deduction based upon their distributive share of the fair market value of the contributed property is $24,870.00 and $193,498.00 in tax years 2011 and 2012, respectfully.

e. The Commissioner erred in proposing an addition to tax in the amounts of $33,285.00 and $89,047.00 for tax years 2011 and 2012, respectfully, pursuant to Internal Revenue Code § 6662.

f. The Commissioner erred in proposing, in the alternative, an addition to tax in the amounts of $16,643.00 and $44,524.00 for tax years 2011 and 2012, respectfully, pursuant to Internal Revenue Code § 6662.

g. The Commissioner erred in each and every determination having the effect of increasing Petitioners' taxable income and/or tax liabilities for tax years 2011 and 2012.

7. The facts upon which Petitioners rely upon as a basis for their case, for tax years ended December 31,2011 and 2012, are as follows:

a. Petitioners properly reported their distributive share of flow-through contributions of HLSI for tax years 2011 and 2012.

b. All of the requirements of Section 170 of the Internal Revenue Code for property contributed by HLS” during 2011 and 2012 were satisfied, and Petitioners properly determined and reported their noncash charitable contribution deductions for tax years 2011 and 2012.

c. Petitioners have established that they properly determined their distributive share of the fair market value of the property contributed during their tax years ended December 31, 2011 and 2012, and properly determined and reported their distributive share of noncash charitable contribution deductions for their tax years 2011 and 2012.

8. Assuming for sake of argument there is a deficiency in income taxes for either tax year 2011 or 2012 with respect to which Commissioner may assert an addition to tax under Internal Revenue Code Section 6662(e):

a. Petitioners were not negligent and did not disregard rules and regulations with respect to which Commissioner may assert an addition to tax is asserted;

b. Petitioners had reasonable cause and acted in good faith with respect to the valuation misstatement upon which such addition to tax is asserted;

c. The claimed values of the property contributed in tax years 2011 and 2012 were based on qualified appraisals made by a qualified appraiser, and in addition to obtaining such appraisals, Petitioners made a good faith investigation of the value of the contributed property; and

d. Petitioners properly computed and reported all items of income, deduction, and credit and loss for tax years 2011 and 2012.

WHEREFORE, Petitioners pray that this Court find that (i) the 2011 and 2012 Returns originally filed by Petitioners are correct; (ii) the adjustments proposed by the Commissioner in his Notice are erroneous; and (iii) there is no deficiency in the Petitioners' income tax, or interest or penalties thereon, for taxable years 2011 and 2012; and further grant Petitioners such other and further relief to which they may be entitled.

DATED this 30^th day of October, 2019.

Respectfully submitted,

Charles E. Geister III
T.C. Bar Number GC0392
Hartzog Conger Cason
201 Robert S. Kerr Avenue
Suite 1600
Oklahoma City, OK 73102
Telephone: (405) 235-7000
Facsimile: (405) 996-3403
cgeister@hartzoglaw.com
COUNSEL FOR PETITIONERS

Len Cason
T.C. Bar Number CL0262
201 Robert S. Kerr Avenue
Suite 1600
Oklahoma City, OK 73102
Telephone: (405) 235-7000
Facsimile: (405) 996-3403
cgeister@hartzoglaw.com
COUNSEL FOR PETITIONERS

J. Leslie LaReau
T.C. Bar Number LJ0943
201 Robert S. Kerr Avenue
Suite 1600
Oklahoma City, OK 73102
Telephone: (405) 235-7000
Facsimile: (405) 996-3403
llareau@hartzoglaw.com
COUNSEL FOR PETITIONERS