Menu
Tax Notes logo

Partnership Challenges Denial of $20 Million Charitable Deduction

JUL. 1, 2019

Oconee Landing Property LLC et al. v. Commissioner

DATED JUL. 1, 2019
DOCUMENT ATTRIBUTES

Oconee Landing Property LLC et al. v. Commissioner

[Editor's Note:

The exhibits can be viewed in the PDF version of the document.

]

OCONEE LANDING PROPERTY,  LLC, OCONEE LANDING  INVESTORS, LLC, TAX  MATTERS PARTNER,
Petitioner,

v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

UNITED STATES TAX COURT

 PETITION FOR READJUSTMENT OF PARTNERSHIP ITEMS UNDER CODE SECTION 6226

PETITIONER HEREBY PETITIONS for a readjustment of the partnership items set forth by the Commissioner of Internal Revenue (“Respondent”) in the Notice of Final Partnership Administrative Adjustment dated April 4, 2019 (hereinafter “FPAA”) issued to Oconee Landing Property, LLC for the taxable year ending December 31, 2015, As the basis for its case, Petitioner alleges as follows:

1. Petitioner Oconee Landing Investors, LLC is the Tax Matters Partner (“TMP”).

2. The legal residence of Petitioner is 2561 Lake Oconee Parkway, Greensboro, Georgia 30642.

3. The Partnership is Oconee Landing Property, LLC (“Partnership”), whose principal place of business is 2561 Lake Oconee Parkway, Greensboro, Georgia 30642.

4. The FPAA was purportedly mailed to the TMP on April 4, 2019 and was issued by the Legacy Technical Services Territory Manager in Hartford, Connecticut. A copy of the FPAA is attached as Exhibit A.

5. The FPAA asserts partnership adjustments in the form of a charitable contribution disallowance in the amount of $20,670,000.

6. In the FPAA, Respondent has erred, inter alia, with respect to the following:

a. In violating the notice requirements of I.R.C. § 7522(a) by failing to describe the basis for the adjustment to the Partnership's tax return.

b. In determining the Partnership is not entitled to the Section 170 charitable contribution deduction in the amount of $20,670,000 because the Partnership failed to establish all of the requirements of Section 170.

c. In determining, alternatively, that if the Partnership met all the requirements of Section 170, the value of the contributed property interest was not more than $1,420,560.

d. In determining that the Partnership is liable for the 40 percent gross valuation misstatement penalty under Section 6662(h) for the 2015 tax year.

e. In determining, alternatively, that the Partnership is liable for the 20 percent penalty under Section 6662(a) for either a substantial understatement of income tax, a substantial valuation misstatement, or negligence or disregard of rules and regulations for the 2015 tax year.

f. Respondent has not complied with Section 6751(b) in asserting penalties for the 2015 tax year.

7. The facts upon which Petitioner relies are, inter alia, as follows:

a. Partnership. The Partnership was formed on November 23, 2015 as a Georgia limited liability company.

b. The Partnership acquired approximately 355.522 acres in Greene County, Georgia from Carey Station, LLC on December 21, 2015 (the “Property”).

c. The Property is divided into four tracts: Tract 1-A containing approximately 269.749 acres; Tract 1-B containing approximately 37.889 acres; Tract 1-C containing approximately 42.383 acres; and Tract 1-D containing approximately 5.501 acres.

d. On December 31, 2015, the Partnership donated a conservation easement to Georgia-Alabama Land Trust, Inc. (“GALT) on the Property.

e. On April 4,2016, the Partnership filed a Scrivener's Affidavit to correct the legal description in the Conservation Deed. The acreage conveyed in Tract 1-B was corrected from 37.889 acres to 37.510 acres.

f. The Deed of Conservation Easement was recorded in Greene County, Georgia on December 31, 2015 (the “Conservation Deed”).

g. At the time of the donation of the conservation easement, the Partnership was owned 97% by Oconee Landing Investors, LLC, 2% by Carey Station, LLC, and 1% by Carey Station Manager, LLC.

h. Tax Return. The Partnership timely filed its Form 1065, U.S. Return of Partnership Income, for the 2015 tax year (“Partnership Tax Return”).

i. The Partnership Tax Return included all required information and attachments, included a properly completed Form 8283.

j. The Partnership Tax Return reported a charitable contribution deduction for a conservation easement in the amount of $20,670,000, pursuant to the qualified appraisal (the “Conservation Easement”).

k. Donee. GALT expressed an intent to conserve the Property, in conjunction with its conservation values.

l. GALT is a tax exempt public charity under Section 501 (c)(3), as described in Sections 509(a)(1) and 170(b)(l)(A)(vi).

m. GALT was at all relevant times a qualified organization under Section 170(h)(3) and eligible to receive deductible conservation easements pursuant to Section 170(h)(1)(B).

n. GALT has the experience and means to monitor and enforce the Conservation Easement.

o. GALT has made annual inspections of the Conservation Easement in compliance with the Conservation Deed.

p. Petitioner received a letter acknowledging the donation of the Conservation Easement in compliance with Section 170(f)(8).

q. Baseline Report. In connection with the donation of the Conservation Easement, qualified individual(s) issued a baseline report and accompanying documentation (the “Baseline Report”) for the Conservation Easement.

r. The Baseline Report contains an evaluation of certain conservation values and purposes protected by the Conservation Easement.

s. The Baseline Report documents the condition of the Property at the time of the donation and lists several of the conservation values present within the Conservation Easement.

t. Conservation Purpose. The Conservation Easement meets at least one of the four conservation purposes required under Section 170(h)(4)(A) and Treas. Reg. § 1.170A-14(d), as documented by the Baseline Report, the Conservation Deed, and the attributes of the Property.

u. Respondent has made no determination that the Conservation Easement failed to preserve any one of the four conservation purposes described in Section 170(h)(4).

v. Appraisal. The appraisal of the values of the Conservation Easement (the “Appraisal”) was performed by Martin H. Van Sant, SRA, and Thomas F. Wingard, SRA, MAI, of Van Sant & Wingard, LLC. Mr. Van Sant and Mr. Wingard were, at the time of the Appraisal, “qualified appraisers” as defined in Treas. Reg. § 1.170A-13(c)(5) (the “Qualified Appraisers”).

w. The Qualified Appraisers concluded that the highest and best use of the Property before donation of the Conservation Easement to be mixed-use development to include commercial, residential, and multi-family buildings.

x. The Qualified Appraisers concluded the highest and best use of the Property after donation of the Conservation Easement to be passive recreational usage.

y. The Qualified Appraisers determined the value of the Conservation Easement to be $20,670,000, using the before and after method pursuant to Treas. Reg. § 1.170A-14(h)(3).

z. The effective date of the Appraisal was December 31, 2015.

aa. The Appraisal performed by the Qualified Appraisers, and used as a basis for the charitable contribution deduction taken by the Partnership for the donation of the Conservation Easement, was a “qualified appraisal” under Treas. Reg. § 1.170A-13(c)(3).

bb. Respondent has made no determination that the Qualified Appraisers were not qualified appraisers, or that the Appraisal was not a qualified appraisal, as defined in Treas. Reg. § 1.170A-13(c)(3) or (c)(5).

cc. The Appraisal correctly determined the value of the Conservation Easement donated by the Partnership.

dd. Reliance on Experts. The Partnership reasonably relied upon the Appraisal in establishing the amount of the charitable contribution deduction.

ee. The Partnership's reliance was reasonable and in good faith, and the Partnership made an independent investigation of the value of the Conservation Easement.

ff. The Partnership provided all of the necessary information to its Certified Public Accountant (“CPA”) and believed the CPA prepared an accurate tax return.

gg. The Partnership reasonably relied on the CPA to prepare an accurate tax return.

hh. The Partnership satisfied all other requirements necessary to be entitled to a charitable contribution deduction for the donation of the Conservation Easement, as reported on its Partnership Tax Return for the 2015 tax year.

ii. Pursuant to Section 7491, the burden should be shifted to Respondent as to both the deductibility and the value of the Conservation Easement because the Partnership has produced credible evidence establishing it is entitled to a charitable contribution deduction for the Conservation Easement in the amount of $20,670,000 for the 2015 tax year, and has otherwise maintained all records, cooperated with Respondent in all phases of the examination process, and complied with all requirements of the Internal Revenue Code and Treasury Regulations.

WHEREFORE, Petitioner prays the Court finds there is no deficiency in tax due from Petitioner for the tax year ending December 31, 2015; that Respondent bears the burden of proof as to all issues; and the Court grant such other and further relief as it deems appropriate.

Respectfully submitted this 27th day of June, 2019.

Vivian D. Hoard
Tax Court Bar No. HV0055
Counsel for Petitioner
Taylor English Duma LLP
1600 Parkwood Circle, Suite 400
Atlanta, GA 30339
(770) 541-2223
vhoard@taylorenglish.com

R. Brian Gardner, III
Tax Court Bar No. GR0812
Counsel for Petitioner
Taylor English Duma LLP
1600 Parkwood Circle, Suite 400
Atlanta, GA 30339 (678)336-7180
bgardner@taylorenglish.com

DOCUMENT ATTRIBUTES
Copy RID