T.C. Memo. 2011-71
UNITED STATES TAX COURT
RANDALL A. AND KELLY C. SCHRIMSHER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 945-09. Filed March 28, 2011.
William J. Bryant and Gwendolyn Denoux Skinner, for
petitioners.
Robert W. Dillard and Jeffrey S. Luechtefeld, for
respondent.
MEMORANDUM OPINION
THORNTON, Judge: This matter is before us on respondent’s
motion for partial summary judgment filed pursuant to Rule 121.1
1
All Rule references are to the Tax Court Rules of Practice
(continued...)
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Respondent determined deficiencies and penalties with respect to
petitioners’ Federal income taxes for 2004 through 2006 as
follows:
Penalty
Year Deficiency Sec. 6662(h)1
2004 $54,091 $21,636
2005 60,686 24,274
2006 42,253 16,901
1
In the notice of deficiency respondent determined that
petitioners are liable for the penalties listed above pursuant to
sec. 6662(h), which imposes a 40-percent penalty for gross
valuation misstatements. Respondent determined alternatively
that petitioners are liable for 20-percent accuracy-related
penalties pursuant to sec. 6662(a) for substantial
understatements of income tax, valuation misstatements, and
negligence or disregard of rules or regulations. Respondent’s
motion for partial summary judgment states that if the Court
determines that petitioners have an underpayment because they
failed to meet the sec. 170 substantiation requirements, rather
than because they overvalued the facade easement, the 40-percent
penalty under sec. 6662(h) will not apply and that petitioners’
penalties under sec. 6662(a) will be $10,818, $12,137, and $8,450
for the years 2004, 2005, and 2006, respectively. Respondent
does not seek summary judgment as to any penalty.
The deficiencies arise largely from respondent’s disallowance of
deductions that petitioners claimed for a charitable contribution
of a facade easement. In his motion for partial summary judgment
respondent contends that the deductions were not properly
substantiated under section 170.
1
(...continued)
and Procedure, and all section references are to the Internal
Revenue Code (Code) for the taxable years at issue.
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Background
The following facts are not in dispute. On December 30,
2004, Randall A. Schrimsher (petitioner) executed a document
entitled “Preservation and Conservation Easement Agreement” (the
agreement) granting a facade easement to the Alabama Historical
Commission (the commission). The facade easement is with respect
to property in Huntsville, Alabama, commonly known as the “Times
Building”. The agreement states in relevant part:
for and in consideration of the sum of TEN DOLLARS,
plus other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the
Grantor [petitioner] does hereby irrevocably GRANT,
BARGAIN, SELL, AND CONVEY unto the Grantee [the
commission], its successors and assigns, a preservation
and conservation easement to have and hold in
perpetuity * * *.
The agreement also includes a clause (the merger clause) stating
that “This agreement sets forth the entire agreement of the
parties with respect to the Easement and supercedes all prior
discussions, negotiations, understanding, or agreements relating
to the Easement, all of which are merged herein.” The agreement
states that in the event of any dispute or question arising in
connection with the agreement, the laws and regulations of the
State of Alabama shall apply.
On Form 8283, Noncash Charitable Contributions, attached to
their 2004 joint Federal income tax return, petitioners listed
the appraised fair market value of the facade easement as
$705,000. Petitioners’ “Appraisal Summary” on the Form 8283
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omitted various required items of information; in addition, it
was not signed or dated by the donor, the appraiser, or any
representative of the donee. Petitioners did not attach to their
tax return any written appraisal of the facade easement.
After applying the limitations of section 170(b) for 2004,
petitioners deducted $193,180 as a noncash charitable
contribution with respect to the facade easement. For 2005 and
2006 they claimed charitable contribution carryover deductions of
$206,699 and $120,724, respectively, with respect to the
contribution of the facade easement.
In the notice of deficiency respondent disallowed any
charitable contribution deduction for the facade easement on the
alternative grounds that petitioners had failed to satisfy the
section 170 substantiation requirements and had failed to
establish the easement’s value to be $705,000. Petitioners,
residing in Alabama, petitioned this Court.
Discussion
The Court may grant summary judgment if there is no genuine
issue of any material fact and a decision may be rendered as a
matter of law. Rule 121(a) and (b); see Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988). As
the party seeking partial summary judgment, respondent has the
burden of showing that there is no genuine issue as to any
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material fact and that a decision may be rendered as a matter of
law. Rule 121(b); see Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986) (interpreting analogous provisions of rule 56 of the
Federal Rules of Civil Procedure); Naftel v. Commissioner, 85
T.C. 527, 529 (1985). Respondent need not, however, negate with
evidence every allegation made by petitioners; he may carry his
burden with a “showing” that there is an absence of evidence to
support the nonmoving party’s case. Celotex Corp. v. Catrett,
supra at 325. Once the opposing party presents evidence
sufficient to support its claims, we must draw all factual
inferences in favor of the opposing party. Dahlstrom v.
Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,
79 T.C. 340, 344 (1982).
A. Respondent’s Alternative Contentions
Respondent seeks summary judgment that the disputed
deductions should be disallowed because petitioners failed to
obtain a contemporaneous written acknowledgment of the facade
easement from the commission as required by section 170(f)(8).
Alternatively, respondent seeks summary judgment that the
disputed deductions should be disallowed because petitioners
failed to satisfy the requirements of section 170(f)(11) in that
they failed to obtain a qualified appraisal and attach it to
their Federal income tax return.
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B. Contemporaneous Written Acknowledgment
As a general rule, a charitable contribution of $250 or more
must be substantiated with a contemporaneous written
acknowledgment from the donee organization.2 Sec. 170(f)(8)(A).
The contemporaneous written acknowledgment “need not take any
particular form. Thus, for example, acknowledgments may be made
by letter, postcard, or computer-generated forms.” H. Conf.
Rept. 103-213, at 565 n.32 (1993), 1993-3 C.B. 393, 443. The
contemporaneous written acknowledgment must include this
information:
(i) The amount of cash and a description (but not
value) of any property other than cash contributed.
(ii) Whether the donee organization provided any
goods or services in consideration, in whole or in
part, for any property described in clause (i).
(iii) A description and good faith estimate of the
value of any goods or services referred to in clause
(ii) * * * .
[Sec. 170(f)(8)(B).]
Petitioners contend that the agreement constitutes a
contemporaneous written acknowledgment within the meaning of
section 170(f)(8). Respondent does not dispute that the
agreement is an “acknowledgment” or that it was
“contemporaneous”. But he contends that the agreement fails
section 170(f)(8)(B)(ii) because it does not state whether the
2
As discussed infra, this requirement is subject to
exceptions contained in sec. 170(f)(8)(D) and (E).
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commission provided any goods or services in consideration for
the facade easement. Respondent acknowledges that the agreement
expressly states that the commission provided consideration for
the facade easement of “TEN DOLLARS, plus other good and valuable
consideration”. Respondent suggests, however, that this language
should be disregarded, asserting that it is “typical
‘boilerplate’”.
Without expressly alluding to the language that respondent
has termed boilerplate, petitioners argue that the “clear and
unambiguous” merger clause signifies that the agreement was the
“entire agreement”, and consequently “it is apparent” that no
cash or compensation was exchanged between petitioners and the
commission. Thus, petitioners seem to suggest that the
consideration recited in the deed ($10 plus other good and
valuable consideration) was fictitious. And indeed it might have
been.3
3
Over a century ago one court commented upon the apparently
durable practice of reciting nominal monetary consideration in
deeds:
The popular idea is that there must be a money
consideration expressed in all deeds, to render them
valid. As a general rule, deeds which appear upon
their face to be founded upon love and affection and a
small money consideration are intended by the parties
as gifts, as the money consideration is rarely ever
paid or intended to be paid. While it is well known to
the profession that it is not essential to the validity
of a deed of gift to express therein a money
consideration, still to satisfy the popular belief it
(continued...)
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But even if the commission actually provided no
consideration for the contribution, the written acknowledgment
must say so in order to satisfy the requirement of section
3
(...continued)
is the almost universal practice to state a small sum
of money as a part of the consideration in such a deed.
The learned lawyer who was the immediate predecessor of
the present Chief Justice of this court, in drawing a
deed of gift which was to be executed by himself, once
expressed the consideration of the same to be love and
affection and “the fictitious dollar of the law.” He
thus yielded to the popular belief and at the same time
indicated by the language used that it was not
essential to the validity of the deed that it should be
founded upon anything else than simply a good
consideration. * * * [Martin v. White, 42 S.E. 279,
282 (Ga. 1902).]
Under Alabama law, to the extent a recitation of
indeterminate “valuable” consideration has operative effect, it
would appear to relate more to a deed of bargain and sale than to
a deed of gift. As the Alabama Supreme Court explained in
Houston v. Blackman, 66 Ala. 559, 561-562 (1880):
In deeds of bargain and sale, the expression of any,
the slightest consideration--for instance, a pepper-
corn even--will support them, as between the parties.
The only use and operation of the expression of a
consideration, or the introduction of a clause reciting
a consideration, is to prevent a resulting trust to the
grantor, and to estop him from denying the making and
effect of the deed for the uses therein declared.
* * *
One possible effect of reciting “other valuable
consideration” in a deed of bargain and sale may be, in the event
the transferor’s creditors later challenge the transfer, to
permit parol evidence as to the existence of adequate pecuniary
consideration. See id.; see also Taylor v. Jones, 232 So. 2d
601, 605 (Ala. 1970) (holding that a deed’s stated consideration
of “the sum of one dollar and other good and valuable
consideration” was sufficient to support conveyances of real
property).
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170(f)(8)(B)(ii). See Friedman v. Commissioner, T.C. Memo. 2010-
45. As the legislative history notes: “If the donee
organization provided no goods or services to the taxpayer in
consideration of the taxpayer’s contribution, the written
substantiation is required to include a statement to that
effect.” H. Conf. Rept. 103-213, supra at 565 n.30, 1993-3 C.B.
at 443.
The only statement in the agreement concerning consideration
is the statement that the commission provided consideration of
$10 plus other good and valuable consideration. Whether or not
it be considered boilerplate and whether or not it be considered
in conjunction with the merger clause, this statement does not
indicate that the commission provided no goods or services. And
if the statement be construed literally to mean that the
commission provided the stated consideration, then the agreement
fails the requirement of section 170(f)(8)(B)(iii) since it does
not include a description and good faith estimate of the “other
good and valuable consideration”.
Consequently, we agree with respondent that the agreement
does not satisfy the requirements of section 170(f)(8)(B)(ii) and
(iii). The parties have not addressed whether any statutory
exception might render the section 170(f)(8)(A) requirement of a
contemporaneous written acknowledgment inapplicable to the
transaction in question. More particularly, section 170(f)(8)(D)
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provides that the requirement of a contemporaneous written
acknowledgment does not apply if the donee organization files a
return, on a form and in the manner regulations may prescribe,
that includes the information otherwise required to be included
in the contemporaneous written acknowledgment. In addition,
section 170(f)(8)(E) authorizes regulatory exceptions, in
appropriate cases, to “some or all” of the requirements of
section 170(f)(8). Pursuant to this authority, the regulations
provide that goods and services “are disregarded” for purposes of
section 170(f)(8) if they have “insubstantial value” under
guidelines provided in Rev. Proc. 90-12, 1990-1 C.B. 471, and
Rev. Proc. 92-49, 1992-1 C.B. 987, and any successor documents.4
Sec. 1.170A-13(f)(8)(i)(A), Income Tax Regs.
Petitioners bear the burden of substantiating their
charitable contribution deductions. See Rule 142(a).5 Neither
4
As relevant here, these guidelines generally provide that
benefits received in connection with a payment to a charity will
be considered to have insubstantial value if these two
requirements are met: (1) The payment must occur in the context
of a fundraising campaign in which the charity informs patrons
how much of their payment is a deductible contribution; and (2)
either (a) the fair market value of all of the benefits received
is the lesser of 2 percent of the donor’s payment or (for tax
years beginning in 2004) $82, or (b) the payment is (for tax
years beginning in 2004) $41 or more and the only benefits
received are “token items”. Rev. Proc. 90-12, sec. 3.01, 1990-1
C.B. 471, 472; Rev. Proc. 2003-85, sec. 3.22(2), 2003-2 C.B.
1184, 1189.
5
Petitioners do not contend that the issue of their
compliance (or noncompliance) with the sec. 170(f)(8)
substantiation requirements constitutes a “new matter” so as to
place the burden of proof upon respondent pursuant to Rule
(continued...)
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in their petition nor in any other fashion in these proceedings
have petitioners raised any issue as to the applicability of any
exception to the contemporaneous written acknowledgment
requirement of section 170(f)(8). We deem petitioners to have
waived any such issue.
C. Conclusion
For the reasons explained above, we conclude and hold that
there is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law disallowing the
disputed deductions for petitioners’ failure to obtain a
contemporaneous written acknowledgment of the facade easement.
In the light of this conclusion, it is unnecessary to address
respondent’s alternative contention that petitioners failed to
satisfy the requirements of section 170(f)(11). Accordingly,
An appropriate order will be
issued granting respondent’s motion
for partial summary judgment.
5
(...continued)
142(a)(1). In certain circumstances, sec. 7491(a) may operate to
shift to the Commissioner the burden of proof with respect to any
factual issue relevant to ascertaining the taxpayer’s tax
liability. As one precondition for shifting the burden of proof,
however, the taxpayer must have complied with Code requirements
to substantiate any item. Sec. 7491(a)(2)(A). Since the
question before us is whether petitioners have complied with the
substantiation requirements of sec. 170(f)(8), the burden of
proof remains with them as to this issue.