Whitehouse Hotel Limited Partnership et al. v. Commissioner

Fifth Circuit upheld the Tax Court in finding that the IRS appraiser was qualified and that the IRS appraiser's failure to comply with USPAP did not render his testimony and report inadmissible but reversed on valuation and penalties.

In a 97-page opinion, the Tax Court doubled down on its initial conclusions in Whitehouse I on just about every point. This is detailed opinion is summaried in the long description.

The Tax Court disallowed the deduction in its entirety because it held that the easement had zero value. The Tax Court found the taxpayers' expert witness appraisers unconvincing, based on numerous methodological flaws.

This is a valuation dispute on a ranch CE. The decision turned on valuation methodology. The Court disagreed with aspects of both appraisers valuations and arrived at its own valuation.

The Tax Court found for the taxpayers on the conservation purposes and reserved rights issues and reduced the valuation by 50% but did not assess penalties.

The District Court ruled for the IRS on summary judgment, holding that the failure to comply with I.R.C. § 170(f)(8) was, in and of itself, fatal to the deduction claim. The court rejected substantial compliance.