Bond v. Comm'r of Internal Revenue

Citation100 T.C. 32,100 T.C. No. 4
Decision Date19 January 1993
Docket NumberNo. 24969–90.,24969–90.
PartiesDewayne BOND and Karen R. Bond, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
CourtUnited States Tax Court

OPINION TEXT STARTS HERE

Patricia Tucker, for petitioners.

Thomas F. Eagan, for respondent.

SHIELDS, Judge:

This matter is before the Court at this time on a motion by each party for summary judgment under Rule 121.1

For 1986 respondent determined a deficiency in petitioners' income tax in the amount of $29,400 and an addition to tax under section 6659 for a valuation overstatement in the amount of $8,820. However, the parties have stipulated that there was no valuation overstatement on petitioners' return for 1986. They have also stipulated that the only issue is whether, as a matter of law, the charitable contribution deduction claimed by petitioners for the value of two thermal airships donated by them in 1986 to a foundation organized and operated in conformance with section 170(c)(2) must be disallowed because petitioners failed to obtain and attach to their income tax return for 1986 a qualified appraisal of the donated property as described in section 155(a)(1)(A) of the Deficit Reduction Act of 1984, Pub.L. 98–369, 98 Stat. 691, and section 1.170A–13(c)(2)(i)(A) and (3), Income Tax Regs.

FINDINGS OF FACT

At the time they filed their petition in this case petitioners resided in Albuquerque, New Mexico. On December 12, 1986, they donated two thermal airships (blimps) to the Maxie L. Anderson Foundation, an organization exempt from tax under section 501(c)(3) and described in section 170(c)(2). In December of 1986, Sid Cutter, at the request of petitioners, made an appraisal of the airships for the purpose of determining their value for use by petitioners in the preparation of their income tax return for 1986. Mr. Cutter was familiar with and knowledgeable of airships. In performing the appraisal, Mr. Cutter personally inspected the airships, computed the value of their component parts, and concluded that the total aggregate fair market value for the parts was $60,000. In arriving at his appraisal, Mr. Cutter made written computations, schedules, and notes, but was unable to locate them at the time of trial.

Prior to April 15, 1987, the due date of petitioners' income tax return for 1986, Mr. Cutter completed Parts II and IV of the Appraisal Summary contained in Section B of respondent's Form 8283, entitled Noncash Charitable Contributions. In Part II of the Form 8283, entitled Information on Donated Property, Mr. Cutter: (1) Described the donated property as thermal airships; (2) stated their appraisal fair market value was $60,000; and (3) summarized their overall physical condition as “2 thermal airships (blimps) in airworthy condition save required FAA annual inspections and fuel tanks.”

In Part IV of the form, entitled Certification of Appraiser, Mr. Cutter attested that he was not the donor, the donee, a party to the transaction in which the donor acquired the property, employed by or related to the donor or donee, nor a person whose relationship to either the donor or donee would cause a reasonable person to question his independence as an appraiser. In the same certification, Mr. Cutter also attested that he held himself out to the public as an appraiser, that he was qualified to make appraisals of the type of property being valued, that the appraisal fees were not based upon a percentage of the appraised property value, and that a false or fraudulent overstatement of the property value might subject him to a civil penalty under section 6701(a).

Mr. Cutter signed the Form 8283 on January 8, 1987, and indicated therein that he was the president of World Balloon Corporation, that the corporation was located at 4800 Eubank, N.E., in Albuquerque, New Mexico 87111, and that the corporation had been assigned identification number 85–0220353 by respondent. No separate written appraisal of the two airships, other than that set forth on the Form 8283, was prepared by Mr. Cutter or received by petitioners before the due date for filing their 1986 return.

On their timely filed income tax return for 1986 petitioners claimed a charitable deduction in the amount of $60,000 with respect to the airships. In support of the deduction petitioners attached to their return the Form 8283 which was prepared by Mr. Cutter in the manner described above.

Petitioners' 1986 return was audited by respondent. Shortly after the audit commenced Mr. Cutter furnished respondent's agent with a letter dated September 21, 1989, which contains the following statements concerning his qualifications and appraisal of the airships.

My qualifications as an appraiser include my years of experience in aviation, and my involvement in the construction of these particular airships. The construction of the airships was based on the principles of aviation and hot air ballooning. I had built three prototype hot air balloons before building these airships.

I received my initial experience, working for my father at Cutter Flying Service. I received a private pilot license at age 17, a commercial pilot license at 18, and flying instructor certification at 21. I joined the Air Force at 23, and flew jets and heavy transports. I went to work for Cutter Flying Service on a regular basis in 1952, was president from 19631974, and from 1974 to the present have served as vice president and director. Cutter Flying Service is involved in charter, sales and service, and is an FAA certified repair station. I, personally, am a certified repairman and am experienced in rebuilding airplanes and balloons. I have approximately 22,000 hours flying time of which 1,200 hours is in helicopters and 4,000+ in balloons. I have been involved in hot air ballooning since 1971.

I am currently president of World Balloon Corporation, which, in addition to offering recreational opportunities to the public, is involved in sales, service, pilot services and pilot training. The Corporation has an FAA Part 141 flight school and an FAA certified repair station. I organized the first two World Hot Air Balloon Championships and the first five Albuquerque International Balloon Fiestas.

I have been a member of the Balloon Federation of America, National Aviation Trades Association, National Aeronautics Association, and the Aircraft Owners and Pilots Association. I have been on the board of directors of the Air Taxi Conference and was an officer of the Balloon Federation of America. I have attended all the major balloon manufacturers maintenance training schools have been a FAA Designated Balloon Pilot Examiner since 1979 and have been a FAA Designated Balloon Pilot Examiner since 1979.

The method that I used to value the two thermal airships that the Bonds donated to the Maxie L. Anderson Foundation was what I refer to as “salvage value”, or what the individual components of the airships were worth. The engine packages were modified helicopter engines.

I estimate that resale value in 1986 was $150,000 and replacement value approximately $500,000. Because the airships are among the largest in the world, they have obvious historical value, but it would be difficult for me to judge that value.

In the deficiency notice respondent determined that the contribution deduction claimed by petitioners was not allowable “because it has not been established that the thermal airships had a fair market value” or “that all the items supposedly donated were in fact donated.” However, in respondent's answer, motion for summary judgment, and memorandum of law in support of the motion, respondent abandons the above contentions and merely asserts that the deduction is not allowable because petitioners did not obtain and attach to their return a qualified appraisal of the airships as required by the Deficit Reduction Act of 1984 and the applicable regulation.

OPINION

Summary judgment is appropriate in any case before us “if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, 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.” Rule 121(b); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The nonmoving party cannot rest upon the allegations or denials in his pleading, but must “set forth specific facts showing that there is a genuine issue for trial.” Rule 121(d); Dahlstrom v. Commissioner, 85 T.C. 812, 820–821 (1985). The moving party, however, has the burden of proving that no genuine issue exists as to any material fact and that he is entitled to judgement on the substantive issues as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Espinoza v. Commissioner, 78 T.C. 412, 416 (1982). In deciding whether to grant summary judgment, we view the factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Naftel v. Commissioner, supra at 529. If there exists any reasonable doubt as to the facts at issue, the motion must be denied. Espinoza v. Commissioner, supra at 416.

Since the facts set forth in our findings are not in dispute it is apparent that summary judgment is appropriate in this case. Consequently, the only question remaining is which motion should be granted.

Section 155 of the Deficit Reduction Act of 1984, Pub.L. 98–369, 98 Stat. 691, reads in pertinent part as follows:

155(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 * * * 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...

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