Whitehouse Hotel Ltd. P'ship v. Comm'r of Internal Revenue
| Decision Date | 30 October 2008 |
| Docket Number | No. 12104–03.,12104–03. |
| Citation | 131 T.C. No. 10,131 T.C. 112,77 Fed. R. Evid. Serv. 1342 |
| Parties | WHITEHOUSE HOTEL LIMITED PARTNERSHIP, QHR Holdings–New Orleans, Ltd., Tax Matters Partner, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
The parties agree that W, a partnership, is entitled to a charitable contribution deduction on account of its having made a qualified conservation contribution to a qualified organization. They disagree as to the amount of the contribution. They further disagree as to whether, if W overstated the amount of the deduction, the overstatement amounted to a substantial valuation misstatement or a gross valuation misstatement and, if either, whether any resulting accuracy-related penalty is excused on account of reasonable cause. P also objects to the appraisal testimony of R's expert witness, A, on the grounds that (1) he is not qualified to testify as an expert as to “facade donations” and (2) even if he is so qualified, his written report is per se unreliable since it is not in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP), and it cannot, for that reason, be received into evidence by the Court pursuant to our duty imposed by Daubert v. Merrell Dow Pharmas., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), and Fed.R.Evid. 702 to exclude unreliable testimony.
2. Held, further, Fed.R.Evid. 702 requires that expert testimony be based on “reliable principles and methods”, and we will not supplant our responsibility to assess an expert appraiser's reliability by accepting USPAP as the defining standard of reliability; failure to adhere to USPAP may affect the weight we accord to an expert appraiser's testimony; that failure does not, however, necessarily preclude our receiving the expert's testimony into evidence; A's testimony is the product of the application of reliable principles and methods of valuation to sufficient facts and data; it is admissible as expert testimony pursuant to Fed.R.Evid. 702.
3. Held, further, value of qualified contribution determined: deduction overstated.
4. Held, further, overstatement is a gross valuation misstatement.
5. Held, further, accuracy-related penalty applicable because failure to make good faith investigation of value of contribution precluded reasonable cause exception.
Gary J. Elkins and Andrew L. Kramer, for petitioner.
Linda J. Wise, Robert W. West, III, and Susan S. Canavello, for respondent.
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¦Contents ¦
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+---------------------------------------------------------------+--¦
¦FINDINGS OF FACT ¦5 ¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------------------------------------------------------+--¦
¦OPINION ¦14¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
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¦I. ¦Introduction ¦14¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+----+----------------------------------------------------------+--¦
¦II. ¦Objection to Mr. Argote's Testimony ¦15¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+----+--+-------------------------------------------------------+--¦
¦ ¦A.¦Introduction ¦15¦
+----+--+-------------------------------------------------------+--¦
¦ ¦B.¦Qualification as an Expert Witness ¦15¦
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¦ ¦C.¦Reliability ¦20¦
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¦ ¦ ¦1.¦Introduction ¦20¦
+----+--+--+----------------------------------------------------+--¦
¦ ¦ ¦2.¦Qualified Appraisal ¦21¦
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¦ ¦ ¦3.¦Exclusion of the Kress Building ¦22¦
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¦ ¦ ¦4.¦Uniform Standards of Professional Appraisal Practice¦23¦
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¦ ¦ ¦5.¦Conclusion ¦26¦
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¦ ¦D.¦Conclusion ¦26¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
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¦III.¦Expert Testimony as to the Value of the Servitude ¦26¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
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¦ ¦A.¦Introduction ¦26¦
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¦ ¦B.¦Highest and Best Use Considerations ¦30¦
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¦ ¦ ¦1.¦Introduction ¦30¦
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¦ ¦ ¦2.¦Discussion ¦31¦
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¦ ¦ ¦3.¦Conclusion ¦36¦
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¦ ¦C.¦Cost Approach ¦36¦
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¦ ¦ ¦1.¦Introduction ¦36¦
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¦ ¦ ¦2.¦Before Restriction Reproduction Cost ¦37¦
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¦ ¦ ¦3.¦After Restriction Reproduction Cost ¦39¦
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¦ ¦ ¦4.¦Cost Approach Value ¦40¦
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¦ ¦D.¦Income Approach ¦40¦
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¦ ¦ ¦1.¦Introduction ¦40¦
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¦ ¦ ¦2.¦Before Restriction Income Approach ¦41¦
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¦ ¦ ¦3.¦After Restriction Income Approach ¦42¦
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¦ ¦ ¦4.¦Income Approach Value ¦43¦
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¦ ¦E.¦Comparable Sales Approach ¦44¦
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¦ ¦ ¦1.¦Introduction ¦44¦
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¦ ¦ ¦2.¦Before Restriction Comparable Sales Approach ¦45¦
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¦ ¦ ¦ ¦a.¦Mr. Roddewig's Approach ¦45¦
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¦ ¦ ¦ ¦b.¦Mr. Argote's Approach ¦48¦
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¦ ¦ ¦3.¦After Restriction Comparable Sales Approach ¦49¦
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¦ ¦ ¦4.¦Comparable Sales Approach Value ¦50¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
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¦IV. ¦Value of the Servitude ¦51¦
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¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
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¦ ¦A.¦Introduction ¦51¦
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¦ ¦B.¦Cost Approach ¦52¦
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¦ ¦ ¦1.¦Introduction ¦52¦
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¦ ¦ ¦2.¦First Impression ¦54¦
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¦ ¦ ¦3.¦Terra Cotta Cost ¦56¦
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¦ ¦ ¦4.¦External Obsolescence ¦58¦...To continue reading
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