DocketNumber: Docket Nos. 4723-88, 13337-88
Citation Numbers: 60 T.C.M. 1314, 1990 Tax Ct. Memo LEXIS 677, 1990 T.C. Memo. 602
Judges: NIMS
Filed Date: 11/27/1990
Status: Non-Precedential
Modified Date: 11/20/2020
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Ps filed a motion for reasonable litigation costs pursuant to
MEMORANDUM OPINION
This matter is before the Court on petitioners' motion for award of reasonable litigation costs filed pursuant to
Petitioners, husband and wife, resided in Wilmington, Delaware, when they timely filed their petitions for redetermination herein on March 10, 1988, and June 10, 1988. The*679 primary issue in this case involved petitioners' charitable contribution deductions for the donation of a conservation easement (the easement) by grant to the Maryland Environmental Trust in 1981. The easement was granted with respect to 22.773 acres of property petitioners owned on the Choptank River in Talbot County, Maryland.
Before granting the easement, petitioners had the property appraised by James Latham, a real estate appraiser recommended by the Maryland Environmental Trust. Latham estimated that the pre-easement market value of the property was $ 212,500 and that the easement reduced the market value of the property by $ 95,460. Petitioners increased this amount by $ 18,740 because Latham assumed petitioners would have to pay for installation of electricity and telephone and subtracted that amount from his valuation of the property. Petitioners believed the utilities would be installed without charge. Thus, petitioners reported a charitable contribution of $ 114,200 on their 1981 tax return. Petitioners carried the excess value of the charitable contribution forward to their 1982, 1983, and 1984 tax years.
Through a preliminary valuation provided by an Internal*680 Revenue Service engineer, respondent determined that the easement was worth $ 22,000. Consequently, respondent issued statutory notices based on this valuation and petitioners sought a redetermination in this Court. Prior to trial, petitioners hired a second appraiser, Judith Reynolds, to value the easement and respondent retained the services of Robert VandeVisser for the same purpose. Ultimately, Reynolds valued the easement at $ 110,000 and VandeVisser at $ 50,150.
By letter and accompanying memorandum dated October 17, 1988, petitioners offered to settle the case at the valuation of $ 110,000. While petitioners assert that "Respondent at no time presented a good faith counterproposal or intimated a willingness to settle the case at anything approaching petitioners' claimed value," respondent alleges otherwise. In particular, respondent alleges that after receiving petitioners' appraisal respondent made oral offers to settle as high as $ 85,000. Respondent asserts that petitioners would not negotiate with respect to their valuation of $ 110,000. In any event, the issue of the value of the easement was tried before this Court in December, 1988.
In
In considering the experts' reports, this Court found that the VandeVisser report was flawed to the extent that VandeVisser assumed that the highest and best use of the property before the easement was a single family residential lot, although it is apparent from our previous Opinion in this case that there was a rational basis for the single family residential lot approach. We accepted, however, petitioners' expert's opinion*682 that subdivision was the highest and best use of the property prior to the easement. On this basis, we concluded that the easement was worth $ 103,000.
Pursuant to
To satisfy the statutory definition of prevailing party, petitioners must (1) *683 establish that the position of the United States in the civil proceeding was not substantially justified; (2) substantially prevail with respect to the amount in controversy or with respect to the most significant issue or set of issues presented; and (3) meet net worth requirements.
In determining whether respondent's position was not substantially justified, the question is one of whether respondent's position in the litigation was unreasonable. The determination of reasonableness should be made based upon all the facts and circumstances surrounding the proceeding and the fact that the Government eventually loses the case should not be determinative.
Petitioners argue that respondent acted unreasonably in pursuing this litigation after respondent was made aware that both Latham and Reynolds had based their valuations on the premise that subdivision was the highest and best use for the property prior to the easement. However, as we have already pointed out, there was also a rational basis for the single family residential lot approach taken by respondent's expert, and we decline to fault respondent for not simply "caving in" when confronted with the countervailing approach taken by petitioners' experts.
The determination of the fair market value of the easement presented special valuation problems which required an analysis of all the facts and circumstances influencing the value of real property. See
Petitioners' assertion that respondent refused to engage in settlement negotiations is refuted by the record which reveals that petitioners were billed by their counsel for settlement discussions with respondent during October and November, 1988. In the absence of any indication that respondent proceeded with his position for any reason other than to prevail in the litigation, we cannot say that respondent was unreasonable.
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