Partnership Challenges Denial of Charitable, Other Deductions

a. Respondent erred in asserting any adjustment for any amount;

b. Respondent erred in asserting an adjustment to “[c]haritable contributions 50 percent” reported on Schedule K, Line 13a in the amount of $180,177,000;

c. Respondent erred in asserting an adjustment to “other deductions” reported on Schedule K, line 1 in the amount of $1,712,242;

d. Respondent erred in asserting an adjustment to “other deductions” reported on Schedule K, line 13d in the amount of $4,416,251;

e. Respondent erred by failing to describe any meaningful factual, tax, or legal basis for disallowing Hancock's “charitable contributions 50 percent” reported on Schedule K, line 13a;

f. Respondent erred by failing to describe any meaningful factual, tax, or legal basis for disallowing Hancock's “other deductions” reported on Schedule K, line 1;

g. Respondent erred by failing to describe any meaningful factual, tax, or legal basis for disallowing Hancock's “other deductions” reported on Schedule K, line 13d;

h. Respondent erred in asserting that Hancock did not establish that it made a non-cash charitable contribution;

i. Respondent erred by asserting, in the alternative, that Hancock did not establish that Hancock's non-cash charitable contribution satisfied all the requirements of Section 170;

j. Respondent erred in asserting that Hancock did not substantiate the “other deductions” reported on Schedule K, line 1 as ordinary and necessary business expenses under Section 162;

k. Respondent erred in asserting that Hancock did not substantiate the “other deductions” reported on Schedule K, line 13d as ordinary and necessary business expenses under Section 162;

l. Respondent erred in asserting penalties based, alternatively, on gross valuation misstatement pursuant to Section 6662(h), a reportable transaction understatement pursuant to Section 6662A, negligence or disregard of rules and regulations pursuant to Section 6662(c), substantial understatement of income tax pursuant to Section 6662(d), or substantial valuation misstatement pursuant to Section 6662(e); and

m. Respondent erred in failing to consider the reasonable cause that existed with respect to all positions taken by Hancock on its 2016 Form 1065 and all other defenses to the proposed penalties.

a. Hancock was a partnership for federal tax purposes in 2016.

b. Petitioner owned 97 percent of the profit, loss, and capital of Hancock on December 31, 2016.

c. A resolution to Hancock's Operating Agreement, dated July 27, 2018 (“Resolution”), named Petitioner as its manager, effective June 17, 2016.

d. Petitioner is a U.S. person.

e. Hancock's 2016 Form 1065 properly named Petitioner as TMP.

f. Hancock meets the net worth criteria described in Section 7430(c)(4)(A)(ii).

g. The property at issue in this case is comprised of approximately 236.12 acres (“Property”).

h. The Property is located in Hancock County, Mississippi.

i. The Property is viewable from Highway 607.

j. The Property is near Interstate 59.

k. The Property is viewable from Old Highway 11.

l. On March 12, 2015, Mine Assets Holdings, LLC (“MAH”) contributed approximately 1,400 acres of land to Wet Mine Assets Holdings, LLC (“WMAH”).

m. The Property was part of the land, described above, that MAH contributed to WMAH.

n. On June 15, 2016, MAH contributed the Property to WMAH.

o. On June 15,2016, WMAH contributed the Property to Hancock as a capital contribution.

p. The Property is within the Pearl River bottomlands.

q. The Pearl River bottomlands have sand and gravel resources, including sand used for hydraulic fracturing and gravel used as construction aggregate.

r. The Property has reserves of sand of the type used by energy companies in the hydraulic fracturing process (“frac sand”).

s. The Property has reserves of construction-grade gravel.

t. The Property has reserves of construction-grade sand.

u. In 2016, there was an active frac sand mining operation adjacent to the Property.

v. In 2016, multiple sand and gravel quarries operated within 10 miles of the Property.

w. Hancock obtained a report related to the Property titled “Mineral Valuation Report 236 Acre Site” (“First Mineral Assessment”).

x. Action Testing Group, LLC (“ATG”) prepared the First Mineral Assessment.

y. A licensed professional engineer and a senior environmental program manager executed the First Mineral Assessment.

z. Dungan Engineering, P.A. (“DE”) drilled seven exploratory holes on the Property (“DE Holes”).

aa. In preparing the First Mineral Assessment, ATG analyzed the samples from the DE Holes.

ab. In preparing the First Mineral Assessment, ATG also analyzed samples from exploratory holes on an adjacent property.

ac. ATG tested the samples from the DE Holes located on the Property using the standards set forth by the American Petroleum Institute (“API”).

ad. ATG tested the samples from the DE Holes located on the Property using the standards set forth by the American Society for Testing and Materials (“ASTM”) for conducting sieve analyses.

ae. The First Mineral Assessment concluded that the mineral resources on the Property were suitable for frac sand, construction sand, and construction gravel.

af. The First Mineral Assessment determined that the Property contained approximately 25.5 million tons of saleable frac sand.

ag. The First Mineral Assessment determined that the Property contained approximately 15.8 million tons of saleable gravel.

ah. The First Mineral Assessment determined that the mineral resources on the Property had a net present value of approximately $194 million.

ai. Hancock obtained a report related to the Property titled “Independent Appraisal Minerals Underlying 236-Acre Fee Property” (“Second Mineral Assessment”).

aj. John T. Boyd Company (“Boyd Company”) prepared the Second Mineral Assessment.

ak. A director of financial analysis specializing in mineral valuation, a mining consultant with degrees in mining engineering and finance, and a licensed professional engineer executed the Second Mineral Assessment.

al. In preparing the Second Mineral Assessment, Boyd Company analyzed the samples from the DE Holes on the Property.

am. In preparing the Second Mineral Assessment, Boyd Company also analyzed exploratory hole samples from an adjacent property.

an. The Second Mineral Assessment concluded that the Property's mineral resources included significant frac sand, construction sand, and construction gravel.

ao. The Second Mineral Assessment determined that the Property contained approximately 22.1 million tons of saleable frac sand.

ap. The Second Mineral Assessment determined that the Property contained approximately 10.7 million tons of saleable gravel.

aq. The Second Mineral Assessment determined that the Property's mineral resources had a net present value of approximately $169 million.

ar. The Property was zoned A-1 (General Agriculture) in 2016.

as. Mining is permitted as a “special exception” to the A-1 (General Agriculture) zoning category.

at. Mining is permitted as a “conditional use” for properties with zoning designations I-1 (Light Industrial) and I-2 (Heavy Industrial).

au. Hancock executed a Deed of Conservation Easement (“Deed”) encumbering the Property on August 2, 2016 (“Conservation Easement”).

av. The Deed was in favor of the Atlantic Coast Conservancy, Inc. (“ACC”).

aw. The Conservation Easement covered the entire Property.

ax. ACC was a “qualified organization” for purposes of Section 170 and the underlying regulations as of August 2, 2016.

ay. ACC was an “eligible donee” for purposes of Section 170 and the underlying regulations as of August 2, 2016.

az. The Conservation Easement constituted a “qualified real property interest” for purposes of Section 170 and the underlying regulations.

ba. The Property was not encumbered by a mortgage as of August 2, 2016.

bb. Hancock did not grant the Conservation Easement to ACC in a bargain sale.

bc. Hancock did not receive any consideration from ACC in exchange for donating the Conservation Easement to ACC.

bd. Hancock did not receive any consideration from a third party in exchange for donating the Conservation Easement to ACC.

be. The Deed was recorded with the Chancery Clerk of Hancock County in Hancock County, Mississippi on August 3, 2016.

bf. The Deed identifies various conservation purposes.

bg. The Deed indicates that the Conservation Easement will protect a relatively natural habitat of fish, wildlife, plants, or similar ecosystems.

bh. The Deed indicates that the Conservation Easement preserves open space (including farmland and forestland) where such preservation is pursuant to a clearly delineated federal, state, or local governmental policy, and will yield a significant public benefit.

bi. The Deed protects the Property as a relatively natural habitat of fish, wildlife, plants, or similar ecosystem, which qualifies as a conservation purpose as defined by Section 170(h)(4)(A)(ii).

bj. The Deed protects the Property as an open space (including farmland and forestland), where such preservation is pursuant to a clearly delineated federal, state, or local governmental policy, and will yield a significant public benefit, which qualifies as a conservation purpose as defined by Section 170(h)(4)(A)(iii)(II).

bk. The Deed describes the purposes of the Conservation Easement as protecting the conservation values of the Property in perpetuity, ensuring that the Property will remain forever predominantly in its natural condition, and preventing any use of the Property that will impair or interfere with the conservation values of the Property.

bl. The Deed identifies the conservation values of the Property.

bm. The Baseline Report identifies the conservation values of the Property.

bn. The Deed granted ACC the right to preserve and protect the conservation values of the Property in perpetuity.

bo. The Deed imposed on ACC the duty to preserve and protect the conservation values of the Property in perpetuity.

bp. The Deed granted ACC the right to enter the Property at reasonable times, to inspect the Property, to monitor compliance with the Deed, and to enforce the purposes of the Conservation Easement.

bq. The Deed prohibits Hancock and all future owners of the Property from the extraction of minerals, oil, gas, or other hydrocarbons, soils, sands, gravel, rock, and other materials on or below the surface of the Property.

br. The Deed prohibits Hancock and all future owners of the Property from constructing improvements on the Property outside of specific areas defined by reference to the Baseline Report.

bs. The restrictions on the use of the Property stated in the Deed are binding on Hancock and all future owners of the Property in perpetuity.

bt. The Deed granted ACC an immediately vested right to a proportionate share of any proceeds that may result from a sale, exchange, or involuntary conversion of the Property, if the Conservation Easement is extinguished in future legal proceedings.

bu. The Deed provides a formula for calculating ACC's proportionate share of extinguishment proceeds that complies with the requirements of Treas. Reg. § 1.170A-14(g)(6)(ii).

bv. A professional biologist prepared the Baseline Report.

bw. The Baseline Report was completed before Hancock donated the Conservation Easement.

bx. The Baseline Report documented the conservation values on the Property at the time of the donation of the Conservation Easement.

by. The Baseline Report documented the physical condition of the Property at the time of the donation of the Conservation Easement.

bz. The Baseline Report concluded that the Property possessed significant wildlife, forest, agricultural, scenic vistas, open space, and plant habitat features.

ca. The Baseline Report concluded that the Property was composed of pine flatwoods forest adjacent to a mature bald cypress swamp forest on floodplains and low terraces, and contains first and second-order freshwater streams.

cb. The Baseline Report contains numerous maps covering the Property, including U.S. Geological Survey topographic maps and aerial photographs.

cc. The Baseline Report contains photographs taken at various locations on the Property.

cd. A licensed and certified real estate appraiser in the state of Mississippi (“Appraiser”) prepared the “Conservation Easement; Appraisal of Market Value Before Conveyance of a Conservation Easement; Market Value After the Conveyance; Market Value of Easement Gift; 236.12+/- Acres in Picayune, Hancock County, Mississippi” (“Easement Appraisal”).

ce. Appraiser performed appraisals on a regular basis.

cf. Appraiser had local knowledge and experience in preparing appraisals related to conservation easements.

eg. Appraiser was not a direct partner of Hancock.

ch. Appraiser was not an indirect partner of Hancock.

ci. Appraiser did not claim, report, or otherwise take a deduction under Section 170 or any other tax provision for the donation of the Conservation Easement.

cj. Appraiser was not a party to the transaction in which Hancock acquired the Property.

ck. Appraiser was not an agent of a party to the transaction in which Hancock acquired the Property.

cl. Appraiser was not the donee of the Conservation Easement.

cm. Appraiser was not an employee of (i) Hancock, (ii) a direct partner of Hancock, (iii) an indirect partner of Hancock, (iv) a party to the transaction in which Hancock acquired the Property, (v) ACC, or (vi) Petitioner.

cn. Appraiser was not “related” under Section 267(b) to any of the persons described immediately above.

co. Appraiser performed a majority of his appraisals in 2016 for parties other than Hancock.

cp. Appraiser was a “qualified appraiser,” as that term is defined under Section 170 and the underlying regulations.

cq. The Tax Court has previously recognized Appraiser as a valuation expert.

cr. The Easement Appraisal was dated August 10, 2016.

cs. The Easement Appraisal was not dated more than 60 days before the date on which Hancock donated the Conservation Easement.

ct. The Easement Appraisal was dated before the extended deadline for filing the 2016 Form 1065 on which the charitable contribution deduction was claimed.

cu. The Easement Appraisal was signed and dated by the Appraiser.

cv. The Easement Appraisal contains a detailed legal description of the Property.

cw. The Easement Appraisal contains a description of the Conservation Easement.

ex. The Easement Appraisal contains a description of the physical condition of the Property.

cy. The Easement Appraisal states the date of the donation of the Conservation Easement to ACC.

cz. The Easement Appraisal contains the name, address, appraiser certification license number, and partial social security number of the Appraiser.

da. The Easement Appraisal contains the name, address, and taxpayer identification number of the appraisal company.

db. The Easement Appraisal contains a list of the qualifications of the Appraiser, including his background, experience, education, and membership in professional appraisal associations.

dc. The Easement Appraisal contains a statement that it was being prepared for income tax purposes.

dd. The Easement Appraisal provides the basis for the conclusions by the Appraiser regarding the fair market value (“FMV”) of the Conservation Easement.

de. The Easement Appraisal states that the FMV of the Property was based on market conditions as of July 18, 2016.

df. The Easement Appraisal concludes that the FMV of the Property, before the donation of the Conservation Easement, was $180,354,000.

dg. The Easement Appraisal concludes that the FMV of the Property, after the donation of the Conservation Easement, was $177,000.

dh. The Easement Appraisal concludes that the FMV of the Conservation Easement was $180,177,000.

di. The Easement Appraisal concludes that the Conservation Easement did not enhance the value of any other property owned by Hancock.

dj. The Easement Appraisal concludes that the FMV of the Conservation Easement, taking into account the enhancement or lack of enhancement to other property owned by Hancock was $180,177,000.

dk. The Easement Appraisal concludes that the highest and best use (“HBU”) of the Property, before the donation of the Conservation Easement, was the mining of frac sand, construction sand, and construction gravel (“Before-Donation-HBU”).

dl. The Easement Appraisal concludes that the Before-Donation-HBU was legally permissible at the time of the donations.

dm. The Easement Appraisal concludes that the Before-Donation-HBU was physically possible at the time of the donation.

dn. The Easement Appraisal concludes that the Before-Donation-HBU was financially feasible at the time of the donation.

do. The Easement Appraisal concludes that the Before-Donation-HBU was maximally productive at the time of the donation.

dp. In determining the value of the surface Property before the donation of the Conservation Easement, Appraiser used the sales comparison and the income capitalization approaches.

dq. The Appraiser determined that using a sales comparison approach was not appropriate for valuing the Property's mineral reserves.

dr. In determining the value of the Property's mineral reserves before the donation of the Conservation Easement, Appraiser used the income capitalization approach.

ds. In determining the FMV of the Property's mineral reserves before the donation of the Conservation Easement under the income method, Appraiser utilized a discounted cash flow (“DCF”) analysis.

dt. Respondent has advocated the use of the DCF method for valuing mineral properties in previous litigation before the Tax Court.

du. The DCF analysis has been recognized as appropriate under the Uniform Appraisal Standards for Federal Land Acquisitions (“UASFLA”) in situations where mineral interests are being acquired.

dv. The Easement Appraisal concludes that the HBU of the Property, after the donation of the Conservation Easement, was agricultural, forestry, and recreational use (“After-Donation-HBU”).

dw. The Easement Appraisal concludes that the After-Donation-HBU is legally permissible after the donation.

dx. The Easement Appraisal concludes that the After-Donation-HBU is physically possible after the donation.

dy. The Easement Appraisal concludes that the After-Donation-HBU is financially feasible after the donation.

dz. The Easement Appraisal concludes that the After-Donation-HBU is maximally productive after the donation.

ea. In determining the value of the Property after the donation of the Conservation Easement, Appraiser used the sales comparison approach.

eb. In determining the FMV of the Property after the donation of the Conservation Easement under the sales comparison approach, Appraiser analyzed 17 sales of comparable properties encumbered by conservation easements.

ec. The appraisal fee charged by Appraiser for the preparation of the Easement Appraisal was not based on a percentage of the appraised value of the Conservation Easement.

ed. The appraisal fee charged by Appraiser for the preparation of the Easement Appraisal was not based on a percentage of the amount allowable as a charitable contribution deduction under Section 170.

ee. The Easement Appraisal was a “qualified appraisal,” as that term is defined in Section 170 and the underlying regulations.

ef. ACC issued a letter to Hancock on August 2, 2016, acknowledging receipt of the donation of the Conservation Easement (“Donation Acknowledgment Letter”).

eg. ACC issued a letter to Hancock on December 2, 2016, acknowledging receipt of stewardship funds of $50,500 (“Stewardship Acknowledgment Letter”).

eh. The Donation Acknowledgment Letter confirms that ACC did not provide any goods or services in exchange for the donation of the Conservation Easement.

ei. The Stewardship Acknowledgment Letter confirms that ACC did not provide any goods or services in exchange for the donation of the stewardship funds of $50,500.

ej. The Donation Acknowledgment Letter was a “contemporaneous written acknowledgement” for purposes of Section 170 and the underlying regulations.

ek. The Stewardship Acknowledgment Letter was a “contemporaneous written acknowledgement” for purposes of Section 170 and the underlying regulations.

el. Hancock timely filed a 2016 Form 1065.

em. The 2016 Form 1065, Schedule K, line 13a reports, among other items, total charitable contributions of $180,227,500.

en. Statement 1 to the 2016 Form 1065 indicates that the total charitable contribution deduction of $180,227,500 was comprised of (i) a non-cash donation of $180,177,000 (i.e., the Conservation Easement donated to ACC) and (ii) cash contributions of $50,500 (i.e., stewardship funds to ACC).

eo. The 2016 Form 1065, Schedule K, line 1 reports, among other items, other deductions of $1,712,242.

ep. Statement 1 to the 2016 Form 1065 indicates that the total other deductions of $1,712,242 were comprised of (i) bank charges of $415, (ii) insurance premiums of $1,709,856, (iii) office expenses of $111, (iv) postage expenses of $250, and (v) registration expenses of $1,650.

eq. The 2016 Form 1065, Schedule K, line 13d reports, among other items, other deductions of $4,416,251.

er. Statement 1 to the 2016 Form 1065, Schedule K, line 13d indicates that the total other deductions of $4,416,251 was comprised of (i) appraisal fees of $38,698, (ii) legal and professional fees of $1,877,553, and (iii) management fees of $2,500,000.

es. Hancock attached Form 8283 (Noncash Charitable Contributions), the Easement Appraisal, and the Deed to its timely 2016 Form 1065.

et. Hancock attached to its Form 8283 a document titled “Supporting Documentation for Form 8283” (“Supporting Documentation”).

eu. Form 8283 and the Supporting Documentation contain all the information required by Treas. Reg. § 1.170A-13(c)(4) with respect to the donation of the Conservation Easement.

ev. Form 8283 indicates that Hancock made a qualified conservation contribution with a value of $180,177,000 to ACC.

ew. Form 8283 reports the adjusted basis of Hancock in the Property.

ex. Form 8283 reports the manner by which Hancock obtained the Property.

ey. Form 8283 reports the date on which Hancock obtained the Property.

ez. ACC signed and dated Form 8283.

fa. Appraiser signed and dated Form 8283.

fb. Form 8283 contains the name and taxpayer identification number of Hancock.

fc. Form 8283 contains the name, address, and taxpayer identification number of ACC.

fd. Form 8283 identifies the date on which ACC received the Conservation Easement.

fe. Form 8283 contains the name of Appraiser.

ff. Form 8283 contains the address and tax identification number of the appraisal company.

fg. Form 8283 contains a certification by Appraiser stating that (i) he performed appraisals on a regular basis, (ii) he was qualified to make appraisals of the type of property being valued, (iii) the fee charged for the appraisal was not based on a percentage of the appraised property value, (iv) he was not one of the persons described in Treas. Reg. § 1.170A-13(c)(5)(iv), (v) he understood that an intentionally false or fraudulent overstatement of the value of the property may subject him to a civil penalty under Section 6701, and (vi) he was not barred from presenting evidence or testimony by the Office of Professional Responsibility.

fh. The statements by Appraiser in Form 8283 described immediately above were accurate.

fi. The Supporting Documentation attached to Form 8283 contains a detailed legal description of the Property, through incorporation of the Baseline Report and Easement Appraisal.

fj. The Supporting Documentation attached to Form 8283 contains a summary of the physical condition of the Property at the time of the donation, through incorporation of the Baseline Report and Easement Appraisal.

fk. Form 8283 contains a description of the manner and date on which Hancock obtained the Property, through the incorporation of the Supporting Documentation, Baseline Report, and Easement Appraisal.

fl. Respondent sent an audit-selection letter to Hancock dated July 17, 2018.

fm. Respondent issued a Notice of Beginning of Administrative Proceedings (“NBAP”), dated September 11, 2016, with respect to the 2016 Form 1065.

fn. Hancock maintained all records required with respect to the 2016 Form 1065.

fo. Hancock and its representatives cooperated with Respondent during the audit.

fp. Hancock and its representatives cooperated with all requests by Respondent for information, documents, meetings, site visits, and interviews during the audit.

fq. Respondent issued at least 22 Information Document Requests (“IDRs”), plus supplemental IDRs, during the audit.

fr. Hancock and its representatives timely responded to each IDR.

fs. Respondent never issued a Summons to Hancock during the audit.

ft. Respondent never issued a Formal Document Request to Hancock during the audit.

fu. Representatives of Hancock provided a tour of the Property to Respondent during the audit.

fv. Hancock properly reported a cash charitable contribution of $50,500 on its 2016 Form 1065.

fw. The FPAA allows a cash charitable contribution of $50,500.

fx. The FPAA asserts an adjustment for “charitable contributions — 50 percent” (i.e., the donation of the Conservation Easement) of $180,177,000.

fy. The FPAA describes the basis for asserting the $180,177,000 adjustment to charitable contributions as follows: “You have not established that that [Hancock] made a noncash charitable contribution during the tax year ended December 31, 2016.

fz. The FPAA also describes the basis for asserting the $180,177,000 adjustment to charitable contributions as follows: “To the extent that you are able to establish that a noncash charitable contribution has been made, you failed to establish that it satisfied all the requirements of I.R.C. § 170 and the corresponding Treasury Regulations for deducting a noncash charitable contribution.”

ga. The FPAA asserts an adjustment for “other deductions” of $1,712,242.

gb. The FPAA describes the sole basis for asserting the $1,712,242 adjustment as follows: “You have not substantiated the $1,712,242 deduction claimed by [Hancock] for Other Expenses as ordinary and necessary in the conduct of a trade or business as required under I.R.C. § 162.”

gc. The FPAA asserts an adjustment for “other deductions” of $4,416,251.

gd. The FPAA describes the sole basis for asserting the $4,416,251 adjustment as follows: “You have not substantiated the $4,416,251 deduction claimed by [Hancock] for Other Expenses as ordinary and necessary in the conduct of a trade or business as required under I.R.C. §162.”

ge. The FPAA describes no specific facts, legal theories, tax theories, or analysis for asserting the adjustments to the 2016 Form 1065.

gf. The FPAA describes no specific facts, legal theories, tax theories, or analysis for possible defenses and/or exceptions to penalties asserted.

gg. After conducting an examination lasting over two years, having meetings with Hancock's representatives, issuing and receiving responses to at least 22 IDRs, and conducting a site visit of the Property in which multiple agents of Respondent participated, the Form 886-A (Explanation of Items) attached to the FPAA consists of just one page.

gh. The FPAA does not describe as a basis for adjustment that the Conservation Easement placed on the Property does not constitute a “qualified real property interest” for purposes of Section 170.

gi. The FPAA does not describe as a basis for adjustment that ACC was not a “qualified organization” for purposes of Section 170.

gj. The FPAA does not describe as a basis for adjustment that ACC was not an “eligible donee” for purposes of Section 170.

gk. The FPAA does not describe as a basis for adjustment that the Conservation Easement fails to meet any one of the “conservation purpose” requirements of Section 170(h)(4)(A).

gl. The FPAA does not describe as a basis for adjustment that the restrictions found in the Deed are not enforceable and binding on current and future owners of the Property in perpetuity.

gm. The FPAA does not describe as a basis for adjustment that the conservation purposes of the Conservation Easement are not protected in perpetuity.

gn. The FPAA does not describe as a basis for adjustment that the Baseline Report fails to adequately document the physical condition of the Property at the time of the donation of the Conservation Easement.

go. The FPAA does not describe as a basis for adjustment that the Easement Appraisal was not a “qualified appraisal.”

gp. The FPAA does not describe as a basis for adjustment that Appraiser was not a “qualified appraiser” with respect to the donation of the Conservation Easement.

gq. The FPAA does not describe as a basis for adjustment that Appraiser failed to use acceptable appraisal standards and methods in preparing the Easement Appraisal.

gr. The FPAA does not describe as a basis for adjustment that the Form 8283 and the Supporting Documentation attached to the 2016 Form 1065 were late, incomplete, or inaccurate.

gs. The FPAA does not propose any adjustment to the basis in the Property reported by Hancock in the 2016 Form 1065.

gt. The FPAA does not propose to change any method of accounting utilized by Hancock and reflected in the 2016 Form 1065.

gu. The penalties alleged in the FPAA do not meet the requirements of Section 6751(b).

gv. Respondent never hired an outside, independent geologist or similar professional to determine the potential for mining the Property during the audit.

gw. Respondent never hired an outside, independent engineer or similar professional to conduct a geotechnical exploration of the Property during the audit.

gx. Respondent never hired an outside, independent mining expert to determine the extent of the mineral reserves underlying the Property during the audit.

gy. Respondent never hired an outside, independent appraiser to determine the FMV of the Conservation Easement donation during the audit.

gz. Respondent never hired an outside, independent biologist, forester, environmental scientist, zoologist, hydrologist, or other type of conservation expert to determine whether the Conservation Easement donation satisfied the “conservation purpose” requirements of Section 170(h)(4)(A).

ha. Respondent solely relied on its own employees (“IRS Appraisers”) to appraise the Property.

hb. The IRS Appraisers were not licensed in Mississippi.

hc. Respondent solely relied on its own employee (“IRS Engineer”) to determine the FMV of the mineral reserves on the Property.

hd. The IRS Engineer was not a licensed Professional Engineer in 2019.

he. Respondent solely relied on its own employees to determine the FMV of the Conservation Easement donation.

hf. Respondent did not rely on any party, other than the IRS Appraisers, to make any determination regarding whether the Easement Appraisal was a qualified appraisal.

hg. Respondent solely relied on his own employees to determine all proposed adjustments in the FPAA.

hh. Respondent ignored the determination by the IRS Appraisers of the FMV of the Property in issuing the FPAA.

hi. Hancock fully complied with Section 170 and the underlying regulations with respect to the donation of the Conservation Easement.

hj. Hancock substantially complied with Section 170 and the underlying regulations with respect to the donation of the Conservation Easement.

hk. Hancock properly deducted ordinary and necessary business expenses on its 2016 Form 1065.

hl. In claiming the charitable deduction related to the Conservation Easement donation on its 2016 Form 1065, Hancock relied on the First Mineral Assessment, Second Mineral Assessment, Survey, Baseline Report, Easement Appraisal, and Deed.

hm. Hancock reasonably relied on the First Mineral Assessment, Second Mineral Assessment, Survey, Baseline Report, Easement Appraisal, and Deed.

hn. Hancock reasonably relied on the qualified, independent, informed professionals who prepared the First Mineral Assessment, Second Mineral Assessment, Survey, Baseline Report, Easement Appraisal, and Deed.

(i) Determine that the 2016 Form 1065 is accurate as filed;

(ii) Determine that there are no adjustments, penalties, additions to tax, or other amounts with respect to the 2016 Form 1065;

(iii) If warranted by the evidence at trial, determine that Hancock undervalued the Conservation Easement and increase the amount of the non-cash charitable donation deduction for 2016 accordingly;

(iv) Determine that Respondent has the burden of proof on all issues; and

(v) Grant such other and further relief that it deems appropriate.