Tax Court Rules That IRS Too Aggressive In Applying Qualified Appraisal And Qualified Appraiser Standards

In Friedberg v. Comm'r, T.C. Memo 2011-238, the Tax Court granted summary judgment for the IRS, holding that an appraisal used to substantiate a facade easement donation amount was not a qualified appraisal because it determined that the appraiser, although purporting to employ comparable sales method for easement's post-donation valuation, didn't actually use that or any other sanctioned method. The court determined that the appraiser used what appeared to be flawed percentage diminution method that looked at eased properties located in cities other than where subject property was located. Because the Tax Court believe that the appraiser did not properly apply the stated methodologies, the Tax Court opined that the façade easement appraisal was not a qualified appraisal.

In Friedberg v. Comm'r, T.C. Memo 2013-224 ("Friedberg II"), issued this week, the taxpayer filed a motion for reconsideration after the Second Circuit's decision in Scheidelman v. Comm'r, 682 F.3d 189, 196-197 (2d Cir. 2013), holding that for purposes of determining compliance with the qualified appraisal rules "it is irrelevant that the ***[Commissioner] believes that the method employed was sloppy or inaccurate, or haphazardly applied... The regulation requires only that the appraiser identify the valued method "used"; it does not require that the method adopted be reliable." After considering the Scheidelman decision, the Tax Court applied the Scheidelman standard that to be considered a qualified appraisal, the appraisal must give the Commissioner the information...