IRS Scores a Win: Penalty Approval Upheld in Easement Case

TCM 2025-74

In Sand Valley Holdings, LLC v. Commissioner, Judge Lauber granted the IRS's motion for partial summary judgment, finding that the IRS had met the requirements of Internal Revenue Code section 6751(b)(1) regarding supervisory approval of penalties. The case concerned a charitable contribution deduction claimed by Sand Valley Holdings, LLC, for the donation of a conservation easement in 2016, which the IRS disallowed. The IRS issued a Notice of Final Partnership Administrative Adjustment (FPAA) disallowing the deduction and determining penalties.

The court concluded that the IRS secured timely supervisory approval for the penalties before issuing the FPAA. The court relied on declarations and documents showing that Revenue Agent Anthony Bryant made the initial penalty determination, and his immediate supervisor, Margaret McCarter, approved it in writing. The court found unpersuasive the taxpayer's arguments that the determination was made by someone else or that a higher-level official was required to approve the penalties. The court also found that the discovery the petitioner sought was irrelevant to the resolution of the motion. In its analysis, the court followed the precedent of the Eleventh Circuit from Kroner v. Commissioner.

Legal Citations:

• IRC: § 6751(b)(1), § 6501(a), § 6501(c)(4), § 7482(b)(1)(E), § 6662(h), § 6662(b)–(e), § 6662A

• Rules: Tax Court Rules of Practice and Procedure, Rule 121(a)(2), Rule 121(d), Rule 70(b)(1), Rule 121(e)

• Cases:

  • Sand Valley Holdings, LLC v. Commissioner, T.C. Memo. 2025-74

  • Sundstrand Corp. v. Commissioner, 98 T.C. 518 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994)

  • Palmolive Bldg. Invs., LLC v. Commissioner, 152 T.C. 75 (2019)

  • Frost v. Commissioner, 154 T.C. 23 (2020)

  • Golsen v. Commissioner, 54 T.C. 742, 756–57 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971)

  • Kroner v. Commissioner, 48 F.4th 1272 (11th Cir. 2022), rev’g in part T.C. Memo. 2020-73

  • Laidlaw’s Harley Davidson Sales, Inc. v. Commissioner, 29 F.4th 1066, 1074 (9th Cir. 2022), rev’g and remanding 154 T.C. 68 (2020)

  • Chai v. Commissioner, 851 F.3d 190, 220 (2d Cir. 2017), aff’g in part, rev’g in part T.C. Memo. 2015-42

  • Sand Inv. Co. v. Commissioner, 157 T.C. 136, 142 (2021)

  • Park Lake II, LLC v. Commissioner, T.C. Memo. 2025-11

  • Salacoa Stone Quarry, LLC v. Commissioner, T.C. Memo. 2023-68

  • Cattail Holdings, LLC v. Commissioner, T.C. Memo. 2023-17

  • Belair Woods, LLC v. Commissioner, 154 T.C. 1, 15 (2020)

  • Nassau River Stone, LLC v. Commissioner, T.C. Memo. 2023-36

  • Hancock Cnty. Land Acquisitions, LLC v. Commissioner, T.C. Memo. 2025-50

  • Ivey Branch Holdings, LLC v. Commissioner, T.C. Memo. 2025-63

  • Goddard v. Commissioner, T.C. Memo. 2022-96, 124 T.C.M. (CCH) 187, 197

  • Snook v. Tr. Co. of Ga. Bank of Savannah, N.A., 859 F.2d 865, 870 (11th Cir. 1988)

  • Hickman v. Taylor, 329 U.S. 495, 507–08 (1947)

  • Caney v. Commissioner, T.C. Memo. 2010-90, 99 T.C.M. (CCH) 1366, 1368

  • Sparta Pink Prop., LLC v. Commissioner, T.C. Memo. 2022-88, 124 T.C.M. (CCH) 121, 124

  • Patel v. Commissioner, T.C. Memo. 2020-133, 120 T.C.M. (CCH) 211, 214

  • Raifman v. Commissioner, T.C. Memo. 2018-101, 116 T.C.M. (CCH) 13, 28

  • Long Branch Land, LLC v. Commissioner, T.C. Memo. 2022-2, 123 T.C.M. (CCH) 1008, 1009

  • Thompson v. Commissioner, T.C. Memo. 2022-80

• Other:

  • Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, §§ 401–407, 96 Stat. 324, 648–71

  • Internal Revenue Manual (IRM) 4.31.2.7.2.5(1)(d) (May 10, 2019)

  • IRM 33.1.2.7.4 (June 2, 2014)

  • IRM 33.1.2.8(1) (Oct. 17, 2016)

Counsel:

• For Petitioner: Vivian D. Hoard and Meeren S. Amin

• For Respondent: Rion A. Daley, Olivia M. Rembach, Rachel L. Gregory, Laurel B. Stout, and Brian R. Cullin

Scores:

• Readability (Flesch-Kincaid Grade Level): 14

• Sentiment: 70 (Neutral to slightly negative, given the legal context)

• Case Significance: 65