William P. Wells & Ruth E. Wells

United States Tax Court

T.C. Memo. 2026-49

WILLIAM P. WELLS AND RUTH E. WELLS,

Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 13104-24. Filed June 10, 2026.

__________

Matthew Pollick Cavitch, for petitioners.

Christopher D. Bradley, David E. Coe, Emily A. Willis, and Donielle A.

Holmon, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

WEILER, Judge: The Internal Revenue Service (IRS or

respondent) issued a Notice of Deficiency (NOD) to petitioners, William

P. Wells and Ruth E. Wells, disallowing the carryover charitable

contribution deductions petitioners claimed for tax years 2019, 2020,

and 2021 (tax years at issue) regarding a noncash charitable

contribution of real property consisting of both land and structures in

Claiborne County, Mississippi.

The issues for decision are whether (1) petitioners satisfied the

requirements of section 170(f)(8) 1 for the charitable contribution they

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all

relevant times, and Rule references are to the Tax Court Rules of Practice and

Procedure.

Served 06/10/26

2

[*2] made during tax year 2016 and (2) section 6662 penalties are

applicable for the tax years at issue.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The

Stipulations of Facts and the attached Exhibits are incorporated herein

by this reference. Petitioners resided in Eads, Tennessee, when they

timely petitioned this Court. 2

I. Background

French Camp Academy (FCA), a Christian boarding school that

has been operating since 1885, is in the town of French Camp,

Mississippi. In 1998 FCA took over Chamberlain-Hunt Academy (CHA),

a military boarding school and nonprofit entity of the State of

Mississippi. CHA is in Port Gibson, Mississippi, and consists of both

land and structures in Claiborne County (Property). FCA owned the

Property through Chamberlain Hunt Properties, LLC (CHP). Over a

14-year period FCA invested over $22 million relating to operational

shortfalls for CHA and capital improvements to the Property. FCA

determined that operating CHA was costly, and it was not acquiring the

requisite number of students to fund it.

FCA made extensive efforts to sell the Property, including posting

it on a publicly listed site and presenting it to the Mississippi State

Government and Alcorn University. The only offer FCA received was

from Chamberlain, LLC (Chamberlain). Mr. Wells and Bill Payne, a

former FCA board member, each owned a 50% interest in Chamberlain.

On July 23, 2013, FCA sold the Property by transferring all of its

interest in its wholly owned entity CHP to Chamberlain for $200,000.

After the transaction, CHA operated for another school year before

closing its doors at the end of 2014. 3 The CHA board of directors at this

time consisted of Tom Bowen, Jim Montgomery, and Mr. Wells. 4

2 Absent stipulation to the contrary, this case is thus appealable to the U.S.

Court of Appeals for the Sixth Circuit. See I.R.C. § 7482(b)(1)(A), (2).

3 In 2015 Jesse Lane, a real estate agent, listed the Property for approximately

$5.5 million, but it did not sell.

4 Tom Bowen resigned as a director sometime after December 30, 2016.

3

[*3] II. Donation of the Property

On December 30, 2016, Chamberlain transferred the Property

from CHP to CHA via quitclaim deed, which was notarized on December

30, 2016 (Quitclaim Deed). The Quitclaim Deed was recorded in

Claiborne County on July 11, 2017. Mr. Wells drafted the Quitclaim

Deed and signed it as manager of Chamberlain, the managing member

of CHP. The Quitclaim Deed granted the Property in consideration for

the sum of $1. It is unclear who physically filed the Quitclaim Deed with

Claiborne County.

On December 30, 2016, Mr. Wells, on behalf of Chamberlain,

signed and sent a letter addressed to Mr. Montgomery, as president of

CHA (Donation Letter). The Donation Letter was drafted by Mr. Wells’s

accountant and return preparer, Dennis Long. At this time, Mr. Long

had been Mr. Wells’s accountant for 30 years, and he considered Mr.

Long to be knowledgeable and reliable about tax law. The Donation

Letter stated:

On behalf of Chamberlain, LLC, sole owner of Chamberlain

Hunt Properties, please accept our donation of the

Chamberlain Hunt Academy Campus consisting of 104

acres of land and 110,622 square feet of buildings. This

property is specifically described in detail in the Integra

Realty Resources Appraisal, IRR – Jackson File No. 176-

2016-0410, dated December 15, 2016. This donation is

being made by Quitclaim Deed dated December 30, 2016,

signed by me William P Wells, Manager, Chamberlain

LLC, managing member of Grantor [CHP]. Per the above

referenced appraisal, the value of the donation is

$4,420,000. It is our sincere hope that this donation

perpetuates Chamberlain Hunt Academy’s operations.

On June 16, 2017, Mr. Long emailed Mr. Wells instructions for a

contemporaneous letter that needed to be signed by Mr. Montgomery

acknowledging the donation, and Mr. Long provided instructions for the

appraiser regarding the Property. In addition, Mr. Long attached the

instructions page for Form 8283, Noncash Charitable Contributions,

regarding “Part IV, Donee Acknowledgement,” and he hand wrote on the

instructions page “for Chamberlain Hunt Academy.”

On June 23, 2017, there was email correspondence between Mr.

Long and Mr. Wells in which Mr. Long stated: “I still need one more

4

[*4] letter signed by Mr. Montgomery acknowledging the Donation. This

was underlined in the instructions to him along with the Form 8283 he

signed.” In response, on June 26, 2017, Mr. Wells asked for clarification

regarding the contemporaneous written acknowledgment (CWA) under

section 170(f)(8) and Form 8283. Later that day Mr. Long responded,

explaining:

He just needs to write a letter on CHA letterhead

acknowledging and thanking Chamberlain, LLC for the

generous gift of the Campus property as of December 30,

2016. It would be really good if he says he understands that

the Campus has a current appraised value of $4,420,000.

That is all that it needs.

On that same day Mr. Wells emailed Mr. Montgomery, writing: “I need

you to write a short note on CHA letterhead. I have drafted already. Let

me know when you can come by or when you can do lunch.” Mr.

Montgomery replied on June 27, 2017, that he could “certainly sign what

[he] need[ed] to sign today.”

Mr. Montgomery, on CHA letterhead, handwrote and signed as

president of CHA a letter addressed to Messrs. Wells and Payne

(Acknowledgment Letter). The Acknowledgment Letter was undated

and stated:

Thank you for the generous gift of the campus property to

Chamberlain Hunt Academy. This gift will be used to help

the school attempt to achieve a mission of continuing to

help students develop and come closer to the Lord in their

faith. As noted, the value of the gift is $4.42 million.

III. Tax Reporting

Mr. Wells signed CHA’s Form 990, Return of Organization

Exempt From Income Tax, identifying himself as president for the

period ending May 31, 2016, and for the period ending May 31, 2017.

CHA’s board of directors for the tax period ending May 31, 2016,

consisted of Messrs. Bowen, Montgomery, and Wells. CHA’s board of

directors for the tax period ending May 31, 2017, included Messrs.

Montgomery and Wells.

On the 2016 Form 1065, U.S. Return of Partnership Income,

Chamberlain claimed a deduction of $4.42 million for a noncash

charitable contribution of the Property to CHA as of December 30, 2016.

5

[*5] Chamberlain attached Form 8283 to its 2016 Form 1065, which

included an attached appraisal prepared by John R. Praytor dated

December 15, 2016, valuing the Property at $4.42 million. A

proportionate share of the deduction flowed through Chamberlain to Mr.

Wells in accordance with his partnership interest.

For tax year 2016 the Wellses reported a charitable contribution

of $2.21 million on their joint Form 1040, U.S. Individual Income Tax

Return, relating to the donation of the Property by Chamberlain. The

Wellses carried forward this charitable contribution on their Forms

1040 for tax years 2019, 2020, and 2021, claiming deductions of

$168,936, $620,192, and $374,561, respectively. Petitioners timely filed

their Forms 1040 for the tax years at issue.

IV. NOD

On June 4, 2024, respondent issued an NOD for petitioners’ 2019,

2020, and 2021 tax years regarding their Forms 1040. The NOD

determined deficiencies of $45,458, $224,368, and $132,882 and

accuracy-related penalties under section 6662 of $9,091.60, $44,873.60,

and $26,576.40 for 2019, 2020, and 2021, respectively. The Form 886–A,

Explanation of Items, disallowed the charitable contribution deduction

carryovers from prior years related to the donation of the Property. 5

Petitioners timely filed their Petition on August 9, 2024, alleging that

they received an 11-page NOD which failed to contain an explanation of

how the deficiencies were calculated or the reason for the adjustments. 6

However, with the filing of his Answer, respondent attached a complete

copy of the NOD.

OPINION

I. Burden of Proof

The taxpayer generally bears the burden of proving the

determinations set forth in an NOD are in error. See Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933). The burden of proof may shift to

5 The parties filed a Stipulation of Settled Issues, Oct. 24, 2025, stipulating

additional adjustments determined in the NOD, including “Sales of Raised Livestock,

Produce, Etc.” reported on Schedule F, Profit or Loss From Farming, and “Taxable

Pensions and Annuities.”

6 The Petition included only the NOD cover letter, Form 4089, Notice of

Deficiency Waiver, and a survey request form from the IRS Independent Office of

Appeals (Appeals).

6

[*6] the Commissioner if the taxpayer introduces credible evidence with

respect to the issue and satisfies certain conditions. I.R.C. § 7491(a)(1)

and (2). Petitioners allege that the burden shifts to respondent under

Rule 142(a)(1) and under section 7491. After considering the issue, we

do not find petitioners’ arguments compelling.

First, under Rule 142(a)(1) petitioners contend that they received

only an 11-page NOD which did not enclose additional statements

explaining the deficiencies. In other words petitioners argue that since

their NOD did not include an explanation as to the deficiency amounts,

respondent is now trying to argue a “new matter.” We disagree.

The burden of proof shifts to the Commissioner with respect to

any “new matter” or “increase[] in deficiency.” Rule 142(a)(1); see Shea

v. Commissioner, 112 T.C. 183, 191 (1999); Wayne Bolt & Nut Co. v.

Commissioner, 93 T.C. 500, 507 (1989); Turner v. Commissioner, 68 T.C.

48, 50 (1977).

The NOD offered by respondent with his Answer and later filed

into evidence at trial contained a full explanation of the issues. Further,

petitioners were fully aware of the issues and the determination made

by Appeals. Petitioners stated in their Petition that the sole issue

remaining in dispute was the 2016 noncash charitable contribution.

Thus, there was no “new matter” arising after the issuance of the NOD.

Second, section 7491(a) provides that the burden of proof may

shift to the Commissioner on a factual issue if, among other

requirements, the taxpayer “introduces credible evidence with respect

to [that] issue”; “complied with the requirements under this title to

substantiate any item;” and “has maintained all records required under

this title and has cooperated with reasonable requests by the

[Commissioner] for witnesses, information, documents, meetings, and

interviews.” I.R.C. § 7491(a)(1) and (2).

Petitioners have not presented a factual dispute in which the

burden of proof becomes controlling. Here the parties agree that the

Court should consider petitioners’ four documents for the CWA issue:

the Donation Letter, the Quitclaim Deed, the Acknowledgment Letter,

and the Form 8283. Thus, the question is whether under section 170 the

facts of this case establish that the CWA requirements were met.

Although the issue is a mixed question of fact and law, it is primarily a

legal question. Consequently, the allocation of the burden of proof has

no bearing on the legal issue of whether the CWA requirements were

7

[*7] met. See Barnes v. Commissioner, T.C. Memo. 2012-80, 103 T.C.M.

(CCH) 1424, 1429–30, aff’d, 712 F.3d 581 (D.C. Cir. 2013); Harper v.

Commissioner, T.C. Memo. 2002-121, 83 T.C.M. (CCH) 1641, 1648; see

also Williams v. Commissioner, 120 F. App’x 289, 293 (10th Cir. 2005),

aff’g T.C. Memo. 2003-97.

Accordingly, we need not decide the section 7491(a) issue since

“[i]n a case where the standard of proof is preponderance of the evidence

and the preponderance of the evidence favors one party, we may decide

the case on the weight of the evidence and not on an allocation of the

burden of proof.” Knudsen v. Commissioner, 131 T.C. 185, 189 (2008),

supplementing T.C. Memo. 2007-340; see Esgar Corp. v. Commissioner,

744 F.3d 648, 653–54 (10th Cir. 2014), aff’g T.C. Memo. 2012-35 and

Tempel v. Commissioner, 136 T.C. 341 (2011); Geiger v. Commissioner,

279 F. App’x 834, 835 (11th Cir. 2008), aff’g T.C. Memo. 2006-271. We

discuss the burden of proof applicable to the accuracy-related penalties

respondent determined against petitioners separately in connection

with our discussion of those penalties.

II. Charitable Contributions

Section 170(a)(1) allows taxpayers to deduct charitable

contributions made within the taxable year. The term “charitable

contribution” is defined in section 170(c). For contributions of property

other than money, the deduction is generally equal to the property’s fair

market value (FMV) at the time of the contribution. Treas. Reg.

§ 1.170A-1(c)(1). A deduction is allowed for the value of charitable

contributions only if verified under regulations prescribed by the

Secretary. I.R.C. § 170(a)(1).

Section 170(f) sets forth a series of substantiation requirements

that vary depending on the character and size of the taxpayer’s

charitable gift. Specifically section 170(f)(8)(A) provides that “[n]o

deduction shall be allowed under subsection (a) for any contribution of

$250 or more unless the taxpayer substantiates the contribution by a

[CWA] of the contribution by the donee organization that meets the

requirements of subparagraph (B).” Additional verification

requirements including “a description of such property and such other

information as the Secretary may require” are imposed for contributions

of property with a claimed value exceeding $500, see I.R.C.

§ 170(f)(11)(B), while for contributions of more than $5,000 the

additional and more rigorous “qualified appraisal” by a qualified

appraiser is required, see I.R.C. § 170(f)(11)(C), (E).

8

[*8] For purposes of this Opinion respondent does not contest the

existence of the alleged donation. Rather, he contends that no deduction

is available, as a matter of law, because petitioners failed to satisfy the

requirements of the CWA. Therefore, we consider those requirements in

turn.

III. CWA Requirements

Section 170(f)(8)(B) requires that the CWA state (1) the amount

of cash and a description (but not value) of any property other than cash

contributed, (2) whether the charitable organization provided any goods

or services in consideration, in whole or part, for the contributed

property, and (3) a description and good-faith estimate of the value of

any goods or services 7 the taxpayer received as consideration. 8 Addis,

118 T.C. at 533–34. Furthermore, the taxpayer must receive the CWA

from the donee organization on or before the earlier of the date the

taxpayer files his return or the due date for filing the return. I.R.C.

§ 170(f)(8)(C).

A taxpayer’s failure to supply a satisfactory CWA bars a

charitable contribution deduction. Izen v. Commissioner, 148 T.C. 71, 77

(2017), aff’d per curiam, 38 F.4th 459 (5th Cir. 2022); 15 W. 17th St. LLC

v. Commissioner, 147 T.C. 557, 562–63 (2016); Albrecht v.

Commissioner, T.C. Memo. 2022-53, at *3–4. The doctrine of substantial

compliance does not apply in this context. Izen, 148 T.C. at 77; 15 W.

17th St., 147 T.C. at 562; French, T.C. Memo. 2016-53, at *8; see also

Addis v. Commissioner, 374 F.3d at 887 (“The deterrence value of [a]

total denial of a deduction [in the case of an improper CWA] comports

with the effective administration of a self-assessment and self-reporting

system.”). The CWA and other substantiation requirements of section

170 are designed to “foster disclosure of ‘dual payment’ or quid pro quo

contributions.” Viralam v. Commissioner, 136 T.C. 151, 171 (2011).

A CWA, however, need not take any specific form and may be

furnished to the donor (for example) by letter, postcard, or computer-

generated media. French, T.C. Memo. 2016-53, at *7; Schrimsher v.

7 “Goods or services include cash, property, services, benefits, and privileges.”

Addis v. Commissioner, 118 T.C. 528, 534 n.8 (2002), aff’d, 374 F.3d 881 (9th Cir. 2004);

see Treas. Reg. § 1.170A-13(f)(5).

8 “A donee organization provides goods or services in consideration for a

taxpayer’s payment if, at the time the taxpayer makes the payment to the donee

organization, the taxpayer receives or expects to receive goods or services in exchange

for that payment.” Treas. Reg. § 1.170A-13(f)(6).

9

[*9] Commissioner, T.C. Memo. 2011-71, 101 T.C.M. (CCH) 1329, 1330

(citing legislative history). “If the donee organization provides no goods

or services to the taxpayer in consideration of the taxpayer’s

contribution, the written substantiation must include a statement to

that effect.” Irby v. Commissioner, 139 T.C. 371, 387–88 (2012).

A. Parties’ Arguments

Petitioners argue that they satisfied the CWA requirements in

several ways. First they argue, citing Irby, 139 T.C. 371, that the

Donation Letter, the Quitclaim Deed, the Form 8283, and the

Acknowledgment Letter should be read together, given that Mr. Wells

was both the donor and the donee. Second, petitioners argue that the

Donation Letter, the Quitclaim Deed, the Form 8283, and the

Acknowledgment Letter repeatedly provide that the claimed deduction

is exactly equal to the claimed value of the donation which shows that

CHA provided no goods or services in consideration of the contribution

made by Chamberlain.

Respondent contends Chamberlain failed to secure from CHA a

CWA that satisfies section 170(f)(8). Respondent does not dispute that

the Court may consider multiple documents in determining whether the

CWA was obtained; however, he argues that the documents petitioners

relied on contain no CWA from the donee, CHA. Further, respondent

contends that the Quitclaim Deed does not specify whether CHA

provided any goods or services, that CHA was not a party to and did not

sign the Quitclaim Deed, and that the Quitclaim Deed does not state it

represented the entire agreement between the parties.

B. Analysis

This Court in Irby, 139 T.C. at 389, determined that “we have

found no authority to indicate . . . that the [CWA] may not be made up

of a series of documents. We thus find that, collectively, the documents

[the taxpayer] provided constitute a [CWA].” Irby examined five

documents and held that when taken together they constituted the CWA

for a bargain sale transaction. Id. at 390. The five documents included

an option agreement to purchase a conservation easement, IRS Form

8283, a letter from the donee, a settlement statement prepared by the

title company listing the amounts paid as part of the bargain sale, and

a deed of conservation. Id. at 388–89. However, unlike the documents in

10

[*10] this case, each of the documents relied upon in Irby was

acknowledged by the donee. 9 Id.

Accordingly, we can examine multiple documents to determine

whether the CWA requirements are satisfied, but those documents must

be acknowledged by the donee. See I.R.C. § 170(a)(1) (providing that a

charitable contribution shall be allowable as a deduction only if verified

under regulations prescribed by the Secretary); Sklar v. Commissioner,

125 T.C. 281, 295 (2005), aff’d, 549 F.3d 1252 (9th Cir. 2008); Viralam,

136 T.C. at 168 (“Section 170(f)(8)(B) requires that the donee

organization state in the acknowledgment ‘Whether the donee

organization provided any goods or services in consideration, in whole

or part, for’ the contributed property or cash.”); Treas. Reg. § 1.170A-

13(f)(2) (“[A] written acknowledgement from a donee organization must

provide the following information . . . .” (emphasis added)).

Here, the only documents acknowledged by CHA were the

Acknowledgment Letter and Form 8283—both signed by Mr.

Montgomery. The Donation Letter was created by Mr. Long and signed

by Mr. Wells on behalf of Chamberlain. The Quitclaim Deed was both

signed and created by Mr. Wells on behalf of Chamberlain, as managing

member of CHP, and it remains unclear who filed the Quitclaim Deed. 10

Petitioners argue that since Mr. Wells was on both sides of the

transaction, the Quitclaim Deed and the Donation Letter should be read

together with the other documents. Petitioners’ argument fails under

the Code as we find that petitioners are required under section 170(f)(8)

to provide a CWA from the donee whether or not the donee and donor

are on both sides of the transaction. “The essential statutory purpose of

the [CWA] required by section 170(f)(8) is to assist taxpayers in

determining the deductible amounts of their charitable contributions

and to assist the [IRS] in processing tax returns on which charitable

contribution deductions are claimed.” Durden v. Commissioner, T.C.

Memo. 2012-140, 103 T.C.M. (CCH) 1762, 1763; see also Villareale v.

Commissioner, T.C. Memo. 2013-74, at *5–6.

9 The Commissioner in Irby argued that the settlement statements were not

acknowledged by the donee since they were acknowledged by the Government of the

United States; however, the Court rejected the argument and found that the

“Government of the United States represents the donee’s interest with respect to the

acknowledgment.” Irby, 139 T.C. at 389 n.14.

10 Mr. Wells testified that he was unsure of who had filed the Quitclaim Deed.

11

[*11] Furthermore, in Simmons v. Commissioner, T.C. Memo. 2009-

208, 98 T.C.M. (CCH) 211, 215–16, aff’d, 646 F.3d 6 (D.C. Cir. 2011), the

Court held that the conservation easement deeds satisfied the

requirements of section 170(f)(8)(A) and (B) because they were signed by

the representatives of the charity, were contemporaneous with the

donation of the easements, and described the properties donated. We

acknowledge that a deed itself may satisfy the CWA requirements of

section 170(f)(8). See, e.g., Averyt v. Commissioner, T.C. Memo. 2012-

198, 104 T.C.M. (CCH) 65, 68–69. However, a deed that satisfied the

CWA requirements must still be acknowledged by the donee. See Big

River Dev., L.P. v. Commissioner, T.C. Memo. 2017-166, at *10–11 (“The

deed of easement in this case was properly executed by [the donee

organization]’s president and recorded in the Allegheny County

Department of Real Estate in January 2005.”); 310 Retail, LLC v.

Commissioner, T.C. Memo. 2017-164, at *12 (“[W]e held that a deed of

easement may constitute a CWA provided that it is properly executed

by the donee and is ‘contemporaneous.’”); RP Golf, LLC v. Commissioner,

T.C. Memo. 2012-282, at *9 (“[T]he agreement in this case was signed

by a representative of [the donee organization] . . . .”); Averyt, 104 T.C.M.

(CCH) at 68 (determining that the conservation deed was signed by a

representative of the donee organization). Here, petitioners ignore that

the Quitclaim Deed was not acknowledged by CHA as it was signed by

Mr. Wells in his capacity as manager of Chamberlain, the managing

member of CHP. See supra note 10. Accordingly, in this case we cannot

rely on the Quitclaim Deed itself for satisfaction of CWA.

The Acknowledgment Letter does thank CHP for the gift and

states: “As noted, the value of the gift is $4.42 million.” The

Acknowledgment Letter, however, does not include a description of the

Property nor state whether any goods or services were provided in the

exchange. While Form 8283 would satisfy the description element of a

CWA, it likewise does not contain a statement regarding whether the

donee provided any goods or services. “Congress has required that a

CWA must include a statement of ‘[w]hether the donee organization

provided any goods or services in consideration’ for the gift.” Cade v.

Commissioner, T.C. Memo. 2025-20, at *9 (quoting I.R.C. § 170(f)(8)(B)).

The documents petitioners rely upon as their CWA contain no statement

to that effect; thus, they cannot serve as a CWA. See id.

Petitioners also argue that the claimed deduction is exactly equal

to the claimed value of the donation, which shows that nothing else was

paid in consideration. However, even if no additional consideration was

provided beyond the claimed deduction, the CWA must say so in order

12

[*12] to satisfy the requirements of section 170(f)(8)(B)(ii). See Brooks v.

Commissioner, T.C. Memo. 2022-122, at *12 (“Proving the facts that

should have been included in the CWA cannot replace the strict

substantiation requirements of section 170(f)(8).”), aff’d, 109 F.4th 205

(4th Cir. 2024); Friedman v. Commissioner, T.C. Memo. 2010-45,

99 T.C.M. (CCH) 1175, 1178; Schrimsher, 101 T.C.M. (CCH) at 1331.

Accordingly, the Acknowledgment Letter and Form 8283 are not

sufficient to satisfy the CWA requirements.

In sum, petitioners have not satisfied the requirements of section

170(f)(8), and their deductions claimed for the noncash charitable

contribution must be disallowed as a matter of law. See I.R.C.

§ 170(f)(8)(A).

IV. Section 6662 Penalties

Respondent seeks to impose the accuracy-related penalty for a

substantial understatement of income tax under section 6662(d) and, in

the alternative, a penalty for negligence or disregard of rules or

regulations under section 6662(c). Respondent bears the burden of

production with respect to section 6662(a) penalties and is required to

present sufficient evidence showing that any penalty is appropriate. See

I.R.C. § 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446−47 (2001).

This includes showing compliance with the procedural requirements of

section 6751(b)(1). 11 See Graev v. Commissioner, 149 T.C. 485, 493

(2017), supplementing and overruling in part 147 T.C. 460 (2016).

Section 6662(a) imposes a 20% accuracy-related penalty on an

underpayment of tax required to be shown on a return. This penalty

applies to underpayments attributable, among other reasons, to

negligence or disregard of rules or regulations, and any substantial

understatements of income tax. I.R.C. § 6662(b)(1) and (2). Section

6662(d)(2)(A) generally defines “understatement” as the excess of the

tax required to be shown on the return over the amount shown on the

return as filed. An understatement of income tax is “substantial” if it

exceeds the greater of $5,000 or 10% of the tax required to be shown on

the return. See I.R.C. § 6662(d)(1)(A).

Negligence “includes any failure to make a reasonable attempt to

comply with the provisions of the internal revenue laws or to exercise

ordinary and reasonable care in the preparation of a tax return.” Treas.

11 The Court has ruled that respondent has complied with the procedural

requirements of section 6751(b)(1). See Order, Oct. 7, 2025.

13

[*13] Reg. § 1.6662-3(b)(1). Negligence also includes a taxpayer’s failure

to “keep adequate books and records or to substantiate items properly.”

Id. Disregard is defined as “any careless, reckless, or intentional

disregard.” I.R.C. § 6662(c).

Penalties will not be imposed, though, if any portion of the

underpayment is attributable to a taxpayer’s reasonable cause and good-

faith attempt to comply with his tax obligations. See I.R.C. § 6664(c)(1).

“The determination of whether a taxpayer acted with reasonable cause

and in good faith is made on a case-by-case basis, taking into account all

pertinent facts and circumstances.” Treas. Reg. § 1.6664-4(b)(1).

Petitioners bear the burden of proof regarding a reasonable cause

defense. See Rule 142(a)(1); Higbee, 116 T.C. at 446–47 (holding that, in

a situation such as here, the taxpayer bears the burden of proof with

regard to issues of reasonable cause).

One possible ground for claiming “reasonable cause” is reliance

on professional advice. Treas. Reg. § 1.6664-4(b). Reliance on the advice

of a tax professional may establish a defense of reasonable cause and

good faith, but only if (1) the adviser was a competent professional who

had sufficient expertise to justify reliance; (2) the taxpayer provided

necessary and accurate information to the adviser; and (3) the taxpayer

actually relied in good faith on the adviser’s judgment. See Neonatology

Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff’d, 299 F.3d 221

(3d Cir. 2002). “Advice does not have to be in any particular form,” but

it must consist of a “communication . . . setting forth the analysis or

conclusion of a person, other than the taxpayer, provided to (or for the

benefit of) the taxpayer and on which the taxpayer relies.” Treas. Reg.

§ 1.6664-4(c)(2); see also id. subpara. (1) (providing additional rules for

reliance on the advice of others).

Petitioners acted reasonably by retaining Mr. Long to assist them

with satisfying section 170 for their noncash charitable contribution.

Mr. Long is a certified public accountant with education and work

experience which makes him sufficiently competent to justify

petitioners’ reliance on his advice. Email correspondence between

Mr. Long and Mr. Wells shows that Mr. Wells exercised diligence in

procuring all records Mr. Long advised should be obtained, including an

appraisal for Form 8283.

Lastly, petitioners relied in good faith on Mr. Long. Mr. Wells

emailed Mr. Long seeking clarification on the CWA requirements.

Mr. Long provided the Form 8283 instructions and a brief explanation

14

[*14] of what the CWA needed to contain. Mr. Wells’s draft of the

Acknowledgment Letter included everything Mr. Long stated it needed.

Petitioners reasonably relied on Mr. Long’s advice as he had been their

tax accountant for some 30 years and they had no reason to question the

advice he was providing. Under the facts herein, we find petitioners

acted with reasonable cause and in good faith with respect to the

underpayments and are not liable for the section 6662 penalties. See

Greenblatt v. Commissioner, T.C. Memo. 2024-109, at *26−27.

V. Conclusion

Since petitioners did not satisfy their CWA requirements under

section 170(f)(8), we will sustain respondent’s disallowance of

petitioners’ noncash charitable contribution carryovers for tax years

2019, 2020, and 2021. Since the CWA requirement is not met, we need

not address the FMV of the Property in question. However, on the basis

of petitioners’ established reasonable cause defense, we will overrule

respondent’s imposition of penalties.

We have considered all of the arguments made by the parties and,

to the extent they are not addressed herein, we find them to be moot,

irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.