Presley v. CIR, 18-9008

Background

Richard and Martine Presley formed Presley Family Ministries, Inc. (PFM), a §501(c)(3) nonprofit, and used their home for ministry activities; they and PFM funded operations and received no salary.
Dr. Presley formed PFM Farms, LLC (for‑profit) to run a blueberry operation and donate proceeds to PFM; PFM Farms paid $119,182.36 in 2008–2009 for pond/land improvements outside the leased acreage.
In 2010 PFM Farms donated land‑improvement expenses and a Toro tractor‑mower to PFM; the Presleys claimed a $107,364 charitable deduction (land improvements) and $3,000 (mower) on their 2010 return but did not disclose details on Form 8283.
The Presleys deeded their residence to PFM in 2012 (deed recorded July 2012), continued living there rent‑free, and claimed a $235,422 charitable deduction on their 2012 return supported by an appraisal signed December 5, 2013; the attached Form 8283 lacked the appraiser declaration and donee acknowledgment signatures.
The IRS audited, disallowed the three charitable deductions, and assessed accuracy‑related penalties under I.R.C. §6662; the Tax Court sustained the disallowances and penalties; the Presleys appealed and the Tenth Circuit affirmed.

Issues

Issue	Presley’s Argument	Commissioner’s Argument	Held
Whether land‑improvement expenses were deductible in 2010	Deduction proper for 2010 because PFM Farms donated expenses and Presleys reported deduction	Expenses were incurred in 2008–2009, so payment/charitable contribution was not made in 2010	Held: Deduction disallowed for 2010 because contribution/payment not made in that year (Presleys did not challenge this ground on appeal)
Whether the $3,000 Toro mower deduction was substantiated	Presleys: omission on Form 8283 excused by reasonable reliance on CPA (reasonable cause)	Commissioner: Form 8283 lacked required description; no reasonable‑cause exception applies	Held: Deduction disallowed; Tax Court correctly found no good‑faith reliance (Presleys should have questioned omission given attorney advice)
Whether the residence donation deduction complied with appraisal/Form 8283 rules	Presleys: substantial compliance or reasonable cause; appraisal and Form 8283 suffice despite some defects	Commissioner: appraisal not a “qualified appraisal” (dated/signed after return due) and Form 8283 incomplete; no substantial compliance or reasonable cause	Held: Deduction disallowed; appraisal dated Dec. 5, 2013 was untimely and Form 8283 incomplete, and failures not excused by reasonable cause
Whether accuracy‑related penalties under §6662 should apply	Presleys: acted in good faith and had reasonable cause relying on advisors	Commissioner: no reasonable cause/good faith; taxpayers failed to exercise ordinary business care	Held: 20% penalties upheld; Tax Court did not clearly err in finding no reasonable cause/good faith for the understatements

Key Cases Cited

United States v. Boyle, 469 U.S. 241 (1985) ("reasonable cause" requires ordinary business care and prudence)
Neonatology Assocs., P.A. v. Comm’r, 115 T.C. 43 (2000) (elements for reasonable reliance on adviser: competence, accurate information, good‑faith reliance)
Bond v. Commissioner, 100 T.C. 32 (1993) (discussing substantial compliance with appraisal/reporting rules)
Martin v. Comm’r, 436 F.3d 1216 (10th Cir. 2006) (standard of review: factual findings for clear error, legal rulings de novo)
Estate of True v. Comm’r, 390 F.3d 1210 (10th Cir. 2004) (review for clear error on reasonable‑cause issues)
RERI Holdings I, LLC v. Comm’r, 149 T.C. 1 (2017) (purpose of substantiation requirements: deter overvaluation of donations)
In re Craddock, 149 F.3d 1249 (10th Cir. 1998) ("reasonable cause" standard in tax context)