United States District Court, S.D. New York
PARTITA PARTNERS LLC and DENISE JO LEVY, a partner other than the tax matters partner, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
MEMORANDUM AND ORDER
KEVIN CASTEL, United States District Judge
2008, plaintiff Partita Partners LLC (“Partita”)
claimed a federal tax deduction of $4, 186, 000 for the
donation of a preservation easement in the façade of a
building that it owns on the Upper East Side. The
Italianate-style building was constructed in the 1870s, and
it has been a part of the Upper East Side Historic District
since 1981. Partita made its donation to the Trust for
Architectural Easements, and, as part of its deed of
easement, reserved 2, 700 square feet for future development
disallowed the deduction in 2014. The IRS also assessed an
underpayment penalty against Partita of 40 percent, asserting
that Partita had made a gross valuation misstatement. In the
alternative, the IRS assessed an underpayment penalty of 20
percent on grounds of negligence, substantial understatement
of income tax or a substantial valuation misstatement.
See 26 U.S.C. § 6662.
and one of its partners, Denise Jo Levy, commenced this
action pursuant to 26 U.S.C. § 6226(b), asserting that
Partita's taxes should be readjusted to recognize the
charitable deduction of the façade easement donation,
and that no underpayment penalty should be imposed.
October 25, 2016, this Court granted a motion for partial
summary judgment that was filed by the United States.
Partita Partners LLC v. United States, 216 F.Supp.3d
337 (S.D.N.Y. 2016) (“Partita I”). The
Court concluded that, as a matter of law, Partita's
donation of the façade easement did not preserve the
building's entire exterior, as required by 26 U.S.C.
§ 170(h)(4)(B), and that Partita therefore was
ineligible for the $4, 186, 000 deduction that it claimed.
See id. at 339-43.
only remaining issue is plaintiffs' challenge to the
underpayment penalties. At a pretrial conference of October
28, 2016, the Court granted leave to plaintiffs to move for
partial summary judgment on the issue of penalties. The
government argues that a trial is needed to resolve
plaintiffs' challenge to the penalties.
reasons explained, the plaintiffs' motion for partial
summary judgment is denied.
judgment “shall” be granted “if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Rule 56(a), Fed.R.Civ.P. A fact is material if it
“might affect the outcome of the suit under the
governing law . . . .” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). On a motion for summary
judgment, the court must “construe the facts in the
light most favorable to the non-moving party and resolve all
ambiguities and draw all reasonable inferences against the
movant.” Delaney v. Bank of Am. Corp., 766
F.3d 163, 167 (2d Cir. 2014) (quotation marks omitted). It is
the initial burden of the movant to come forward with
evidence on each material element of his claim or defense,
demonstrating that he is entitled to relief, and the evidence
on each material element must be sufficient to entitle the
movant to relief in its favor as a matter of law. Vt.
Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244
(2d Cir. 2004).
moving party meets its burden, “the nonmoving party
must come forward with admissible evidence sufficient to
raise a genuine issue of fact for trial in order to avoid
summary judgment.” Jaramillo v. Weyerhaeuser
Co., 536 F.3d 140, 145 (2d Cir. 2008). “A dispute
regarding a material fact is genuine ‘if the evidence
is such that a reasonable jury could return a verdict for the
nonmoving party.'” Weinstock v. Columbia
Univ., 224 F.3d 33, 41 (2d Cir. 2000) (quoting
Anderson, 477 U.S. at 248).
Partita's Motion for Summary Judgment Is Denied as to the
Valuation Misstatement Penalties.
The Penalties Established by Section 6662.
noted, the Court has previously concluded that Partita was
not eligible for a charitable deduction based on its donation
of a historic preservation easement, because the donation did
not preserve the entire exterior of the building, as required
by the plain language of the Internal Revenue Code.
Partita I, 216 F.Supp.3d at 341-43; 26 U.S.C. §
170(h)(4)(B)(i)(I). Familiarity with Partita I is
6662 of the Internal Revenue Code establishes penalties for
the underpayment of taxes. It provides that “there
shall be added to the tax an amount equal to 20 percent of
the portion of underpayment, ” including when
underpayment “is attributable to 1 or more of the
following” specified circumstances. 26 U.S.C. §
6662(a), (b). The 20 percent penalty applies when the
underpayment of taxes is caused by “[n]egligence or
disregard of rules or regulations, ” “[a]ny