On January 28, 2021, the Tax Court issued a Memorandum Opinion in the case of Sells v. Commissioner (T.C. Memo. 2021-12). The main issue presented in Sells v. Commissioner was whether the conservation easement deduction was appropriately denied, but it is the prior supervisory approval that we’ll focus on below. Background to the Penalty Issue in Sells v. Commissioner The IRS asserted penalties for both the conservation easement and the timber donation. However, the parties stipulated that the IRS had a “penalty-approval form” only for two of the five petitioners. Both these penalty-approval forms were approved by a “Group Manager” and dated before the two petitioners received their notices. The penalty-approval form for one petitioner shows approval of penalties for substantial understatement and gross misvaluation, but it doesn’t approve a penalty for negligence or substantial misvaluation. This form doesn’t specifically mention either the easement or the timber, but states that…