Appraiser’s evaluation of a property intended for tax reporting not shielded from IRS interrogation

A property owner transferred a conservation easement on his property to a local nature conservancy. An appraiser was hired by the owner’s attorney to determine the value of the easement, which the property owner reported as a charitable contribution deduction on his federal income tax return. The report containing the appraiser’s opinion of value was attached to the tax return. The Internal Revenue Service (IRS) summoned the appraiser, instructing him to provide additional information to the IRS to aid in the determination of the accuracy of the property owner’s charitable contribution deduction. The appraiser refused to appear before the IRS, claiming any additional information regarding his appraisal of the property owner’s conservation easement was protected from being disclosed to the IRS by the attorney-client privilege, since his communication with the property owner’s attorney regarding the valuation of the conservation easement was directly related to legal advice. The IRS sought to enforce the summons, claiming the appraiser’s work product and testimony regarding the value of the property owner’s conservation easement was not protected from being disclosed to the IRS by attorney-client privilege, since the appraiser’s communication with the property owner’s attorney regarding the valuation of the conservation easement was related solely to the value of the easement, not legal advice. The United States court of appeals held the appraiser hired by the property owner’s attorney to determine the value of the conservation easement claimed as a charitable contribution deduction on the property owner’s federal income tax return was required to appear before the IRS in accordance with the IRS summons to provide additional information regarding the accuracy of the property owner’s charitable contribution deduction, since the appraiser’s additional information regarding the appraisal of the property owner’s conservation easement was not directly related to legal advice and thus not protected by attorney-client privilege. [United States v. Richey(January 21, 2011) _ CA4th_]

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