Tax Court denies cross-motions in Hobby Lobby–related charitable deduction case
The David & Barbara Green 1993 Dynasty Tr. v. Commissioner, No. 19631-19, 165 T.C. No. 7, 2025 BL 355961, 2025 Us Tax CT Lexis 2334 (Oct. 02, 2025), Court Opinion
On October 2, 2025, the U.S. Tax Court denied dueling motions for partial summary judgment in consolidated deficiency cases involving three electing small business trusts and two individual shareholders of Hobby Lobby Stores, Inc.
The dispute centers on S-corporation-level noncash charitable contribution deductions for biblical artifacts donated in 2011 and 2012 to Museum of the Bible.
Judge Toro’s opinion holds that factual disputes over a “reasonable cause” defense under section 170(f)(11)(A)(ii)(II) preclude summary adjudication; dissents by Judges Marshall and Jenkins would decide several legal issues now.
Why It Matters
The ruling keeps alive taxpayers’ ability to argue reasonable cause to cure alleged Form 8283 and appraisal-related defects for large noncash gifts.
It also tees up unresolved, trust-specific questions about how sections 641, 642, 681, 512(b)(11), and 170 interact for ESBTs claiming S-corporation pass-through charitable deductions.
Key Facts
Parties: Three ESBTs (David and Barbara Green 1993 Dynasty Trust; Green Stewardship Trust; Green Family Delta Trust) and Mart & Diana Green; Steven & Jackie Green, vs. Commissioner.
Entity: Hobby Lobby Stores, Inc., an S corporation.
Ownership: Trusts and Greens held >99% of Hobby Lobby in 2011–2012.
Donations: >1,200 artifacts (Hebrew scrolls; manuscripts in Hebrew, Greek, Latin, Aramaic; printed books and Bibles dated 1455–1782) to Museum of the Bible.
Claimed deductions: $23,038,000 (2011) and $61,633,000 (2012) at S-corp level; shareholders reported pro rata shares.
Substantiation at filing: Forms 8283 attached to Form 1120-S; aggregate basis and aggregate FMV listed with ranges of acquisition dates; portions of appraisals by Lee R. Biondi attached.
2012 appraisal nuance: Biondi’s report referenced input from Michael R. Thompson and Carol Sandberg; only Biondi signed the Form 8283 declaration.
Preparation/review: Hobby Lobby prepared returns; Grant Thornton LLP reviewed federal filings; company asserts reliance on Grant Thornton for compliance issues.
IRS action: Notices of deficiency disallowed deductions for failure to satisfy section 170 requirements; asserted gross or substantial valuation misstatement penalties under section 6662.
Venue: Appeals would lie to the Tenth Circuit.
Timeline
Dec 30, 2011: Contribution of 431 Hebrew biblical scrolls (claimed FMV $23,038,000; aggregate basis $1,753,432).
Dec 31, 2012: Contribution of 800+ manuscripts/books (claimed FMV $61,633,000; aggregate basis $18,749,758).
2012–2013: Appraisal declarations signed by Biondi (July 31, 2012; Aug 15, 2013).
Post-filing: IRS examines and issues deficiency notices to the trusts and individuals.
Oct 2, 2025: Tax Court denies both sides’ partial summary judgment motions.
Court Findings
Reasonable cause is triable: Whether failures to meet section 170(f)(11) substantiation rules are excused by reasonable cause and not willful neglect is a fact-intensive question requiring trial.
Professional-reliance defense is in play: Taxpayers’ claimed reliance on Grant Thornton raises factual disputes about adviser competence, information provided, and actual good-faith reliance.
No summary win on strict/substantial compliance: The court declines to reach whether Forms 8283 and appraisals strictly or substantially complied, given potential mootness if reasonable cause is found.
Trust-specific legal issues deferred: Competing readings of sections 641, 642, 681, 512(b)(11), and 170 for ESBTs are not resolved at summary judgment.
Penalties not decided here: Valuation and penalty matters remain for trial (with a separate memo opinion on section 6751(b) filed the same day).
Judgment Details
Motions denied: Commissioner’s two partial summary judgment motions (substantiation; trust deduction limits) and petitioners’ cross-motions are denied.
Issues reserved for trial:
Availability and scope of reasonable cause under section 170(f)(11)(A)(ii)(II).
Whether any substantiation defects occurred and, if so, whether they are excused.
Valuation of contributed artifacts for penalties and any alternative computations.
For the trusts, whether section 681 disallows deductions allocable to UBI and, alternatively, whether any deduction is limited to adjusted basis (including the impact, if any, of Green v. United States).
Outcome
The Tax Court entered an order denying all pending motions for partial summary judgment; the consolidated cases proceed to trial on fact-dependent issues and unresolved trust-law questions.
The Takeaway
Large noncash charitable gifts live or die on paperwork, but section 170’s statutory reasonable-cause “escape hatch” can keep deductions alive if taxpayers can prove prudent reliance and good-faith effort.
For ESBTs, the interaction of subchapter J and the charitable-deduction regime remains unsettled and will likely be shaped by trial records and appellate review.
The David & Barbara Green 1993 Dynasty Tr. v. Commissioner, No. 19631-19, 165 T.C. No. 7, 2025 BL 355961, 2025 Us Tax CT Lexis 2334 (Oct. 02, 2025), Court OpinionSource: Tax Notes
Dissent Summaries
Marshall, J. (joined by Guider and Jenkins, JJ.)
Argues Rule 121 says the Court “shall” grant summary judgment when no material fact is disputed; parties filed extensive stipulations and briefing expecting legal rulings.
Would resolve several legal issues now to narrow trial, including substantiation compliance questions and trust-specific issues, leaving only factual matters (like valuation) for later.
Criticizes the majority for denying all motions after thousands of pages of submissions, offering little guidance and delaying efficient resolution.
Jenkins, J. (joined by Nega, Way, Guider; Marshall joins Parts I & III)
Supports partial summary adjudication of purely legal questions even if reasonable cause requires trial.
Notes prior cases typically analyze strict or substantial compliance before turning to reasonable cause; sees no factual overlap preventing legal rulings here.
Would decide certain substantiation and ESBT legal issues now to expedite litigation and inform settlement, reserving only fact-bound reasonable-cause and valuation questions.
List of citations
I.R.C. §§ 170, 641, 642, 681, 512(b)(11), 6662, 7482(b)(2), 1361, 1366, 6037. Statutory framework for charitable deductions, trust taxation, UBI interactions, penalties, venue, and S-corp pass-throughs.
Treas. Reg. §§ 1.170A-13(c); 1.681(a)-2(a); 1.6664-4(b)(1); 1.1366-1(a)(1). Regulatory substantiation, UBI allocation, reasonable-cause standards, and S-corp item reporting.
DEFRA § 155; AJCA § 883. Off-Code and later codified provisions driving appraisal and Form 8283 requirements.
Sundstrand Corp. v. Commissioner, 98 T.C. 518, aff’d, 17 F.3d 965 (7th Cir. 1994). Cited for summary-judgment standards and viewing facts favorably to nonmovant.
FPL Group, Inc. & Subs. v. Commissioner, 116 T.C. 73 (2001). Purpose of summary judgment to expedite litigation.
Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Burden-shifting framework for summary judgment.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). What constitutes a genuine dispute of material fact.
Tesone v. Empire Mktg. Strategies, 942 F.3d 979 (10th Cir. 2019). Tenth Circuit articulation of summary-judgment burdens.
Electronic Arts, Inc. v. Commissioner, 118 T.C. 226 (2002); Take v. Commissioner, 82 T.C. 630, aff’d, 804 F.2d 553 (9th Cir. 1986). Additional summary-judgment principles.
United States v. Boyle, 469 U.S. 241 (1985). Ordinary business care and prudence; reasonable-cause lens.
Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, aff’d, 299 F.3d 221 (3d Cir. 2002). Three-part test for reliance on professional advice.
Grecian Magnesite v. Commissioner, 149 T.C. 63, aff’d, 926 F.3d 819 (D.C. Cir. 2019). Case-by-case reasonable-cause evaluation.
Murphy v. Commissioner, T.C. Memo. 2023-72; Pankratz v. Commissioner, T.C. Memo. 2021-26. Section 170(f)(11) codification background and “escape hatch” articulation.
Belair Woods, LLC v. Commissioner, T.C. Memo. 2018-159; Presley v. Commissioner, T.C. Memo. 2018-171, aff’d, 790 F. App’x 914 (10th Cir. 2019); Chrem v. Commissioner, T.C. Memo. 2018-164; Crimi v. Commissioner, T.C. Memo. 2013-51. Substantiation, substantial-compliance, and reasonable-cause caselaw.
Green v. United States, 880 F.3d 519 (10th Cir. 2018). Benchmark for limiting deductions to basis in certain trust contexts.
Turner Broad. Sys., Inc. & Subs. v. Commissioner, 111 T.C. 315 (1998). Partial summary adjudication utility.
Kroh v. Commissioner, 98 T.C. 383 (1992); Espinoza v. Commissioner, 78 T.C. 412 (1982). Cautions on the “drastic remedy” and standards for summary judgment.
Schweizer v. Commissioner, T.C. Memo. 2022-102; Patacsil v. Commissioner, T.C. Memo. 2023-8; Kelly v. Commissioner, T.C. Memo. 2021-76, aff’d, 139 F.4th 854 (9th Cir. 2025); Woodsum v. Commissioner, 136 T.C. 585 (2011). Cited in dissents for approach to reasonable cause and adviser reliance.
Carpenter v. United States, 495 F.2d 175 (5th Cir. 1974); Adler v. Commissioner, 330 F.2d 91 (9th Cir. 1964); Casa De La Jolla Park, Inc. v. Commissioner, 94 T.C. 384 (1990); Green v. Commissioner, 59 T.C. 456 (1972); Caterpillar Tractor Co. v. United States, 589 F.2d 1040 (Ct. Cl. 1978). Authorities referenced in the dissents regarding the limits of form instructions and legal standards.