LESLIE H. SOUTHWICK, Circuit Judge: This appeal marks the second time Whitehouse Hotel Limited Partnership appeals from a ruling of the United States Tax Court disallowing a significant portion of a tax deduction claimed for a historic conservation easement. Whitehouse also appeals the tax court’s enforcement of a 40 percent gross overstatement penalty. We AFFIRM the determination of the amount of the deduction but VACATE the penalty. FACTUAL AND PROCEDURAL BACKGROUND Whitehouse was formed in 1995 to purchase the Maison Blanche building in New Orleans, renovate it, and reopen it as a Ritz-Carlton hotel and condominium complex with retail space. Built between 1907 and 1909, the Maison Blanche is located on Canal Street in the city’s Central Business District. The building was listed on the National Register of Historic Places in *239 1966 and designated a City of New Orleans landmark in 1980. Whitehouse’s development plan included combining the Maison Blanche with the contiguous Kress building. Whitehouse also owned a parking garage in the immediate vicinity which would be utilized in the new complex. On December 29, 1997, Whitehouse conveyed a conservation easement to the Preservation Alliance of New Orleans, d/b/a Preservation Resource Center (PRC), a Louisiana nonprofit corporation dedicated to historical preservation. The easement burdens the Maison Blanche with a number of restrictions and affirmative obligations, all revolving around maintaining the appearance of the ornate terracotta facade. In its 1997 tax return, Whitehouse claimed a $7,445 million charitable contribution deduction for the easement. In 2003, the Commissioner issued Whitehouse a Notice of Final Partnership Administrative Adjustment, which allowed a deduction of only $1.15 million for the easement. The Commissioner further assessed a gross undervaluation penalty of 40% of the portion of underpayment of tax that year. See 26 U.S.C. § 6662(h)(2). Whitehouse challenged both the valuation of the easement as well as the gross undervaluation penalty in the tax court. See Whitehouse Hotel Ltd. P’ship v. Comm’r, 131 T.C. 112 (2008). The 2006 trial focused on the pre and post-easement valuation of the Maison Blanche building. 1 The difference in value represents the value of the conservation easement and therefore the amount of the permissible deduction in the year of conveyance. See 26 C.F.R. 1.170A-14(h)(3). At trial. Whitehouse presented the expert testimony of Richard Roddewig, 2 while the Commissioner proffered that of Dunbar Argote. As we held in our 2010 decision reviewing that decision, both Rod-dewig and Argote were well-qualified to evaluate, appraise, and testify about commercial real estate. Whitehouse Hotel Ltd. P’ship v. Comm’r, 615 F.3d 321, 326 (5th Cir.2010). The expert reports, testimony, and cross-examination of Roddewig and Argote are at the center of this controversy. The two appraisers reached widely varying conclusions regarding the proper parameters and valuation methods to use in their valuations. They arrived at vastly different pre- and post-easement valuations. The two appraisers did not agree even on what property they were to evaluate. Roddewig included the adjacent Kress building in his valuation because it was to be brought under common ownership the …
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