615 F.3d 321 (2010) WHITEHOUSE HOTEL LIMITED PARTNERSHIP; QHR Holdings-New Orleans Limited, Tax Matters Partner, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. No. 09-60085. United States Court of Appeals, Fifth Circuit. August 10, 2010. *324 Gary J. Elkins (argued), Yvonne Chalker, Elkins, P.L.C., Andrew Lewis Kramer, New Orleans, LA, for Petitioners-Appellants. Bethany Buck Hauser (argued), Dept. of Justice, Kenneth L. Greene, Nathan J. Hochman, Dept. of Justice, Tax Div., Appellate Section, Washington, DC, Robert R. Di Trolio, John DiCicco, Clarissa C. Potter, Washington, DC, for Respondent-Appellee. Elizabeth Sherrill Merritt, Washington, DC, for Nat. Trust for Historic Preservation in U.S., Amicus Curiae. Before BARKSDALE, GARZA and DENNIS, Circuit Judges. RHESA HAWKINS BARKSDALE, Circuit Judge: This appeal by Whitehouse Hotel Limited Partnership, a Louisiana limited partnership, concerns the allowable amount for its claimed $7.445 million charitable-contribution deduction for its donation, in 1997, of a historic-preservation facade easement. The easement burdens the Maison Blanche building, owned by Whitehouse and located in New Orleans. In tax court, Whitehouse challenged the Commissioner of Internal Revenue's decision, in 2003, which disallowed $6.295 million of the amount claimed for the undisputed qualified conservation easement and imposed an underreporting penalty for 40% of the portion of underpayment of taxes due for tax-year 1997. Here, Whitehouse challenges the tax court's agreeing both with most of that disallowance and with the penalty. Primarily at issue is whether the tax court properly considered the easement's effect on Whitehouse's opportunity to build on top of a building also owned by Whitehouse and contiguous to the Maison Blanche building. VACATED and REMANDED. I. Whitehouse was formed in 1995 for the purpose of purchasing and renovating a parcel of New Orleans property. The parcel is contained within both the Vieux Carré Historic District, as listed in 1966 in the National Register of Historic Places, and the Canal Street Historic District (part of the Central Business District). This property included the Maison Blanche building (constructed between 1906 and 1908), which consists of a base level with six floors, a U-shaped tower with eight floors, and two subsequently constructed annexes with five and six floors, respectively. In 1980, the Maison Blanche building was designated as a City of New Orleans landmark. *325 The property also included the six-story Kress building (constructed in 1910) that is contiguous to the Maison Blanche building on Canal Street; and a parking garage contiguous to the Kress building (Kress garage). Whitehouse also owned a second parking garage located across Iberville Street from the block containing the above-described Maison Blanche and Kress buildings and the Kress garage. Whitehouse purchased the underlying land and these buildings, with plans to renovate the buildings into, inter alia, a Ritz-Carlton hotel. Subsequent to the donation of the historic-preservation facade easement, the property within the above-described block was developed into a 452-room Ritz-Carlton Hotel with a spa and parking garage; a 230-room Iberville Suites Hotel; a 75-room Maison Orleans Hotel; and retail space. On 29 December 1997, Whitehouse conveyed the easement to the Preservation Alliance of New …
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