United States Court of Appeals
                      For the First Circuit

No. 14-1863

                  GORDON KAUFMAN; LORNA KAUFMAN,

                     Petitioners, Appellants,

                                v.

                 COMMISSIONER OF INTERNAL REVENUE,

                       Respondent, Appellee.


              APPEAL FROM THE UNITED STATES TAX COURT

          [Hon. James S. Halpern, U.S. Tax Court Judge]


                              Before

                        Lynch, Chief Judge,
               Thompson and Kayatta, Circuit Judges.


          Frank Agostino, with whom Tara Krieger, Agostino &
Associates, PC, Michael E. Mooney, and Nutter McClennen & Fish LLP
were on brief, for appellants.
          Patrick J. Urda, Attorney, Tax Division, United States
Department of Justice, with whom David A. Hubbert, Deputy Assistant
Attorney General, and Jonathan S. Cohen, Attorney, Tax Division,
United States Department of Justice, were on brief, for appellee.



                          April 24, 2015
           LYNCH,    Chief   Judge.       This   appeal   turns   on   a

straightforward question: did the Tax Court clearly err when it

found that taxpayers Gordon and Lorna Kaufman must pay penalties

for claiming a charitable deduction on their tax returns for a

worthless historic preservation easement on their home? Finding no

clear error, we affirm.

           The Kaufmans claimed a charitable deduction of $220,800

on their 2003 and 2004 returns.       The deduction corresponded to the

purported value of a historic preservation facade easement on their

Boston home, which they donated to the National Architectural

Trust, since renamed the Trust for Architectural Easements ("the

Trust").    The Commissioner of Internal Revenue disallowed the

deduction and assessed deficiencies and accuracy-related penalties

for both tax years in question.

           The Tax Court affirmed the disallowance of the deduction

on a motion for summary judgment, holding that the charitable

deduction was invalid as a matter of law, see Kaufman v. Comm'r,

(2010) [hereinafter "Kaufman I"], and it reaffirmed

this ruling after holding a trial on the remaining issues in the

case, see Kaufman v. Comm'r, 

(2011) [hereinafter

"Kaufman II"]. The Kaufmans appealed to this court, and we vacated

the Tax Court's decision and remanded for further proceedings. See

Kaufman v. Shulman, 

, 33 (1st Cir. 2012) [hereinafter

"Kaufman III"].     On remand, the Tax Court found that the value of


                                  -2-
the easement was zero and that the Kaufmans were liable under

applicable IRS regulations for a 40% accuracy-related penalty for

making a gross valuation misstatement.                      Kaufman v. Comm'r, 

(2014) [hereinafter "Kaufman IV"].

                  The Kaufmans appeal for a second time.                  They do not

contest the Tax Court's finding that the value of the easement was

zero,       but    they   argue      that   the    court    erred   in   imposing   the

accuracy-related penalties. They also advance, for the first time,

an   argument        that      the   Commissioner     did    not    comply   with   the

procedural requirements of 26 U.S.C. § 6751(b)(1)1 in assessing

those penalties.

                  We affirm. The Tax Court's finding that the Kaufmans are

liable for accuracy-related penalties was neither clearly erroneous

nor infected by any error of law.                   The Kaufmans failed to raise

their second argument before taking this appeal (or, indeed, at any

earlier point in the labyrinthine history of this litigation), and

so we deem it waived.

                          I.   Facts And Procedural History

A.                The Easement Donation

                  In 1999, Lorna Kaufman, a company president with a Ph.D.

in psychology, bought a single-family residence for herself and her



        1
          Unless otherwise noted, all references to Title 26 of the
United States Code (the Internal Revenue Code) and to IRS
regulations refer to the versions applicable in 2003 and 2004, the
tax years at issue.

                                             -3-
husband Gordon at 19 Rutland Square in the South End of Boston for

just over $1 million.     Kaufman 

.    The home is

subject to certain zoning restrictions by virtue of its location in

the South End historic preservation district. Around October 2003,

she and Gordon, an emeritus professor of statistics at MIT,

"learned about a tax incentive program for historic preservation"

promoted by the Trust, which the Trust represented would allow the

couple to qualify for a charitable deduction in the amount of

10-15% of the value of the South End residence.        

    As

explained in Kaufman III,

                 A provision of the Internal Revenue
          Code, 26 U.S.C. § 170(h) (2006), creates an
          incentive for taxpayers to donate real
          property interests to nonprofit organizations
          and government entities for "conservation
          purposes." . . .        [T]he statute allows
          taxpayers to claim a deduction for donating a
          real property interest -- including an
          easement -- "exclusively for conservation
          purposes."     These purposes include the
          preservation of "historically important" land
          areas or structures.
                 The deduction for granting the easement
          is intended to reflect the value of what the
          taxpayer has donated which, in the absence of
          a "market" for such easements, can be measured
          by "the difference between the fair market
          value of the entire contiguous parcel of
          property before and after the granting of the
          restriction."

          In   December    2003,    the   Kaufmans   entered   into   a

Preservation Restriction Agreement (PRA) with the Trust, which

granted to the Trust an "easement in gross, in perpetuity, in, on,

                                   -4-
and   to     the    Property,   Building,    and   the   Facade"   and   limited

alterations to the property. Under the Trust's system, donors were

also required to give a cash contribution to the Trust equal to 10%

of the value of the donated easement.          Kaufman 

.

The Kaufmans did so.

               As the Trust requested, the Kaufmans also sent a form

letter in late 20032 to their mortgage lender, Washington Mutual

Bank, asking it to subordinate its interest in the property to the

Trust's easement.          

      The letter stated that the

easement "convey[ed] the right of prior approval or [sic] any

future changes [the owner] wish[ed] to make on the exterior of the

property."          Significantly, the letter also noted that "[t]he

easement restrictions are essentially the same restrictions as

those       imposed   by   current   local   ordinances    that    govern   this

property."         Gordon later testified that he "[d]idn't notice" the

sentence stating that the PRA restrictions were the same as the

South End zoning restrictions already in place and that he "made a

mistake" in signing the form.          He stated that he thought the PRA

restrictions were "much tougher," but admitted that he did not

compare the two sets of restrictions.              Lorna testified similarly,

stating that she "probably didn't focus on" the sentence in



        2
          The letter is undated, but the Kaufmans apparently sent
it sometime between October 2003, when they began corresponding
with the Trust about the easement donation, and December 2003, when
the Kaufmans signed the final PRA.

                                       -5-
question and that she believed that granting the easement would

subject their home to stricter controls.

          In   order   to   obtain    a    charitable   deduction   for the

donation of the easement, the Kaufmans were required to obtain an

appraisal of its fair market value.          See 26 U.S.C. § 170(f)(11).

The Trust offered the names of two appraisers it recommended, and

the Kaufmans selected Timothy Hanlon. Kaufman 

.

Hanlon was a certified professional appraiser who managed his own

residential appraisal company.       

only appraisals

of partial interests in real property that he had done were nine

appraisals of the value of facade easements donated to the Trust.

As the Tax Court explained, Hanlon had learned to appraise facade

easements by speaking with representatives from the Trust, who had

told him that "the range of values for facade easements is between

11% for properties in highly regulated areas and ('towards') 15% in

less regulated or unregulated areas."         Trust representatives also

suggested language for him to include in his appraisals, which

Hanlon in fact incorporated "almost verbatim" into all of his

reports, regardless of the property involved.

          Hanlon's January 2004 appraisal attempted to arrive at

the value of the easement through the "before and after" method of

valuation, which involved "determining the difference between 'the

fair market value of the property prior to donation of the easement

and the fair market value of it after donation of the easement.'"


                                     -6-
He determined that the value of the property before the grant of

the easement was $1,840,000.    He acknowledged that there was "much

overlap" between the burdens imposed by the PRA and the burdens

imposed by the South End zoning restrictions, but concluded that

the PRA restrictions were "stricter."     His explanation for why the

PRA   controls   were   purportedly   stricter,   however,   was   vague,

nonspecific, and not entirely logical.       A representative excerpt

from his report reads as follows:

           The [PRA] easement is granted in perpetuity
           while the historic district ordinances and
           local zoning practices may change over time to
           reflect changes in political, economic and
           aesthetic needs and tastes in a community.
           The Historic District ordinances contain
           relief for economic hardship, which the [PRA]
           does not.    The [PRA] may result in higher
           insurance and property maintenance costs than
           those on properties not so encumbered.
           Rehabilitation costs may be higher also as the
           property owner could be obligated to restore
           or replace deteriorated materials rather than
           replace   them    with    cheaper   substitute
           materials. . . .       Marketability could be
           affected as a segment of the buying public may
           show resistance to being subjected to yet
           additional limitations and restrictions on
           their property rights.

           Despite his conclusion that the PRA imposed more robust

restrictions on the use of the property than did the South End

zoning restrictions, Hanlon also opined that the PRA did not change

or inhibit the property's development to its highest and best use

as a single-family dwelling.




                                  -7-
          Hanlon estimated that the burdens imposed by the PRA

would reduce the property's fair market value by 12%, and so he

calculated the value of the easement at $220,800.        To reach this

conclusion, Hanlon relied on a document prepared by IRS employee

Mark Primoli stating that "the proper valuation of a facade

easement should range from approximately 10% to 15% of the value of

the property."3     Hanlon then made a list of burdens that he

believed would affect the value of a property encumbered by a

facade easement and assigned a percentage to each such that the

percentages added up to 15%.   These calculations were based on his

"judgment, experience, and . . . 'common sense,'" not on any data

or statistical analysis.   Kaufman IV, 

, slip

op. at 26.    He then "adjusted the percentages" to "reflect th[e]

differences   and   similarities"    between   the   South   End   zoning

restrictions and the restrictions imposed by the PRA.              Hanlon

acknowledged that his method was "unique" and that it was "not a

generally accepted appraisal practice or valuation method."



     3
          The   Primoli   article,   entitled   "Facade  Easement
Contributions," was prepared sometime prior to November 2003 (the
record does not disclose the precise date) "as part of an IRS
program focusing on specialized areas of tax law." Scheidelman v.
Comm'r, 

, 196 n.5 (2d Cir. 2012). In crafting the
article, Primoli had "relied upon a 1994 IRS 'Audit Technique
Guide,' used to train tax examiners but not intended to set IRS
policy."   

both the Audit Technique Guide and a
revised version of Primoli's article omitted any reference to the
ten to fifteen percent range for fear the numbers were being
misconstrued." 

was not mentioned in Hanlon's
January 2004 appraisal.

                                    -8-
            Gordon testified that he thought Hanlon's appraisal

"looked like a professionally [sic], respectable appraisal by a

credentialed appraiser."         He sent the appraisal to his longtime

accountant, David Cohen.        According to Gordon, Cohen replied that

"the appraisal looked professional and well done, [and] the results

were reasonable."        Cohen testified that he "had seen many real

estate appraisals" and the Hanlon appraisal "seemed very similar to

the other ones [he] had seen."         He also stated that he offered the

Kaufmans no opinion on whether the magnitude of the easement

valuation was reasonable.

            A    week   after    receiving     Hanlon's     appraisal,       Gordon

e-mailed Mory Bahar, a representative of the Trust.                    Lorna and

Cohen were copied on the e-mail.             Gordon expressed concern as to

whether "the reduction in resale value of the property due to the

easement [would be] so large as to overwhelm the tax savings that

accrue    from   it."     He    then   asked   if   Bahar    had     "statistical

documentation that bears on how much of a reduction in resale value

takes    place   for    residential    properties."         Gordon    also   noted

Hanlon's statement "that the restrictions imposed by the . . .

Trust are much stricter than Boston Landmark's restrictions," and

he asked Bahar to "read that section of the appraisal and give me

your comments about it."

            Bahar's reply to Gordon, copied to Lorna and Cohen,

reads, in relevant part, as follows (emphases added):


                                       -9-
            In areas that are regulated by local historic
            preservation ordinances and bodies such as
            Boston   historic   neighborhoods   (including
            yours) the property owners are not allowed to
            alter the facade of their historic buildings,
            whether there is an easement or not. . . .
            Therefore, properties with an easement are not
            at a market value disadvantage when compared
            to   the   other   properties   in  the   same
            neighborhood.    But if the district is not
            being regulated and historic preservation is
            not being enforced then the presence of the
            easement . . . will be viewed negatively by
            those buyers who would want to change the
            facade or demolish the building.
                   And here are some supporting data for
            that principle:
                   [] We have tracked 26 resold properties
            to-date on which we held an easement, and none
            was resold at a loss or had any issues for
            resale that we are aware of. . . .
                   [] Over 100 lenders have approved to
            subordinate their loans to our easements
            to-date in over 800 cases. . . . Why would
            these banks (including yours) approve these
            transactions if they saw a risk or adverse
            financial impact on their collateral??
                   . . . .
                   [] One of our directors, Steve McClain,
            owns fifteen or so historic properties and has
            taken advantage of this tax deduction himself.
            He would never have granted any easement if he
            thought there would be a risk or loss of value
            in his properties.

            Gordon testified that he found Bahar's e-mail "only

mildly informative because, . . . as a mathematical statistician,"

he   was   skeptical   of   the   statistical   significance   of   Bahar's

supporting data, and because Bahar was an "agent" of the Trust and

so had an interest in convincing Gordon to donate the easement.

However, he responded to Bahar, again copying Lorna and Cohen, and



                                    -10-
stated that he appreciated the "very detailed reply" and that he

would "talk to Dave Cohen about final implementation."

          The Kaufmans decided to go forward with the easement

donation despite the warning signals in the Bahar e-mail.     They

spread the $220,800 deduction over two tax years, 2003 and 2004,

because they otherwise would have exceeded the statutory limits on

deductions in a single year.   Kaufman 

(citing

26 U.S.C. § 170(b)(1)(E)).

B.        The IRS Investigation And First Round Of Litigation

          "In March 2007, evidently as part of a wide-ranging

investigation into perceived abuses of the easement program, the

IRS opened an investigation into the Kaufmans' claimed charitable

deductions."   Id.4   In 2009, the IRS issued deficiencies of

$39,081.25 plus $14,535.80 in accuracy-related penalties for 2003,

and $36,340.00 plus $14,536.00 in accuracy-related penalties for

2004. The agency disallowed the deductions on two grounds relevant

here: (1) they were invalid as a matter of law because the easement

conveyance did not comply with relevant regulations, and (2) the


     4
          The IRS became concerned in the mid-2000s "that
individuals and organizations ha[d] been abusing the conservation
statute to improperly shield income or assets from taxation."
Kaufman 

(internal quotation marks omitted)
(quoting IRS news releases from 2005 and 2006).       In fact, the
agency placed historic preservation easements on its "Dirty Dozen"
list of tax scams in 2005, 2006, and 2009, and has continued taking
steps since then to crack down on abuse of the program. See
generally L.J. Kreissl & K.B. Friske, IRS Takes A Hard Stance on
Deductions for Conservation Easements, Prac. Tax Strategies, Feb.
2010.

                               -11-
Kaufmans had not established that the value of the easement was

$220,800.      

              The Kaufmans petitioned for review by the Tax Court,

which,   on    a   motion   for   summary   judgment,   upheld   the   IRS's

disallowance on ground (1).       Kaufman I, 

.     The court

reaffirmed that finding after a trial on other issues in the case.

Kaufman II, 

.         In its post-trial opinion, the Tax

Court did not reach the issue of valuation of the facade easement

and so did not impose any accuracy-related penalties on the

Kaufmans, reasoning that the court should "not now be required to

invest the time and effort necessary to resolve the difficult

factual questions of intent and value presented by" the IRS's claim

that the Kaufmans had acted negligently or unreasonably in claiming

the deduction.      See 

              The Kaufmans then appealed to this court, challenging the

disallowance of the facade easement deduction.          We found that the

Tax Court erred in disallowing the deduction as a matter of law and

vacated that aspect of the decision.        Kaufman 

.5


     5
          The IRS had argued, and the Tax Court had agreed, that
the conveyance of the easement did not comply with 26 C.F.R.
§ 1.170A-14(g)(6), the "extinguishment provision." That provision

              requires that "when a change in conditions
              gives rise to the extinguishment of a
              perpetual    conservation   restriction    [by
              judicial proceeding], the donee organization,
              on a subsequent sale, exchange, or involuntary
              conversion of the subject property, must be
              entitled to a portion of the proceeds at least

                                     -12-
We further explained that, "since the Tax Court's decision not to

impose penalties with respect to the [facade easement deduction]

depended on the same rationale on which it based its grant of

partial summary judgment, . . .     the Tax Court's decision not to

impose further penalties on the Kaufmans must be vacated as well."

We remanded for the Tax Court to consider

"the grounds left unaddressed, including the proper value of the

easement."    

mark omitted).   We also noted

that, if the value was determined to be zero, "then the Kaufmans

would be liable for penalties under 26 U.S.C. § 6662 . . . unless

they could show 'reasonable cause.'"    

Tax Court's Decision On Remand

             1.     The Easement Valuation

             On remand, the Tax Court, in a thorough analysis, found

that the easement's value was zero.     The court accepted Hanlon as


             equal to that proportionate value of the
             perpetual conservation restriction, unless
             state law provides that the donor is entitled
             to the full proceeds from the conversion."

Kaufman 

(alteration in original) (quoting 26
C.F.R. § 1.170A-14(g)(6)(ii)). The Tax Court held that, because
the Kaufmans' mortgage lender had retained a "claim to all
insurance proceeds . . . and all proceeds of condemnation" superior
to the claim of the Trust, the Trust was not guaranteed to receive
its due proportion of the proceeds in the event of a condemnation
of the Kaufmans' residence. 

original). We held
that this was error because it was sufficient that the Trust
retained a claim to its due proportion of the proceeds as against
the owner-donor; the regulation did not require the Trust to have
an absolute right to those proceeds as against the rest of the
world. 

                                 -13-
an expert appraiser of partial interests in property but evaluated

his testimony with some skepticism given his "closeness to [the

Trust] and the singularity of his experience in valuing facade

easements     for   clients   and   for    a    patron     all    interested   in

establishing high values for the easements."                     Kaufman IV, 

, slip op. at 46-49.                 The court ultimately

rejected Hanlon's methodology and assumptions as unsupported and

unreliable.    See 

            Instead, the Tax Court found persuasive the testimony of

the IRS's expert, John Bowman.       See 

         Bowman, who, like

the Tax Court, rejected Hanlon's analysis, see 

30-35,

opined that the donation of the facade easement would not result in

a diminution in property value for several reasons.                    First, he

agreed with Hanlon that after the donation, "there would be no

change in the highest and best use of the property."                  

36.   Second, Bowman found, based on a "component by component"

comparison of the South End zoning restrictions with the PRA

restrictions, that the latter were "'basically duplicative' of, and

'not materially different' from" the former.               

38; see

also 

     Finally, relying both on published literature

and on his own study of data concerning sales and resales of

residential properties in the Boston area, Bowman found no evidence

that owners of restriction-encumbered properties have historically

had   difficulty       marketing     or        financing     them      or   that


                                    -14-
restriction-encumbered properties actually sell for less than

comparable properties without restrictions.            

39-43.

Bowman accordingly concluded that the easement was worthless.              

       The    Tax   Court   agreed   and   sustained   the    IRS's

disallowance of the Kaufmans' charitable deduction for the easement

donation.      

              2.         The Accuracy-Related Penalties

              The court then turned to the issue of penalties.           Before

explaining the Tax Court's findings, we provide an overview of the

relevant statutory provisions.             Section 6662 of the Internal

Revenue Code imposes a penalty equal to 20% of any underpayment of

income tax due to, among other things, "[n]egligence or disregard

of rules or regulations," "[a]ny substantial understatement of

income tax," or "[a]ny substantial valuation misstatement."                 26

U.S.C. § 6662.6      In the case of a "gross valuation misstatement,"

defined as a 400% or more overstatement of the value of any

property claimed on a tax return, the penalty is increased to 40%

of the underpayment.         

     "The value . . . claimed on

a return of any property with a correct value . . . of zero is

considered to be 400% or more of the correct amount," and the


      6
          A "substantial understatement of income tax" is defined
as at least 10% of the actual amount of the tax or $5,000,
whichever is greater. 26 U.S.C. § 6662(d)(1)(A). A "substantial
valuation misstatement" occurs if "the value of any property . . .
claimed on any return of tax . . . is 200 percent or more of the
amount determined to be the correct amount of such valuation." 

                                        -15-
applicable penalty is 40%.      26 C.F.R. § 1.6662-5(g).    Only one

accuracy-related penalty may be assessed with respect to a given

underpayment, even if the underpayment is subject to a penalty on

multiple grounds.   See 

          There are exceptions to imposition of penalties. Section

6664(c)   sets   forth    a    "reasonable   cause   exception"   for

underpayments.   It provides, in relevant part:

          (1)   In  general.   No   penalty   shall   be
          imposed . . . with respect to any portion of
          an underpayment if it is shown that there was
          a reasonable cause for such portion and that
          the taxpayer acted in good faith with respect
          to such portion.
          (2) Special rule for certain valuation
          overstatements.     In   the   case   of   any
          underpayment attributable to a substantial or
          gross valuation overstatement . . . with
          respect to charitable deduction property,
          paragraph (1) shall not apply unless--
                 (A) the claimed value of the property
                 was based on a qualified appraisal
                 made by a qualified appraiser, and
                 (B) in addition to obtaining such
                 appraisal, the taxpayer made a good
                 faith investigation of the value of the
                 contributed property.

26 U.S.C. § 6664(c).     The   regulations instruct that "[t]he

determination of whether a taxpayer acted with reasonable cause and

in good faith is made on a case-by-case basis, taking into account

all pertinent facts and circumstances," including, inter alia, the

taxpayer's "experience, knowledge, and education"; whether the

taxpayer relied on an appraisal, and if so, whether such reliance

was reasonable and in good faith; and whether the taxpayer relied


                                 -16-
on information in a W-2 or other tax form, provided that the

"taxpayer did not know or have reason to know the information was

incorrect."      26 C.F.R. § 1.6664-4(b)(1).

              The Tax Court found the Kaufmans liable for a 40% penalty

for a gross valuation misstatement because they claimed a deduction

for the donation of a facade easement whose true value was zero.

Kaufman IV, 

, slip op. at 66-67.                 The court

further determined that the "reasonable cause" exception was not

applicable. That was because, although the first prong of the test

was met, that is, "the reported value of the easement was based on

a qualified appraisal made by a qualified appraiser," the second

prong was not, that is, the Kaufmans had not made a good faith

investigation of the easement's value.               

   The court

explained that "there is no evidence that, other than consulting

Mr. Bahar" -- who in fact told them that the donation of the

easement would not reduce the value of their home -- the Kaufmans

"made any independent investigation of the value of the facade

easement, much less an investigation confirming that its value was

the   value    they   reported    on   the    2003   and   2004   returns,   viz,

$220,800."      

      In a separate analysis, the court also

found, for essentially the same reason, that the Kaufmans had not

acted with reasonable cause and in good faith.               

      7
          The Tax Court held in the alternative that the Kaufmans
were liable for a 20% penalty for substantial understatement of
income tax and negligence. Kaufman IV, 

, slip

                                       -17-
            This appeal followed.         The Kaufmans challenge the Tax

Court's     finding   that   they   are    liable   for   accuracy-related

penalties.     They have not, however, appealed the court's finding

that the actual value of the easement was zero.

            II.   Penalty For Gross Valuation Misstatement

A.          Standard Of Review

            The parties agree that "[o]ur review of the tax court's

ruling is 'in most respects similar to our review of district court

decisions: factual findings for clear error and legal rulings de

novo.'"     Schussel v. Werfel, 

, 87 (1st Cir. 2014)

(quoting Drake v. Comm'r, 

, 68 (1st Cir. 2007)).           "The

Tax Court has the primary function of finding the facts in tax

disputes,     weighing   the   evidence,      and   choosing   from   among

conflicting factual inferences and conclusions those which it

considers most reasonable," and we "have no power to change or add

to those findings of fact or to reweigh the evidence." Scheidelman

v. Comm'r, 

, 151 (2d Cir. 2014) (per curiam) (quoting

Comm'r v. Scottish Am. Inv. Co., 

, 123-24 (1944))

(internal quotation marks omitted).

            In turn, "[t]he determination that a taxpayer is liable

for an accuracy-related penalty is [] a factual determination

reviewed for clear error." Curcio v. Comm'r, 

, 225 (2d



op. at 81-86. Because of our disposition of this case, we need not
address these rulings.

                                    -18-
Cir. 2012); accord Daoud v. Comm'r, 

, 441 (9th Cir.

2013); Rovakat, LLC   v. Comm'r, 

, 128 (3d Cir.

2013); Stobie Creek Invs. LLC v. United States, 

, 1381

(Fed. Cir. 2010); see also Kikalos v. Comm'r, 

, 986-87

(7th Cir. 2006); cf. United States v. Boyle, 

, 249 n.8

(1985) ("Whether the elements that constitute 'reasonable cause'

are present in a given situation is a question of fact, but what

elements must be present to constitute 'reasonable cause' is a

question of law.").

           Specifically, courts have treated the issue of whether a

taxpayer acted in "good faith" for purposes of the good faith

investigation requirement and the reasonable cause and good faith

exception as an issue of fact appropriately reviewed for clear

error.   See Whitehouse Hotel Ltd. P'ship v. Comm'r, 

,

247-50 (5th Cir. 2014).      This makes particularly good sense,

including in the context of this case.   The Tax Court, which heard

firsthand the evidence -- including, importantly, the testimony of

the Kaufmans themselves and their accountant -- was in the best

position to make the determination of whether the taxpayers acted

in good faith.   See Frank Sawyer Trust of May 1992 v. Comm'r, 

, 606 (1st Cir. 2013) ("[D]eferential clear error review is

especially appropriate when -- as here -- knowledge and intent are

pivotal to the Tax Court's ruling and credibility determinations

comprise a prime element of the court's ultimate conclusion."


                               -19-
(quoting Crowley v. Comm'r, 

, 1080 n.4 (1st Cir.

1992)) (internal quotation marks omitted)).

B.           Analysis

             1.      The Tax Court's Holding That The Kaufmans Did Not
                     Conduct A Good Faith Investigation

             After a careful review of the record, we cannot say that

the Tax Court's finding that the Kaufmans failed to make a good

faith investigation into the value of the easement was        clearly

erroneous.        Indeed, the conclusion was well supported by the

evidence. Specifically, it was clearly reasonable for the court to

conclude that events after the Kaufmans' receipt of Hanlon's

appraisal would have put a reasonable person on notice that further

investigation was required to verify the purported value of the

donated easement.       After receiving Hanlon's appraisal, Gordon,

expressly concerned that the donation of the easement to the Trust

might hurt the market value of the house, e-mailed Bahar for

reassurance, and Bahar unequivocally told him that he did not

expect the donation to decrease the value of the residence at all.

This should have immediately raised red flags as to whether the

value of the easement was zero. Yet the evidence shows Gordon made

an immediate decision to press ahead with the donation after

Bahar's reassurance that it would not hurt the value of the

residence. Moreover, the Kaufmans had signed a letter stating that

the restrictions imposed by the PRA were the same as those already



                                  -20-
in place on the residence by virtue of the South End zoning

restrictions.

           The Tax Court was entitled to reject as not credible

Gordon's testimony that he did not put much stock in Bahar's

assessment of the effect of the easement donation on the value of

the property.8        It was also entitled to reject the Kaufmans'

testimony that they did not notice the language about the easement

restrictions in the letter they sent to Washington Mutual.               And,

even accepting that testimony, it was within the Tax Court's

purview   to   find    that   the   Kaufmans   should   have   done   further

investigation and that they failed to do so.

           The Kaufmans' protestations that they were unable to

critically evaluate the Hanlon appraisal because they were not

experts in easement valuation are beside the point.            The Tax Court

did not suggest that the Kaufmans should have been able to critique

the Hanlon appraisal in a vacuum, or that they should have known

from the outset that the value of the easement was zero.              Rather,



     8
          Gordon's testimony that he discounted Bahar's analysis
because it was not sufficiently statistically rigorous could easily
be doubted. It was also striking in its self-contradiction. This
statement is belied by Gordon's failure to apply the same
statistical rigor to Hanlon's analysis, which was not based on any
statistical analysis at all -- just Hanlon's judgment, experience,
and "common sense." Kaufman IV, 

, slip op. at
26. Indeed, Gordon admitted that he had no basis upon which to
accept Hanlon's analysis other than the fact that Hanlon was a
professional appraiser, and that he could not judge the accuracy of
Hanlon's 10-15% range because "to judge its accuracy you would have
to see the sample data on which it was based." 

                                     -21-
the court found that the Kaufmans should have recognized obvious

warning signs indicating that the appraisal's validity was subject

to serious question, and should have undertaken further analysis in

response.

            The Kaufmans also miss the mark in arguing that it was

conventional wisdom during the tax years in question that a

conservation easement, in general, would decrease the value of a

piece of property.         The IRS regulations themselves reject any

notion that the grant of a conservation easement itself affects the

fair market value.        As the Scheidelman court observed,

            [t]o the contrary, the regulations provide
            that an easement that has no material effect
            on the obligations of the property owner or
            the uses to which the property may be put "may
            have no material effect on the value of the
            property." And sometimes an easement "may in
            fact serve to enhance, rather than reduce, the
            value of the property. In such instances no
            deduction would be allowable."

(footnote omitted) (quoting 26 C.F.R.

§ 170A-14(h)(3)(ii)); see also 

n.1 (noting that "[t]his

is especially true if only a simple facade easement has been

granted over a property that has substantial market value because

of its historic character" (alterations, citation, and internal

quotation marks omitted)).         Moreover, "neither the Tax Court nor

any   Circuit     Court   of   Appeals   has   held   that   the   grant   of   a

conservation easement effects a per se reduction in the fair market

value."     

(alteration in original) (citations and


                                     -22-
internal quotation marks omitted); see also Nicoladis v. Comm'r, 

(1988) (disclaiming adoption of any "general

'10-percent rule' . . . with respect to facade donations").

          The Tax Court did not purport to equate "good faith

investigation" with "exhaustive investigation." It merely required

that the Kaufmans do some basic inquiry into the validity of an

appraisal whose result was squarely contradicted by other available

evidence glaringly in front of them.   There was no clear error in

such reasoning.

          The Kaufmans also argue that they must be found to have

acted in good faith because they reasonably relied on their

accountant, Cohen, who reviewed the Hanlon appraisal and expressed

no reservations about the Kaufmans taking the easement deduction.

But Cohen testified that he offered the Kaufmans no opinion on

whether the easement valuation was reasonable or not.9     And so,

reliance on Cohen could not, by definition, constitute a "good

faith investigation of the value of the contributed property,"   26

U.S.C. § 6664(c)(2)(B) (emphasis added), particularly given the

other information available to the Kaufmans that cast doubt on the

validity of the appraisal.




     9
          Gordon testified that Cohen said the results of the
Hanlon appraisal were "reasonable."     But the Tax Court, as
factfinder, was entitled to weigh the credibility of the
conflicting testimony, and to credit Cohen's testimony over
Gordon's. See Frank Sawyer 

.
                               -23-
           The Fifth Circuit's decision in Whitehouse, upon which

the Kaufmans rely, is not to the contrary and is consistent with

our conclusions. There, the taxpayer had relied on two appraisals,

and moreover, the valuations were much more complicated because

many issues were in dispute, including the property's boundaries,

its highest and best use, and how the donation of the easement

would affect the highest and best use. See 

, 247-48, 250. Most importantly, there is no indication that

the taxpayer in Whitehouse encountered "red flags" suggesting that

the easement had no value.

           The Kaufmans mistakenly attempt to rely on the Tax

Court's decision in Chandler v. Commissioner, 

(2014).

It is also distinguishable.      There, as here, the taxpayers relied

on an appraisal and the advice of their accountant.            

Unlike in this case, there were no "red flags" analogous to the

Bahar e-mail or the Washington Mutual letter. Indeed, the Chandler

court expressly distinguished this case on that precise basis. See

  Kaufman   involved    "different    circumstances,"

namely,   "[t]he   taxpayers'    continued    reliance    on   the   initial

appraisal in the face of [Bahar]'s comments").            Such "red flags"

were likewise missing from the other cases cited by the Kaufmans.

See Zarlengo v. Comm'r, 

(2014); Scheidelman v.




                                   -24-
Comm'r, 

(2010), vacated and remanded, 

(2d Cir. 2012).10

             2.      The Tax Court's Alternate Holding That The
                     Kaufmans Did Not Act With Reasonable Cause And In
                     Good Faith

             The Tax Court also did not clearly err in finding, as an

alternate holding, that the Kaufmans did not satisfy the reasonable

cause and good faith exception, for the same reasons already

discussed.        "Generally,   the    most   important   factor"   in   the

reasonable cause and good faith determination "is the extent of the

taxpayer's effort to assess the taxpayer's proper tax liability."

26 C.F.R. § 1.6664-4(b)(1). Courts should "tak[e] into account all

pertinent facts and circumstances," "including the experience,

knowledge, and education of the taxpayer."         

were

highly intelligent, very well-educated people, and the Tax Court

reasonably found that developments casting doubt on the Hanlon

appraisal should have alerted them that they needed to take further

steps to assess their "proper tax liability."

             Moreover, and importantly for our purposes,




     10
          We also note that, because of the applicable standard of
review, the cases cited by the Kaufmans in which the Tax Court
found that the taxpayer acted in good faith are of limited help to
the Kaufmans. Even if the Kaufmans were identically situated to
the taxpayers in those cases (and they are not), and even if the
Tax Court's findings on the good faith issue in those cases would
have been affirmed on appeal as not clearly erroneous, it would not
logically follow that the Tax Court clearly erred in finding a lack
of good faith in this case.

                                      -25-
           [r]easonable cause and good faith ordinarily
           is not indicated by the mere fact that there
           is an appraisal of the value of property.
           Other   factors   to   consider  include   the
           methodology and assumptions underlying the
           appraisal,    the    appraised    value,   the
           relationship between appraised value and
           purchase price, the circumstances under which
           the   appraisal    was   obtained,    and  the
           appraiser's relationship to the taxpayer or to
           the activity in which the property is used.

26 C.F.R. § 1.6664-4(b)(1).    Hanlon's assumptions and methodology

were questionable at best, and the appraisal value was suspiciously

high in view of other evidence available to the Kaufmans. Further,

Hanlon at least arguably had an incentive to calculate a high value

for the easement, given that he performed appraisals for the Trust

and the Trust received cash donations corresponding to a set

percentage of the assessed value of the donated easements, see

Kaufman 

.   In view of these facts, the Tax Court

did not clearly err in concluding that the Kaufmans' reliance on

Hanlon's appraisal was not sufficient to satisfy the reasonable

cause and good faith exception.

           3.     The Kaufmans' Remaining Arguments

           The Kaufmans advance three additional arguments in an

effort to show that the Tax Court's analysis was infected by legal

error.   We address and reject each in turn.

           First, the Kaufmans argue that the IRS did not meet its

burden of production to impose any penalty.    Not so.   In addition

to the basic underlying facts, the IRS submitted the expert


                                -26-
testimony of Bowman, who concluded, based on market research and a

comparison     of    the     South     End    zoning        restrictions     with    the

restrictions imposed by the PRA, that the value of the easement was

zero.    The        Kaufmans    criticize          Bowman    for    not    relying   on

"contemporary       comparable       sales    data    to    determine     the   'after'

value," but they concede elsewhere that this sort of data was

"nonexistent" and that accordingly it was reasonable to compare the

South End zoning restrictions with the PRA restrictions to arrive

at a valuation of the easement.                    Bowman's testimony, while not

compelling a finding that the value of the easement was zero,

certainly heavily supported such a finding -- a point the Kaufmans

seem to have implicitly conceded by their decision not to challenge

the Tax Court's valuation of the easement.

             Second, the Kaufmans argue that the Tax Court employed an

erroneous definition of the term "good faith."                     The court used the

phrase   "honesty       in     belief"       and     required      the    Kaufmans    to

"demonstrate how they honestly came to believe that, beyond being

simply the amount determined in the Hanlon appraisal, the value of

the facade easement was $220,800."                  Kaufman IV, 

, slip op. at 72.            The Kaufmans contend that this "is an

impossibly high standard of proof" and that "[a] more suitable

definition for good faith . . . would be the absence of 'bad' faith

-- that is, the absence of 'dishonesty of belief or purpose.'"                       At

oral argument, counsel for the Kaufmans framed this argument


                                         -27-
somewhat differently, asserting that the Tax Court employed an

overly "subjective" standard in evaluating the Kaufmans' good

faith.

             The Kaufmans' proposed objective/subjective distinction

is unhelpful and not supported by the text of the regulations. The

inquiry must necessarily be somewhat subjective, since courts must

consider     "the   experience,    knowledge,   and   education   of   the

taxpayer."     26 C.F.R. § 1.6664-4(b)(1); see also 

"an honest misunderstanding of fact or law that is reasonable

in light of all of the facts and circumstances" may be indicative

of reasonable cause and good faith (emphasis added)).        At the same

time, the inquiry is not entirely subjective, as the regulations

instruct courts to consider whether the taxpayer would "know or

have reason to know" that information on which he or she relied was

incorrect.    

    The more helpful framing of the

issue is that set forth in the regulations: whether, "taking into

account all pertinent facts and circumstances," the taxpayer acted

in good faith.      

the standard the Tax Court used.

             Turning to the argument in the Kaufmans' brief, the

contention that the "honesty in belief" standard is "impossibly

high" is undercut by the fact that the Tax Court has in fact

recently applied that definition of "good faith" in a case in which

it found in favor of the taxpayers. See Zarlengo, 

, slip op. at 57-58.           Importantly, Black's Law Dictionary


                                    -28-
seemingly treats both definitions as paths to reach a finding.                                 It

defines "good faith" as having several components: "[a] state of

mind    consisting       in    (1)       honesty    in    belief        or       purpose,      (2)

faithfulness      to   one's       duty    or     obligation,      (3)       observance        of

reasonable commercial standards of fair dealing in a given trade or

business,    or    (4)    absence         of     intent    to    defraud          or    to   seek

unconscionable advantage."                Black's Law Dictionary 808 (10th ed.

2014) (emphases added).11

            Third, the Kaufmans make an argument that obtaining a

qualified appraisal made by a qualified appraiser "[a]utomatically"

constitutes a good-faith investigation. This interpretation of the

statute cannot be correct.                  Section 6664(c)(2) sets forth two

separate requirements that must be met in order for the reasonable

cause exception to apply to a gross valuation overstatement: "(A)

the    claimed    value       of   the    property       was    based    on       a    qualified

appraisal made by a qualified appraiser, and (B) in addition to

obtaining    such      appraisal,          the     taxpayer      made        a    good       faith

investigation of the value of the contributed property."                                      The


       11
          Insofar as the Kaufmans mean to argue that it would be
error to require them to determine that the easement was worth
precisely $220,800 -- as opposed to, say, $215,000 (or $220,799)
-- we do not understand the Tax Court's opinion to require that
level of precision. The court's analysis, considered as a whole,
suggests that it merely required that the Kaufmans, after a good-
faith investigation of the value of the easement, believe that
Hanlon's appraisal was reasonably accurate.    Cf. Fire & Police
Pension Ass'n of Colo. v. Simon, 

, 241 n.5 (1st Cir.
2015) (citing Connor B ex rel. Vigurs v. Patrick, 

, 54
n.9 (1st Cir. 2014)).

                                            -29-
Kaufmans' reading would render the second requirement meaningless,

in violation of the rule that "a statute ought, upon the whole, to

be so construed that, if it can be prevented, no clause is rendered

superfluous, void, or insignificant."                 Young v. United Parcel

Serv., Inc., 

, 1352 (2015) (citations and internal

quotation marks omitted) (declining to read the second clause of

the   Pregnancy    Discrimination          Act   as   "simply    defin[ing]      sex

discrimination to include pregnancy discrimination" because "[t]he

first clause accomplishes that objective").

            Simply       obtaining    an   appraisal    is   not    the   same    as

reasonably relying on that appraisal. The Kaufmans concede as much

in their reply brief, acknowledging that "'obtaining' a qualified

appraisal alone will not satisfy the good-faith investigation

requirement, nor will 'unreasonable' reliance."                 There may well be

situations in which the taxpayer need do little more than read an

appraisal and note that there is no other evidence that reasonably

casts doubt on the accuracy of the appraisal.                Here, however, the

Tax Court supportably found that the Kaufmans obtained a qualified

appraisal   from     a    qualified    appraiser,      but   that   other     facts

available to the Kaufmans should have alerted them that it was not

reasonable to rely on that appraisal.

            The Tax Court's analysis with respect to the accuracy-

related penalties was sound as a legal matter and not clearly

erroneous as a factual matter.


                                       -30-
                 III.   Compliance With 26 U.S.C. § 6751

              The Kaufmans also argue, for the first time on appeal,

that    the    Commissioner's     assessment     of   the   accuracy-related

penalties did not comply with 26 U.S.C. § 6751(b)(1), which

provides that no tax penalty "shall be assessed unless the initial

determination     of    such   assessment   is   personally    approved   (in

writing) by the immediate supervisor of the individual making such

determination or such higher level official as the Secretary [of

the Treasury] may designate."12        We do not consider this argument

because it was not preserved.

              We generally treat arguments not raised below as waived.

E.g., Anderson v. Hannaford Bros. Co., 

, 158 n.5 (1st

Cir. 2011).      The Supreme Court has recognized the wisdom of this

rule in the specific context of appeals from tax courts, noting

that the practice "is essential in order that parties may have the

opportunity to offer all the evidence they believe relevant to the

issues which the trial tribunal is alone competent to decide" and

"in order that litigants may not be surprised on appeal by final

decision there of issues upon which they have had no opportunity to

introduce evidence."           Hormel v. Helvering, 

, 556

(1941).




       12
          The Commissioner disputes the accuracy of this assertion
as a matter of fact.

                                     -31-
          The Kaufmans acknowledge that they did not raise this

argument below but urge us to consider it notwithstanding that

general rule because it "involves a question of law and facts that

are not in dispute."    As the government explains, that is wrong;

the question of whether the requirements of § 6751(b)(1) were in

fact met in this case is a question of fact, the resolution of

which would require further development of the record.

          The Kaufmans contend in their reply brief that it was the

IRS's burden to show that the requirements were met, and that the

Commissioner   cannot   now    "enlarge    the   record   to   demonstrate

compliance with section 6751."        But the question whose burden it

was to show compliance with § 6751 is beside the point.               The

Kaufmans had the responsibility of arguing in the Tax Court that

the Commissioner had not complied with the statute in order to put

the Commissioner on notice that the issue was in dispute.          Having

failed to make that argument below, the Kaufmans cannot now fault

the Commissioner for introducing no evidence to rebut it.             See

.

                              IV.   Conclusion

          The judgment of the Tax Court is affirmed.




                                    -32-