THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, August 16, 1995 TAG: 9508160409
SECTION: LOCAL PAGE: B5 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 81 lines
Does the federal government owe a $47,000 tax refund to developer R.G. Moore for ruining his 60 acres in Chesapeake by declaring most of it wetlands?
Or does Moore owe $290,000 for an opulent party that he deducted as a business expense, and a loan to business partner Nancy Creech that he wrote off as uncollectible?
Lawyers debated these issues Tuesday in federal court in a case that could set a precedent for landowners hurt by 1989 wetlands regulations.
Moore, the Virginia Beach mega-developer who has built 14,000 homes and developed 19,000 lots, is suing the government for the tax refund. The government is suing Moore for the back taxes.
For six hours Tuesday, Judge John A. MacKenzie heard testimony on who owes whom. The trial is scheduled to conclude today.
The central issue is: Were new wetlands regulations in 1989 so burdensome that they constituted a government ``taking'' of Moore's property? If so, can he deduct the loss on his income taxes?
The case revolves around the personal tax returns of R.G. and Frances Rae Moore. The couple, who jointly own the R.G. Moore Building Corp., paid $2.5 million in taxes for 1989. That same year their company sold $58 million worth of houses and residential lots, mostly in Virginia Beach.
Moore's claim centers on 60 acres that he owns off Elbow Road, near Stumpy Lake. It is part of a 691-acre tract owned by a partnership that includes Moore.
The partners planned a big residential subdivision called Elbow Road Estates, but it was never built. The plans were ruined by new federal wetland rules in 1989.
Under the new rules, 46 of Moore's 60 acres were declared wetlands. Moore applied for a permit from the Army Corps of Engineers anyway, but gave up when consultants told him it was hopeless.
As a result, the property's value dropped drastically. Before 1989, it was worth $1 million, an appraiser testified. After 1989, it was worth $35,800.
``The government changed the rules'' in mid-development, argued Moore's attorney, Douglas E. Kahle.
But the Internal Revenue Service did not allow Moore to deduct the loss. It ruled that Moore did not complete his permit application to the Army corps, so it was never formally rejected. Besides, the government claims, the property is not a 100 percent loss.
``Mr. Moore is not entitled to the loss deduction that he claimed,'' argued Michael J. Martineu, a tax attorney for the U.S. Justice Department.
Other courts around the country have ruled that the 1989 wetlands rules were a ``taking,'' but those cases were filed in U.S. Claims Court. No one has ever tried to claim such a loss on his tax returns.
Lawyers on both sides agree it is a case without precedence.
Meanwhile, the government claims that Moore wrongly deducted as a business expense a $347,000 party he threw in 1989 for real estate agents who sold at least two of his homes.
Moore threw similar expensive parties every year at Norfolk's Omni Waterside Hotel, with sit-down dinners and entertainers such as Wayne Newton and Barbara Mandrell for up to 600 real estate agents.
Moore claimed the parties were strictly business. ``It increased my sales tremendously,'' he testified. Each year he held the parties, agents sold 600 to 1,200 R.G. Moore homes. Without the parties, he wouldn't have sold half as many, Moore said.
The government also says Moore improperly wrote off a $700,000 personal loan to Nancy Creech, a business partner and former city councilwoman.
Moore loaned the money to Creech when they were partners in a Rudee Inlet condominium. He expected her to pay it back from profits from the 1,200-acre Lake Ridge development, in which they were both partners. But that project went bust and Creech never repaid the loan.
The government claims Moore gave up too easily. Moore says the Lake Ridge collapse pushed Creech over the edge. She filed for personal bankruptcy last year.
A ruling in the case is not expected for several days or weeks. ILLUSTRATION: Photo
R.G. Moore
by CNB