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Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Sunday, May 11, 2014

Easements Score Big In Tax Court

Gavel

Former owner of the Tampa Bay Buccaneers, Hugh Culverhouse Jr., now owns Parker Ranch Holdings, LLC (PRH).  In 2006, PRH claimed a charitable deduction of approximately $24 million for the donation of an easement on 82 acres of land to Sarasota County, Florida.  The land is presently being used for a public park, community garden, and conservation area. 

Although the IRS was willing to stipulate that the easement was worth something (a contrary position from other easement donation cases), it objected to the amount of the deduction.  Although the Tax Court did not allow the entire deduction, they allowed most of it--$19 million.  The court ruled that 20% accuracy-related penalty did not apply.

One of the reasons the court allowed this deduction is because conservation easements are rarely bought and sold.  Problems arise in valuing the property by establishing what the property could potentially be worth.  In some cases, the IRS has found that easements were worthless, since they did not significantly add to existing restrictions. 

The Tax Court’s decision might make people rethink their involvement in conservation easements.

See Peter Reilly, Former Tampa Bay Buccaneers Owner Scores Touchdown in Tax Court, Forbes, May 8, 2014. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

http://lawprofessors.typepad.com/trusts_estates_prof/2014/05/easements-score-big-in-tax-court.html

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