Thursday, January 31, 2019
Partnership Not Entitled to Charitable Contribution Deduction for Two of Three Easements, Conservation Purpose Not Protected in Perpetuity
In Pine Mountain Preserve, LLLP v. Commisioner, the Tax Court's 116 page opinion determined that (cribbing from CCH):
A partnership was not entitled to charitable contributions deductions for two easement deeds because the conservation purpose of their donated easement was not protected in perpetuity and, consequently, was not a qualiﬁed conservation contribution. The IRS argued that the easements did not protect conservation purposes in perpetuity because the easement deeds permitted the property to be used in ways inconsistent with the conservation purposes of the easements. Further, the two easements deeds did not restrict a speciﬁc, identiﬁable piece of real property because they allowed supposedly conserved land to be taken back and used for residential development. Because neither easement constituted a restriction (granted in perpetuity) on the use which may be made of the real property, neither easement constituted a "qualiﬁed real property interest" that could give rise to a charitable contribution deduction under Code Sec. 170(h)(1)(A). Therefore, the partnership was not entitled to a deduction for conservation easements for the two tax years at issue. However, the easement deed for the third tax year did not contain a reserved-right provision allowing the landowner to construct houses. Although the third easement deed allowed the landowner to use the land in various other ways, these uses were consistent with the conservation purposes of the easement. Further, the third easement covered a speciﬁc, identiﬁable piece of real property, was "granted in perpetuity" under Code Sec. 170(h)(2)(C) and was made "exclusively for conservation purposes." Moreover, the inclusion in the easement of a provision allowing amendments, provided that they were "not inconsistent with the conservation purposes of the donation," did not prevent that easement from satisfying the granted-in-perpetuity requirement of Code Sec. 170(h)(2)(C). Therefore, the partnership could get a deduction for the donation of the easement for the third tax year at issue.
Darryll K. Jones