139 T.C. No. 14
T.C.2012Background
- Irby Ranches, LLC granted two conservation easements to Colorado Open Lands in 2003 (west parcel) and 2004 (east parcel) funded by FRPP, GOCO, and Gunnison County, in a bargain sale allowing continued agricultural use and perpetual conservation restrictions.
- The deeds required Colorado Open Lands to reimburse the funding agencies from any extinguishment proceeds, with GOCO and other parties, and allowed transfer to qualified organizations.
- Petitioners claimed charitable contribution deductions for the bargain-sale easements on 2003 and 2004 Form 1065/8283; the IRS disallowed those deductions for failure to meet 170 requirements.
- Arnold Butler prepared a qualified appraisal (August 2003; with addenda) valuing the easements, and petitioners attached Form 8283 containing the appraised values and bargain-sale amounts.
- The case focused on (i) whether the easements’ terms protect conservation in perpetuity under 170(h)(5) and 1.170A-14(g); (ii) whether the appraisal qualifies under 1.170A-13; and (iii) whether contemporaneous written acknowledgments and substantiation meet 170(f)(8) requirements.
- The November 3, 2011 agreement between counsel created a trial to resolve these issues; a subsequent order indicates all three gaps were found satisfied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether easement restrictions are perpetually enforceable under 170(h)(5) | Irbys: restrictions are enforceable; reimbursement provisions align with perpetual conservation | IRS: reimbursement structure undermines perpetual protection | Yes; restrictions protected in perpetuity under 170(h)(5) and 1.170A-14(g) (ii) |
| Whether Petitioners obtained a qualified appraisal | Appraisal complied with 1.170A-13(c)(3) for qualified appraisal | IRS: appraisal lacked explicit income tax purpose statement | Yes; appraisal qualified under 1.170A-13(c)(3) despite absence of explicit statement in some documents |
| Whether contemporaneous written acknowledgment satisfied 170(f)(8) | Documents collectively constitute contemporaneous acknowledgment | No single document sufficed, but series can meet requirement | Yes; requirements satisfied through combined documents including deeds, option agreements, and Form 8283 |
| Whether substantiation requirements of 170(f)(8) were met | All required documentation provided; bargain-sale nature disclosed | Not separately stated, potentially incomplete | Yes; proper substantiation satisfied under the statute and regulations |
Key Cases Cited
- Glass v. Commissioner, 124 T.C. 258 (Tax Court 2005) (perpetuity requirements under 170(h)(5))
- Wall v. Commissioner, T.C. Memo. 2012-169 (Tax Court 2012) (extinguishment proceeds and donor vs. donee rights)
- Simmons v. Commissioner, T.C. Memo. 2009-208 (D.C. Cir. 2011) (appraisal adequacy despite lack of explicit tax-purpose statement)
- Kaufman v. Shulman, 687 F.3d 21 (1st Cir. 2012) (regulatory interpretation of extinguishment proceeds and windfalls)
- Averyt v. Commissioner, T.C. Memo. 2012-198 (Tax Court 2012) (contemporaneous acknowledgments may be formed from multiple documents)