RP Golf v. Commissioner, 860 F.3d 1096

Background

RP Golf, LLC owned golf course property in Platte County, Missouri, financed by mortgages from Hillcrest and Great Southern.
In December 2003 RP Golf conveyed a permanent conservation easement to Platte County Land Trust (PLT) and claimed a $16.4 million charitable deduction on its 2003 partnership return.
The mortgages remained unsubordinated at the time of the easement conveyance; Hillcrest and Great Southern executed written subordinations dated April 14, 2004 (effective December 31, 2003).
The IRS Commissioner disallowed the deduction, asserting the easement was not a “qualified conservation contribution” because it was not "protected in perpetuity" per 26 U.S.C. § 170 and related regulations.
At trial the Tax Court credited the banks’ lack of corroborating evidence and rejected RP Golf’s claim of pre-conveyance oral subordination agreements, finding RP Golf failed to prove such agreements.
The Eighth Circuit affirmed, holding the regulatory rule requiring mortgage subordination at the time of the gift controls and that the Tax Court’s credibility-based findings were not clearly erroneous.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the easement was “protected in perpetuity” when mortgages were subordinated after the conveyance	RP Golf: subordination after conveyance (or oral pre-conveyance agreements) satisfies protected-in-perpetuity—timing not required by statute	Commissioner: regulation 26 C.F.R. § 1.170A-14(g)(2) requires mortgage subordination at the time of the gift; absence defeats deduction	Held for Commissioner: subordination must exist at time of conveyance; post-conveyance subordinations do not qualify
Whether the “remote future” provision (§1.170A-14(g)(3)) saves the deduction despite no prior subordination	RP Golf: foreclosure risk was negligible, so deduction should not be disallowed	Commissioner: subordination requirement shows foreclosure risk is not "remote or negligible" and the provision does not override timing rule	Held for Commissioner: remote-future provision does not modify strict subordination requirement
Whether RP Golf proved pre-conveyance oral subordination agreements	RP Golf: representatives orally secured banks’ consents before conveyance	Commissioner: no credible corroboration from banks; Tax Court’s credibility finding defeats claim	Held for Commissioner: Tax Court’s factual finding rejecting oral agreements not clearly erroneous
Standard of review for Tax Court findings on credibility	RP Golf: characterization of some statements as “Opinion” not avoid deference	Commissioner: credibility findings are factual and entitled to deference	Held: factual credibility determinations reviewed for clear error and upheld in this case

Key Cases Cited

Minnick v. Comm’r, 796 F.3d 1156 (9th Cir. 2015) (post-conveyance subordination did not satisfy the regulation)
Mitchell v. Comm’r, 775 F.3d 1243 (10th Cir. 2015) (subordination must exist at time of gift; remote-future provision does not negate requirement)
Engle v. Comm’r, 464 U.S. 206 (Commissioner may promulgate regulations to enforce tax code)
Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44 (2011) (deference to reasonable agency regulations unless arbitrary or manifestly contrary)
Chase Bank USA, N.A. v. McCoy, 562 U.S. 195 (2011) (deference to agency interpretation when reasonable)
Comm’r v. Nat’l Alfalfa Dehydrating & Milling Co., 417 U.S. 134 (1974) (deductions allowed only where clearly provided by statute)
Anderson v. City of Bessemer City, 470 U.S. 564 (credibility determinations by factfinder are rarely clearly erroneous)
Blodgett v. Comm’r, 394 F.3d 1030 (8th Cir. 2005) (tax court credibility findings nearly unreviewable)