By Kenneth H. Bridges, CPA, PFS June 2020
As mentioned in some of my previous articles on the topic, Georgia is the epicenter of the syndicated conservation easements industry, which has been in the IRS’ crosshairs for quite some time. Accordingly, we continue to provide regular updates on the topic of conservation easements.
Below is a brief summary of cases of interest which were released from April to mid-June 2020.
In Oakbrook Land Holdings (opinion released May 12, 2020), the IRS prevailed on the technical foot fault it is using to win most of these cases, which is that the deed did not comply with the proportionality rule in the event of judicial extinguishment of the easement. The primary importance of this case is that the full court (with a couple of dissenters) upheld the validity of the IRS regulation dealing with how the deed must provide for extinguishment proceeds to be shared. Judge Holmes probably summarized the syndicated conservation easement situation best in his dissenting opinion; one excerpt from which includes: “I fear that our efforts to clear cut and brush hog our way out of the volume of conservation-easement cases we have to deal with has left us a field far stumpier than when we began.” The Woodland Property Holding (May) and Hewitt (June) cases were subsequently added to the list of cases in which the IRS has prevailed before Tax Court judges based on failure to adhere to the proportionality rule.
The taxpayers got a rare win in Champions Retreat (released May 13, 2020) when the 11th Circuit ruled that the Tax Court erred in disallowing a conservation easement deduction solely because the property was a golf course. The 11th Circuit found that even though 80% of the land was a golf course, the natural areas of the property still provided a habitat for protected plant and animal species and provided scenic views for the public canoeing and kayaking on the adjacent rivers. The 11th Circuit remanded the case to the Tax Court for the Tax Court to determine the appropriate amount of the deduction.
Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP, an Atlanta-based CPA firm.
This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice. The article provides only a very general summary of complex rules. For advice on how these rules may apply to your specific situation, contact a professional tax advisor.