In Uncategorized on 10/03/2012 at 17:45

OK, But Forget the Ten Dollars

If hypertechnical semantic gymnastics are what does it for you (and if so, only my innate courtesy prevents me from adding “in which event I most respectfully suggest you get a life”), take a peek at RP Golf, LLC, SB Golf, LLC, Tax Matters Partner, T. C. Memo. 2012-288, filed 10/3/12, Judge Paris reaching for her driver on this one.

It’s another scenic easement, involving acres of Platte County, Missouri, which a golf club operator deeded to an appropriate 501(c)(3) to protect, preserve and defend from any development, and incidentally to claim a $16.4 million tax break.

Once again, it all comes down to the famous Section 170(f)(8) substantiation requirement. No letters from the 501(c)(3), so let’s look at the deed.  Describes the property? Yes. Contemporaneous? Yes, both golf clubber and 501(c)(3) signed the deed. But the deed doesn’t say that no (emphasis by the Court) goods or services were furnished by the 501(c)(3) to the cheerful giver, although IRS and golf clubber agree that golf clubber got nothing from the 501(c)(3).

The deed does say “for and in consideration of the covenants and representations contained herein and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Grantor on behalf of itself and its heirs, successors and assigns, in consideration of the premises contained herein and other valuable consideration paid to its full satisfaction….” T. C. Memo. 2012-288, at p. 4.

Here’s the problem, of course, the boilerplate “other good and valuable consideration”. This is part of what sunk poor ol’ Randy Schrimsher, but its absence saved Gayle and Margaret Averyt and their pals. See my blogpost “Yes In Deed”, 7/16/12.

Randy’s deed had the ten dollar language, and even though in his case  Tax Court agreed it was boilerplate, there was no contemporaneous evidence to show there wasn’t “other good and valuable consideration,” and apparently no one thought to stipulate that there wasn’t. Gayle and Maggie, on the other hand, said nothing about anything but how they loved the environment.

Judge Paris hits the ball squarely between the bunker and the fairway. “Despite the veiled reference to ‘other good and valuable consideration’, neither party alleges that goods or services were exchanged for the easement contribution. In fact, the agreement indicates to the contrary–that there was no consideration exchanged. The most obvious indication is that the agreement does not recite any amount of consideration. Cf. Schrimsher v. Commissioner, T.C. Memo. 2011-71 (the deed conveying a conservation easement recited as consideration ‘the sum of TEN DOLLARS, plus other good and valuable consideration’). The absence of any statement regarding consideration is underscored by the agreement recitals, which state that the easement is ‘freely’ given. Therefore, the Court concludes that the ‘other good and valuable consideration’ recited in the agreement is boilerplate language and has no legal effect for purposes of sec. 170(f)(8).” T. C. Memo. 2012-288, at pp. 10-11, footnote 7.

Note the capital letters, in which are written the fatal sum that scuttled poor Randy Schrimsher. What if he had used lowercase letters instead?

Better still, scrivener, leave out the ten dollars. Whether in upper or lower case.

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