“They Alway Must Be With Us”

In Uncategorized on 03/11/2014 at 17:17

Thus Judge Buch, quoting John Keats (Book I of Endymion, for those who slept through freshman English Lit), puts paid to another Section 170(h)(2)(C) and (h)(5)(A) conservation easement claim, in Patrick J. Wachter and Louise M. Wachter, 142 T. C. 7, filed 3/11/14.

IRS wants to fight over contemporaneous acknowledgment and no-goods-or-services, but those involves facts and so are off the summary judgment table.

But the perpetual easement issue is front-and-center, and the Clan Wachter is up against the laws of the great State of North Dakota, the only US State (to my knowledge or Judge Buch’s) that caps the duration of easements. North Dakota, in a fight with the Fed’ral Guvmint over migratory bird sanctuaries, passed a law restricting easements to 99 years. The Supremes decided that the law could not affect Federal deals already in the works, but any made thereafter would be subject to the law.

The Wachters, making their deal thereafter, claimed that the 99-year out was so remote as to be negligible, a song we’ve heard before; see my blogpost “Money-Back Guarantee”, 6/24/13.

Well, it isn’t that remote.

Judge Buch: “As used in the regulation and as interpreted by our caselaw, the event is not remote. On the dates of the donations it was not only possible, it was inevitable that [the donee of the easements] would be divested of its interests in the easements by operation of North Dakota law. Therefore, the easements were not restrictions granted in perpetuity and were thus not qualified conservation contributions.” 142 T. C. 7, at p. 16 (Footnote omitted).

The omitted footnote mentions the application of the 99-year-lease rule in case of Section 1031 like-kind exchanges, but here the issue is not whether property is like anything else, and there’s no express statutory requirement for perpetuity in Section 1031.

So while the residual value of the burdened properties may be minimal for 99 years, that doesn’t change things; it’s not value. It’s remoteness.

“Remote” means that a rational businessperson wouldn’t consider the event as at all probable. And though the word “remote” might mean “distant” in other contexts, here it means “virtually impossible”.

But here it’s not even improbable, it’s certain. The Wachters’ easements won’t “alway” be with us.

 And their noncash deduction won’t be with them at all.

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