In Uncategorized on 04/08/2014 at 17:18

IRS says that maybe one or more of the minor children of Douglas G. Carroll & Deirdre M. Smith might throw out their parental units’ conservation easement, so IRS wants summary judgment tossing Mom and Dad’s charitable deduction, in Docket No. 5445-13, filed 4/8/14.

Not so fast, says Judge Lauber.

Background: :”… petitioner Carroll deeded a parcel of land in Maryland to himself, his wife, and to himself as custodian, under the Maryland Uniform Transfers to Minors Act, for each of their three minor children. … petitioners and petitioner Carroll, as custodian for the minor children, conveyed a conservation easement on this property to the Maryland land trusts organized under I.R.C. § 501(c)(3). Petitioners claimed a charitable contribution deduction for this non-cash contribution on their Federal income tax return… and claimed carryover contributions….” Order, at p. 1.

Our old friend “in perpetuity” shows up. See my blogpost “A Joy Forever”, 4/4/11, and “‘A Joy Forever’? – Maybe Not”, 7/20/12.

IRS says the kids, or any one of them, as co-owners, can revoke the conservation easement within a reasonable time of reaching the age of majority. And Judge Lauber assumes that Maryland law would permit this.

But the savings clause “so remote as to be negligible” gives Doug and Deirdre a shot at saving their deductions.

Judge Lauber: “This Court has construed the phrase ‘so remote as to be negligible’ to refer to a possibility that ‘persons generally would disregard as so highly improbable that it might be ignored with reasonable safety in undertaking a serious business transaction,’ 885 Inv. Co. v. Commissioner, 95 T.C. 156, 161 (1990) (quoting United States v. Dean, 224 F.2d 26, 29 (1st Cir. 1955)), or ‘a chance which every dictate of reason would justify an intelligent person in disregarding as so highly improbable and remote as to be lacking in reason and substance,’ Graev v. Commissioner, 140 T.C. -,-, (slip op. at 27-28) (June 24, 2013) (quoting Briggs v. Commissioner, 72 T.C. 646, 657 (1979), aff’d without published opinion, 665 F.2d 1051 (9th Cir. 1981)). ‘[A] conservation easement fails to be “in Perpetuity” * * * if, on the date of the donation, the possibility that the charity may be divested of its interest in the easement is not so remote as to be negligible.’ Graev v. Commissioner (slip op. at 27); see Wachter v. Commissioner, 142 T.C. –,-(slip op. at 15-16) (March 11, 2014).” Order, at p. 2.

Of course I blogged the Graev case, above cited, in my blogpost “Money Back Guarantee”, 6/24/13, and the Wachter case, ditto, in my blogpost “They Alway Must Be With Us”, 3/11/14.

OK, so does IRS get judgment (that is, an opinion) as a matter of law that the kids’ right to void the easement is not so remote as to be negligible?

Doug and Deirdre claim it is, that the kids will do the right thing.

Remember, in summary judgment motions, the non-moving (opposing) party gets the benefit of the doubt.

Judge Lauber: “Viewing the facts and drawing inferences therefrom in the light most favorable to petitioners as the nonmoving parties, we conclude that there are genuine disputes of material fact as to whether the probability that the petitioners’ children will void their contribution is ‘so remote as to be negligible.’ Order, at p. 3.

So let’s find out at the trial what the chances are that the kids will revoke the easement when they put away childish things.


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