In Uncategorized on 04/28/2016 at 16:43

Judge Elizabeth Crewson Paris takes a line from the 1967 Dionne Warwick wake-up call, as she again unshipped her driver, the one she used back three years ago, which featured in my blogpost “Valuable Consideration?” 10/3/12.

Once again we’re back again in Platte County, MO, with the golfing conservationists shooting for a $16 million charitable deduction, in RP Golf, LLC, SB Golf, LLC, Tax Matters Partner, 2016 T. C. Memo. 80, filed 4/28/16.

We’re now looking at what the T. C. Memo. summarized in the aforesaid blogpost didn’t cover.

Aside from having subjected land they didn’t own to the conservation easement, the golfers took 100 days to obtain and record written subordination agreements from the two banks that held mortgages (out in MO they call them “deeds of trust,” but same-same) on the lands they did own. The golfers claim the banks orally agreed to subordinate, but don’t remember who they talked to, and anyway the “no oral modifications” language in notes and deeds of trust bunkers that one.

Of course, conservation easements have to be in perpetuity, and senior liens that might defeat them must go away or be subordinated. From Day One; no mulligans on that one.

State law does play a role in determining what interests in land have been conveyed, and here there is a State statute that delineates what is properly a conservation easement (but the golfers flunk this latter test).

The golfers claim State law lets them remedy the out parcel problem.

But they’re bunkered yet again. “Petitioner has argued that, where the grantor did not yet own the land described in a deed, he may rely on chapter 5 of the Missouri title examination standards (MTES) to cure the defect, but not so in this case.  The title exam standard described cannot be relied upon to make a current donation of an easement in property the donor does not yet own.  1 Mo. Prac., Methods of Prac.: Transact. Guide sec. 5.14 (4th ed. 2016).  First, the cure period provided in chapter 5 of the MTES is 10 years from recording.  A cure after donation is inconsistent with the requirements in section 170 that both the easement grant and the conservation purpose protection be perpetual from the time the easement is granted, not at a time 10 years after the grant.

“Second, reliance on chapter 5 of the MTES requires that the Court inquire into actual events after the grant of the easement.  Even if chapter 5 of the MTES can be relied upon to cure a defect in title under State law, chapter 5 of the MTES cure period cannot be used to cure a defective charitable contribution for purposes of Federal income tax law.” 2016 T. C. 80, at p. 20, footnote 14.

And of course your lenders have to subordinate at Day One, in such a manner as binds BFPs and everybody else. Judge Paris cites all the cases on that point, most of which I’ve blogged and I’ll spare you the cross-references; you can easily find them in my archive.

The golfers double-bogeyed that one.

  1. […] Lew Taishoff, the Quick Draw McGraw of the tax blogosphere had something Thursday – “Forever, And Ever, We Never Will Part“. […]


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