In Uncategorized on 06/16/2017 at 22:59

No, this is not a newly-discovered manuscript by John Ronald Ruel Tolkien, coming soon to a theatre near you. No elves, dwarves or hobbits today, only another scenic easement case with some very sketchy arguments from IRS in pursuit of summary J.

Judge Morrison isn’t having it.

Here’s ORC Partners, LLC, Five Rivers Conservation Group, LLC, Tax Matters Partner, Docket No. 1041-16, filed 6/16/17, a designated hitter.

We’re dealing with GA law, as State law determines property rights, while Federal law governs the taxation thereof.

IRS wants summary J knocking out the ORCs’ $5,570,000 claimed Section 170(h) deduction.

First, IRS claims that, although the donee of the easement is a genuine 501(c)(3), the easement merges with the fee if both the dominant tenant and the fee owner are one and the same under GA law. Although the easement instrument provides for no such merger unless waiver of that provision is expressly stated, IRS claims the mere fact that such statement is necessary proves that the chance of such a merger of interests is not so remote as to be negligible.

Back to the Graev gambit yet again, so-remote-as-to-be-negligible variation. It’s the same idea getting a workout.

And the ORCs could buy out the 501(c)(3), or vice versa.

“Second, the IRS contends that the easement can be amended in such a way that one of the conservation purposes that the easement purports to serve could be harmed. Paragraph 20 of the easement allows the easement to be amended upon the consent of both parties if the amendment ‘would be appropriate to promote the Purposes of the Easement’, the amendment is ‘in accordance with the Policies’ of the [501(c)(3)], the amendment is approved by the Georgia Department of Natural Resources, and the amendment is ‘consistent with the Purposes of the Easement and the aggregate Conservation Values.’ Under section 1.170A-14(e)(2), Income Tax Regs., a conservation easement that would accomplish one of its enumerated conservation purposes but that would permit the destruction of other significant conservation interests is not exclusively for conservation purposes.” Order, at pp. 3-4.

First, it is a question of fact whether the possibility of merger of the easement and the fee is so remote as to be negligible.

Second, it is a question of fact whether the policies of the 501(c)(3) “… would cause it not to agree to an amendment that would harm one of the purported conservation purposes of the easement. The IRS does not deny that the [501(c)(3)]’s policies are relevant to the question of whether it would approve a harmful amendment. The question therefore is whether ORCs has shown that there is a genuine dispute about the [501(c)(3)]’s policies. We conclude it has raised a genuine dispute.” Order, at p. 5.

Given the brusque dismissal of IRS’ summary J claims, it might be a good idea for IRS not to try this move again.




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