In Uncategorized on 02/11/2020 at 15:27

There’s no new conservation (scenic) easement case today, but the recent freshet from The Glasshouse at 400 Second Street, NW, with its concomitant attack on extinguishment clauses, makes one think. At least, it makes me think.

I’d rather glibly dismissed the chances of extinguishment based upon eminent domain. Most conservation easement cases arise in boondock localities, where the local taxpayers make Howard Jarvis look profligate. The chances of a municipality raising taxes to buy an abandoned strip-mine for a public park that maybe five people will ever visit are, as Reg. 1.642(c)-(2)(d) says “so remote as to be negligible.’”

But maybe bankruptcy is not so remote. Judge Morrison ducked the direct issue (see my blogpost “Thanks a Lot, Judge,” 10/11/16). He decided Rose Hill on the short-changed 501(c)(3) clause and the non-public availability of most of the servient tenement, although nodding in the direction of the powers of Bankruptcy Court to avoid the easement.

And his treatment of the 20% chop is interesting. Rose Hill’s preparer gets his clients off that chop, because he wasn’t wrong in treating as a real possibility the powers of Bankruptcy Court or the bankruptcy trustee to avoid the easement .

All that said, even if there’s a bankruptcy down the road, and even if the Bankruptcy Court (or the bankruptcy trustee) successfully avoids the easement, what will be left for the owners of the property after administration expenses and creditors’ claims?  Or for the 501(c)(3) for that matter?

Time to forget about hypotheticals and draft easements that track the current Code and Regs. And, as has been suggested by some commentators smarter than I, not take boilerplate deeds of easement proffered by the 501(c)(3)s, without giving them a hard look and tailoring them to suit. The 501(c)(3) isn’t going to have the deduction disallowed; your client is.

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