Attorney-at-Law

EXTINGUISHED AND OVERVALUED

In Uncategorized on 06/23/2020 at 16:31

More syndicated conservation/scenic easement cases today, and though they all go off on extinguishment (the 501(c)(3) doesn’t get the stepped-up value for improvements on extinguishment, thus not perpetual), the valuation gambit is the better move.

It’s well-known that I have touted Judge Holmes’ dissent in Oakbrook as soon as his wordprocessor cooled down. See my blogpost “They Always Must Be With Us,” 6/12/20. And Judge Kerrigan’s conclusion that “Treasury exercised reasoned judgment in its effort to reach the goal of section 170(h)(5)(A),” while it sounds good, is just what Judge Holmes said: a sledgehammer that takes out legitimate easements as well as syndicated, marked-up phonies.

So let’s compare and contrast Lumpkin One Five Six, LLC, 156 Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 94, filed 6/23/20, and its companion Lumpkin HC, LLC, Hurricane Creek Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 95, filed 6/23/20, with Plateau Holdings, LLC, Waterfall Development Manager, LLC, Tax Matters Partner, 2020 T. C. Memo.93, filed 6/23/20.

The phrase above quoted comes from 2020 T. C. Memo. 94, at p. 13.

And though Judge Kerrigan in both Lumpkin cases hews to the Oakbrook majority line, with a healthy dose of Chevron for good measure, the basic objection remains. Treasury’s reg. 1.170A-14(g)(6)(ii) gives the 501(c) a windfall and penalizes the honest grantor. Like a certain hard master in a story told by a far more exalted personage, in the extremely unlikely event of judicial extinguishment, the 501(c)(3) is “reaping where you have not sown, and gathering where you have not scattered seed.” And the reg torpedoes the easement, properly valued or overvalued, on the possibility of an event “so remote as to be negligible.” No governmental authority is going to raise taxes to condemn this kind of junk property. These strip-mined GA wastelands, miles from nowhere, with low six-figure bases, somehow are allegedly worth millions. In a valuation case, they are toast.

Judge Lauber does a better job with Plateau Holdings. The easement, supposedly reducing the value of this TN ex-strip mine by $25.5 million, covered land sold eight (count ’em, eight) days before for less than $6 million. And the best part of the land was not included in the easement.

True, Judge Lauber plays the Oakbrook extinguishment gambit, but goes on to slug the Plateau crew with the 40% chop. And the job he does on the Plateau’s appraisal is well worth reading in full. That should have been the opinion.

Judge Lauber does want to know how to deal with the 20% chop on whatever was left of the deduction after he demolished it. So let the parties brief that, and he’ll give me more blogfodder anon.

Footnote to my colleague Peter Reilly, CPA: Though Lumpkin was the name of a Hobbit pony, this Lumpkin is a county in GA.

I hope y’all have your money on Judge Holmes in the Oakbrook appeal. I didn’t even have a sentimental penny on Tiz The Law.

 

 

 

 

  1. […] Lew Taishoff covered Plateau Holdings with Extinguished And Overvalued. […]

    Like

  2. […] Lew Taishoff covered Plateau Holdings with Extinguished And Overvalued. […]

    Like

  3. […] Lew Taishoff covered Plateau Holdings with Extinguished And Overvalued. […]

    Like

  4. […] Lew Taishoff covered Plateau Holdings with Extinguished And Overvalued. […]

    Like

  5. […] Lew Taishoff covered Plateau Holdings with Extinguished And Overvalued. […]

    Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: