In Uncategorized on 06/30/2020 at 14:11

Judge Mark V Holmes called it the brush hog, dissenting in Oakbrook (see my blogpost “They Always Must Be With Us,” 5/12/20). And it certainly does chop through everything in its path.

I refer, of course, to the fixed-price payout at extinguishment, which indiscriminately eviscerates scenic/conservation deductions, syndicated or otherwise, abusive or innocuous.

Today we have Habitat Green Investments, LLC, MM Bulldawg Manager, LLC, Tax Matters Partner, et al., Docket No. 14433-17, Green Creek, LLC (same TMP, Docket No. 14435-17), Turtle River Properties, LLC (same TMP, Docket No. 14434-17), and Charles W. Harris & Jacqueline Harris, Docket No. 24201-15, all filed 6/30/20.

The opinions are much of a muchness. Chas & Jacque play the “Swiss cheese” variation (reserving rights to “…install underground utilities, construct structures necessary for drainage, construct bridges foot, horse, bicycle, and maintenance traffic, and construct certain roads, trails, and walkways–all, we assume, subject to the conservation purposes of the deed.” Order, at p. 3.).

But, at close of play, the fixed-price payout at extinguishment sends off all four.

Judge David Gustafson has the whole thing. And he follows Procrustes by putting them all to bed in the same bed.

“In Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo. 2020-54, we held a deed violates the “protected in perpetuity” requirement of section 170(h)(5), as interpreted in 26 C.F.R. sec.1.170A-14(g)(6), if the donee’s share of the extinguishment proceeds is reduced by excluding the value of any improvements made by the donor after the date of gift. We reached the same conclusion in Hewitt v. Commissioner, T.C. Memo. 2020-89, where the deed at issue was equivalent to the Deed at issue here. (The provision allocating the proceeds in the event of a judicial extinguishment in the deed in Hewitt contained language virtually identical to the critical parenthetical in paragraph 9.4 in the Deed at issue here).

“Petitioners contend that we misconstrue the regulation. However, we strictly construe Section 1.170A-14(g)(6), Income Tax Regs., see Hewitt, slip op. at *15- 17 (and in the cases cited therein), and such construction requires in the context of allocating proceeds from an extinguishment that ‘the value of post easement improvements may not be subtracted out of the proceeds before determining the donee’s proportionate share.’ Id. slip op. at *19; see also Oakbrook Land Holdings, slip op. at *37-41.” Harris, Order, at p. 6, but the others follow suit, with slight but insignificant variation.

For the story of Dave Hewitt, who saved Daddy’s farm from the mobile homesters, see my blogpost “‘Gude Faith, He Maunna’ Fau’ That’- Part Deux,” 6/17/20.

When the USCCAs get their innings, watch out for the silt-stir. I’m still backing Judge Holmes’ dissent in Oakbrook.

Now lest I be accused of favoring phony dodges, allow me to point out that Judge Holmes said there remains the trial, where Tax Court expertise in valuations will assure that bogus valuations and bogus valuers will share the fate of the crumbling façade easement merchants.

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