In Uncategorized on 07/22/2020 at 17:47

Belair Woods, LLC, Effingham Managers, LLC, Tax Matters Partner, 2020 T. C. Memo. 112, filed 7/22/20, has some new arguments why they’re entitled to the ginormous write-off they took for the conservation easement on some dubious GA scrubland. This is Belair 3. Judge Albert G (“Scholar Al”) Lauber, who’s getting his second MA after his Cambridge classics one, this time in sketchy strip-mine write-offs, notes the history.

“In Belair Woods, LLC v. Commissioner, T.C. Memo. 2018-159, we held that Belair failed to satisfy the requirement that it attach a fully-completed ‘appraisal summary’ to the return on which its deduction was claimed. See sec. 1.170A-13(c)(2)(i)(B), Income Tax Regs. However, we reserved for trial the question whether Belair could excuse this failure by showing that it ‘[wa]s due to reasonable cause and not to willful neglect.’ See sec. 170(f)(11)(A)(ii)(II). In Belair Woods, LLC v. Commissioner, 154 T.C. ___ (Jan. 6, 2020), we addressed, and resolved mostly in respondent’s favor, the parties’ dispute as to whether the IRS had obtained timely supervisory approval, as required by section 6751(b)(1), for the accuracy-related penalties it determined in this case.” 2020 T. C. Memo. 112, at p. 2, footnote 2. For Belair 1, see my blogpost “Channeling Bartleby – Part Deux,” 9/20/18, and for Belair 2, see my blogpost “Can We Talk – Part Deux,” 1/6/20.

Besides the already-exploded “Reg. 1.170A-14(g)(6) is invalid” (blown up by Oakbrook), and “improvements out and prior claims in,” blown up by the Coalholders, Belair claims IRS stiped out that a deed, amended to state as theirs did, was OK in USDCDAZ, but that case settled before the issue whether original or amended deed controlled was decided. A tactical concession in one case doesn’t bind in another. Besides, the Elevenses, where this case is Golsenized, has a tough two-step test, and this case isn’t close. IRS neither took a position under oath, nor would their present position make a mockery of the judicial system.

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Please excuse the interruption, during which I vented politically about mockeries of our judicial system.

Belair claims future improvements aren’t “the land.” Judge Scholar Al isn’t buying.

“We disagree. The donation of a conservation easement gives rise to a deduction only if it imposes ‘a restriction (granted in perpetuity) on the use which may be made of the real property.’ Sec. 170(h)(2)(C). The ‘donation under this paragraph’ thus consists of the use restrictions that are imposed in perpetuity by the easement deed. See sec. 1.170A-14(g)(6)(i), Income Tax Regs. The restrictions imposed by the easement deed necessarily apply, not only to the land, but also to any improvements made by the grantor pursuant to its reserved rights.” 2020 T. C. Memo. 112, at p. 15. The deed has much to say about said improvements. And ultimately, you can’t sell a road, driveway, pond or underground utility line separate from the land on which it sits.

Belair claims the improvements are worthless. But if so, why cut them out of the split-up on extinguishment?

Belair has a 1939 GA case that says an easement is not compensable in condemnation, but Judge Scholar Al (presumably with a little help from IRS’ counsel) has much since to the contrary.

Taishoff asks why we’re fighting over an event whose occurrence is “so remote as to be negligible.” These HRH syndicates would get demolished in an appraisal trial.




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