Racing the Dawson’s Creek flash flood, Judge Holmes ends the saga of Kumar Rajagopalan and Susamma Kumar, 2020 T. C. Memo. 159, filed 11/19/20. All y’all remember that Kum and Sus were fighting over chops since 2015; if not, see my blogpost “The Ghoul at the Graev,” 2/1/18.

Well, as a parting gift, Judge Mark V Holmes finds that local tax records, real arms’-length sales, and bank loans substantiate that the diminution of value engendered by Kum’s and Sus’ conservation easement was at least what Kum’s and Sus’ return showed, so no deficiency equals no chops, Boss Hoss or no Boss Hoss.

Kum and Sus bought and sold in Western North Carolina, during the run-up to the Black ’08, when another frothy real estate market was bubbling over.

The battling appraisers are only there to let Judge Holmes mix-and-match his way to justify his analysis of admittedly arms’-length sales by Kum and Sus, banks’ appraisals, and local tax appraisal records. Apparently North Carolina’s assessors and bank appraisers are better than others. Howbeit, when Kum and Sus granted the easement, there was gold, or maybe dilithium crystals (hi, Peter Reilly), in them thar hills.

Finally, there’s a Holmesian reality check.

“This is an exceptionally unusual conclusion to reach in a conservation-easement case. The Kumars…benefit from timing their donation at what turned out to be very nearly the frothiest point on a local real-estate bubble that was even bubblier than it was in most parts of the nation. In valuing that donation, they get the benefit of the bubble even as the Commissioner would get the benefit of its bursting a couple years later. We recall the old aphorism among observers of the stock market that ‘bulls make money, bears make money, but pigs get slaughtered.’ Kumar… here took a return position that was very considerably subhyperporcine–they get to keep their deductions in full and owe no penalty.” 2020 T. C. Memo, 159, at p. 30.  

Before you ask about “qualified interest” and “perpetuity,” note that “…many of our recent opinions have focused on the… requirements–that the contribution be ‘a qualified real property interest,”’ see, e.g., Pine Mtn. Pres., LLLP v. Commissioner, 151 T.C. 247, 265-72 (2018), aff’d in part, rev’d in part, vacated and remanded, __ F.3d __, 2020 WL 6193897 (11th Cir. Oct. 22, 2020), and that the contribution be “exclusively for conservation purposes,” see, e.g., Oakbrook, at *14. Attacking the conservation deed on these technical grounds has allowed the Commissioner to deny deductions in full and even win penalties. The Commissioner disarmed himself of such arguments in these cases when he chose to stipulate that this easement was ‘exclusively for a conservation purpose.’ See supra p. 8. We enforce stipulations unless a party was misled, there was a mutual mistake, or justice requires…none of which has occurred here.

“The Commissioner argues as to the first requirement that the deed violates section 170(h)(2)(C)’s requirement that the restriction be granted in perpetuity. The deed does have an amendment clause that allows the parties to modify certain restrictions in the deed of easement. See supra p. 8. The Commissioner argues that this deprives the easement of the required perpetuity. We expressly rejected this argument in Pine Mountain, 151 T.C. at 280-81, and will follow that opinion here, as we must.” 2020 T. C. Memo. 159. at pp. 11-12.

And a Taishoff “Good Job” to Michelle A Levin, Esq., and the crew from Sirote & Permutt, P.C.