The Good Book (Exodus) plays a large role in Judge Holmes’ prose, but Kevin A. Sells, et al., 2021 T. C. Memo. 12, filed 1/28/21, fares less well than the hero of that history. Kev and the als have their conservation easement burned up on the improvements-out-split-at-extinguishment clause we’ve seen so often (and enshrined in Oakbrook, despite Judge Holmes’ dissent; see my blogpost “They Always Must Be With Us,” 5/12/20).

Now what would a conservation easement case be, without a passing stone thrown at Reg. Section 1.170A-14(g)(6)(ii)? Here, Kev and the als claim the last sentence thereof nullifies the improvements-out-split-at-extinguishment clause if State law does. And AL law does say easements are contract rights, not real property rights, when land thus encumbered is taken for a public purpose, like eminent domain. But this applies to easements appurtenant, that is, between adjacent landowners, not easements in gross, where the donee of the easement owns no land. This sort of law is to prevent adjacent landowners, who are not having their land taken, from gumming up condemnation proceedings and extorting the municipalities. CA is different (what else is new?), because they’re concerned that if the 501(c)(3)s were frozen out in condemnation, municipalities would try to glom the servient tenements at scrap prices, based on after tax valuations, and cut out the 501(c)(3)s.

OK, the conservation deed miscue (if easement extinguished, 501(c)(3) doesn’t get any benefit of improvements) takes out the land. But on the land there stands some trees, which Kev and the als also claim were part of the grant to the 501(c)(3).

“According to the appraisal, [Kev’s and the als’ LLC] acquired the land on which it placed the easement on the very same date that it reported it had acquired the timber–August 6, 2002. And [LLC] contributed both the easement and the timber to the same donee, [501(c)(3)]. Because of this, we find it more likely than not that the timber donated by [LLC] is the same standing timber on which it had placed a conservation easement.

“That is a problem. The value that [LLC] placed on the standing timber is its value as timber products. One can see this on the Form 8283–which describes the donation of “Pulp, Chip N Saw, Saw Timber”–products that result from timber’s harvest. And the attached appraisal–which described eight products–would require the timber’s harvest.” 2021 T. C. Memo. 12, at p. 23.

But by AL State law, since unsevered timber belongs to the landowner, either that was a partial gift of a present interest (barred by Section 170 since lumbering isn’t a conservation purpose), or a gift of a future interest (and that’s not deductible at present, if at all).

But looking at chops, since the fatal split-at-extinguishment clause showed up often throughout the Southeastern United States, where these dodges flourished, and their 501(c)(3) easement protector wasn’t a promoter, Ken and the als have a reasonable cause to think their deal was legit, even if they had not a reasonable basis so to assume. See 2021 T. C. Memo. 12, at p. 38, footnote 21. Hence Section 6664 spares them almost all the chops.

And anyway, IRS’ Boss Hoss looks like a camel; a camel is a horse designed by a committee. If you want a good chuckle (and in these times, who doesn’t?), check out 2021 T. C. Memo. 12, at p. 34, where we have a vintage Holmes table encapsulating IRS’ miscues and pratfalls, as shots on goal and saves, in trying to hand chops to Kev and the als. And read the account commencing at p. 27, aptly entitled “The Chaighoul Problem.” The Jersey Boys should love this.

Judge Holmes, no fan of Boss Hossery, certainly loves it. See my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

One of the als, Steve Whatley, is an outlier, so he gets a separate case all to himself.

Read this opinion. Despite the handling the Joint ABA/NYSBA Tax Committee gave the order in Liao (see my blogpost “A Couple Trusts, A Couple Iowa Tax cases – Knock It Off,” 11/17/20), I’m a fan of Judge Holmes.

But I shouldn’t omit a Taishoff “Good Try,” to Gregory P. (“Dusty”) Rhodes, Esq., and his team from Sirote & Permutt, PC.