It’s a reprise of a gambit that’s been tried and failed, but Habitat Green Investments, LLC, MM Bulldawg Manager, LLC, Tax Matters Partner, et al., Docket No. 14433-17, filed 2/10/25, are at it again.

Section 170(e)(1)(A) limits any charitable contribution by excluding any gain in value that is not capital gain; IOW, inventory gets valued at donor’s basis, and Section 724(c) keeps inventory donated to a partnership as inventory.

Once again, Habitat Greeners’ trusty attorneys are in there pitching. They claim the “easement” the Habitat Greeners donated is different from the land which they retained. While the partners may have donated inventory land (that is, land held for sale to customers in the ordinary course of business), they still have the land. All they gave to the 501(c)(3) guardian is an easement, which they say is only a “restriction,” and the Habitat Greeners don’t sell easements in the ordinary course of business to customers or anyone else. Like Alice in Wonderland, they donated the grin, not the cat.

Judge David Gustafson: “Petitioner’s position would create odd, even perverse, consequences if it were adopted. By petitioner’s reasoning, if it had donated its entire property in fee simple, then the property donated would have had inventory character, and section 170(e)(1)(A) would have reduced the amount of its deduction to be no more than its basis. But since petitioner donated merely an easement and retained the remainder of the property interest, then (says petitioner) it avoids section 170(e)(1)(A) and gets an unreduced deduction for the value of its donation. It is not clear why Congress would have created such an advantage for land owners who donate only partial interests.” Order, at p. 4.

Besides, contrary to the Habitat Greeners’ claim this was never before Tax Court, the argument failed in Oconee Landing Property, LLC, Oconee Landing Investors, LLC, Tax Matters Partner, T.C. Memo. 2024-25, filed 2/21/24. I blogged the opinion, but not on that point.