Court Denies Conservation Easement Charitable Deduction

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Jason B. Freeman

Jason B. Freeman

Managing Member


Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine, a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

Plateau Holdings, LLC, Waterfall Development Manager, LLC, TMP v. Comm’r, T.C. Memo. 2020-93 | June 23, 2020 | Lauber, J. | Dkt. No. 12519-16

Short SummaryPlateau Holdings, LLC (Plateau), a partnership for federal tax purposes, donated conservation easements related to two parcels of real property in Tennessee to Foothills Land Conservancy (Conservancy), a tax-exempt organization.  However, eight days before Plateau made this donation, an investor acquired, in an arm’s length transaction, a 98.99% indirect ownership interest in Plateau for less than $6 million.  On its 2012 federal income tax return (Form 1065), Plateau claimed a roughly $25.5 million charitable contribution deduction for the donation.

After audit, the IRS issued Plateau’s TMP a notice of final partnership administrative adjustment (FPAA) that disallowed the charitable contribution for donation of real property and determined a 40% gross valuation misstatement penalty under Section 6662(e) and (h).

Key Issue:  Whether Plateau:  (1) may claim a charitable contribution deduction for the conservation easements; and (2) is liable for the gross valuation misstatement penalty.

Primary Holdings

Key Points of Law:

InsightThe IRS has targeted syndicated contribution easements such as the one in Plateau.  However, on June 25, 2020, the IRS offered a settlement for those taxpayers with pending docketed Tax Court cases involving syndicated conservation easement transactions.  See IR-2020-130 (June 25, 2020).  The settlement, if accepted by the taxpayer, would require a concession of the income tax benefits the taxpayer received from the charitable contribution deduction.  In addition, the following requirements would have to be met:  (1) all partners must agree to settle and the partnership must pay the full amount of tax, penalties and interest before settlement; (2) partners may deduct the cost of acquiring their partnership interests and pay a reduced penalty of 10% to 20% depending on the ratio of the deduction claimed to partnership investment; and (3) partners who provided services in connection with any syndicated conservation easement transaction must pay the maximum penalty asserted by IRS (typically 40%) with no deduction for costs.  Taxpayers eligible for this offer will be notified by letter.


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