Tax Court in Brief | Corning Place Ohio, LLC v. Comm’r | Non-cash Charitable Contributions and Conservation Easements

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The Tax Court in Brief – February 28th – March 4th, 2022

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Tax Litigation:  The Week of February 28, 2022, through March 4, 2022

Corning Place Ohio, LLC v. Comm’r, T.C. Memo. 2022-12 | February 28, 2022| Lauber, J. | Dkt. No. 12428-20


Short Summary: This case involves a review of a motion for summary judgment on the issue of whether the IRS’s denial of a charitable contribution deduction for a conservation easement was proper. In 2015, Corning Place Ohio, LLC (LLC) purchased for $6 million, a building that was built in 1893 for sons of President James A. Garfield on land owned by John D. Rockerfeller. After making renovations, LLC deeded a façade easement to a “qualified organization” within the meaning of section 170(h)(3). The deed provided for a split of sales proceeds between LLC and the organization if the property was sold following judicial extinguishment of the easement. For tax year 2016, LLC claimed a charitable contribution deduction of $22,601,000. The IRS disallowed the deduction.

Issues: Was the IRS entitled to a summary judgment on the denial of the charitable contribution deduction when: (1) LLC reserved a right to sales proceeds, thus challenging the “perpetuity” of the conservation easement; and/or (2) in LLC’s applicable tax return, LLC failed to include (i) the $500 statutory filing fee and (ii) the qualifications of the appraiser?

Primary Holdings:

Key Points of Law:

Insights:  Conservation easements are under scrutiny by the IRS. Taxpayers seeking to deduct noncash charitable contributions in the form of conservation easements should take due care to “cross the t’s and dot the i’s” in the conveyances themselves as well as in the tax returns in which the charitable deduction is requested. And, by all means, submit the $500 statutory filing fee, especially when requesting a charitable contribution deduction of $22,601,000.

Related Freeman Law Sources:

Recent Tax Court Conservation Easement Decision Demonstrates Continued IRS Enforcement Efforts and Penalty Defenses

Syndicated Conservation Easements (and Other Tax Schemes) Beware