Professional Documents
Culture Documents
Published
Published
No. 13-2161
Argued:
Decided:
ARGUED:
David
Mace
Wooldridge,
SIROTE
&
PERMUTT,
P.C.,
Birmingham, Alabama, for Appellants.
Patrick J. Urda, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
ON BRIEF: Ronald A. Levitt, Gregory P. Rhodes, Michelle A.
I.
The parties stipulated to the following facts before the
Tax Court.
Between 1994 and 1996, B.V. and Harriet Belk accumulated
roughly
410
Counties
1996,
acres
outside
the
Belks
of
of
land
straddling
Charlotte,
formed
North
limited
Union
and
Carolina.
liability
Mecklenburg
In
February
company,
Olde
remains
wholly
owned
by
the
Belks
--
Old
ninety-nine
2004,
Olde
Sycamore
executed
conservation
easement
Mountain
National
Trust,
Inc.
(the
on
the
184-acre
parcel
number
of
Trust)
and
The Easement
enforceable
use
Sycamores
substitution
right
is
conditioned
upon
the
to
that
Easement.
Sycamore,
of
The
if
the
the
property
substitution
Trust
originally
provision
agrees
(and
it
subject
thus
cannot
to
permits
the
Olde
unreasonably
least
184
acres
and
to
advance
4
its
stated
conservation
purpose.
the
circumstances
easement
contribution deduction.
On
its
2004
may
under
be
which
claimed
the
as
Section
grant
of
charitable
income
tax
return,
Olde
Sycamore
claimed
2009,
the
notice
of
Commissioner
deficiency,
substantial amounts in
2006.
The
of
Internal
informing
Revenue
them
that
sent
they
the
owed
Commissioner
reasoned
that
the
Belks
had
not
corresponding
Treasury
Regulations
ha[d]
been
satisfied
to
issued
conclusion.
supplementary
opinion
reaching
the
same
II.
The Internal Revenue Code permits taxpayers to deduct from
their
taxable
contribution.
income
26
the
U.S.C.
value
of
170(a)(1).
qualifying
The
Code
charitable
generally
for
Id.
conservation
contribution.
Id.
170(f)(3)(B)(iii).
The Code defines a qualified conservation contribution as
a contribution (A) of a qualified real property interest, (B)
to a qualified organization, (C) exclusively for conservation
purposes.
Id. 170(h)(1).
that the donation be of a qualified real property interest -that the Tax Court concluded the Belks had not satisfied here,
and which is now the focus of this appeal. 1
A
qualified
real
property
interest
includes
Id. 170(h)(2)(C).
Because an easement
of
conservation
real
easement
property,
can
properly
id.,
the
provide
donation
the
basis
of
of
--
exception
to
the
requirement
that
conservation
The regulations
unexpected
and
extraordinary
Thus, absent
circumstances,
real
See
INDOPCO,
New
Inc.
v.
Commissioner,
503
U.S.
79,
84
(1992);
III.
The Tax Court concluded that the Belks were not entitled to
claim a deduction for the donation of the easement because Olde
Sycamore had not donated a qualified real property interest.
26 U.S.C. 170(h)(1).
was
not
granted
in
8
perpetuity,
as
required
by
170(h)(2)(C).
real
property
Appellants
Br.
26.
governed
The
by
the
Easement
original
here
easement.
satisfies
this
For
26 U.S.C. 170(h)(2)(C)
some
property.
or
any
(or
interchangeable
parcels
of)
real
see
also
Websters
Third
New
International
Dictionary
property
is
the
real
property
to
which
the
donated
These provisions of
qualified
real
property
interest
as
used
in
10
the
subject
to
purports
real
a
to
property
use
contributed
restriction
restrict
in
to
the
Trust
perpetuity.
development
rights
in
The
is
not
Easement
perpetuity
for
may
is
constitute
be
not.
a
perpetual,
For
this
qualified
the
restriction
reason,
the
conservation
on
Easement
the
real
does
contribution
not
under
would
critical
to
enable
the
them
statutory
deductions
for
U.S.C.
170(f)(11)(D)
charitable
to
and
bypass
several
regulatory
schemes
contributions.
requires
that
requirements
For
[i]n
governing
instance,
the
case
26
of
is
claimed
. . .
qualified
appraisal
of
such
matters
not
that
the
Easement
11
requires
that
the
removed
conservation
documentation
easement
sufficient
make
to
available
establish
the
to
the
condition
donee
of
the
Not only
of
conservation
interests
by,
for
instance,
easement
can
be
extinguished
without
sacrificing
the
impractical
the
continued
12
use
of
the
property
for
Id. 170A-14(g)(6).
retain
granted
tax
in
benefit
Reply Br.
when
perpetuity,
conservation
subsequently
easement,
cannot
though
further
its
The
may
be
claimed
for
the
donation
of
a charitable
a
conservation
easement
only
when
that
easement
restricts
the
use
of
the
IV.
The
Belks
offer
two
reasons
why
we
should
reject
this
Kaufman
v.
Shulman,
687
21
(1st
Cir.
2012);
In those
to
the
Belks,
Simmons
and
Kaufman
demonstrate
that courts have approved deductions for easements that put the
perpetuity of the conservation easement at far greater risk than
the clause at issue in this case.
this
argument
misses
the
critical
between
But
those
speak in terms of perpetuity, they are not one and the same.
The provision at issue here, 170(h)(2)(C), governs the grant
of the easement itself, while the provision at issue in Simmons
and Kaufman, 170(h)(5)(A), governs its subsequent enforcement.
Thus,
Simmons
proposition
that
and
Kaufman
donation
plausibly
will
not
stand
be
only
rendered
for
the
ineligible
simply because the donee reserves its right not to enforce the
easement.
a
conservation
easement
qualifies
for
charitable
deduction
Indeed, as we have
language
of
170(h)(2)(C)
is
equally
unpersuasive.
an
easement,
conservation
170(h).
the
easements
See
Tax
in
Appellants
Courts
North
Br.
15
logic
Carolina
32-37.
would
render
ineligible
But
whether
all
under
state
conclusion
qualify
for
conservation
Id.
170(h)(2)(C)
the
applicable
could
unless
easement
law
36.
deduction
no
state
at
that
requires
that
the
gift
of
to
qualify
for
federal
charitable
deduction,
Thus, an easement
that, like the one at hand, grants a restriction for less than a
perpetual term, may be a valid conveyance under state law, but
is still ineligible for a charitable deduction under federal
law.
V.
Finally,
substitution
satisfying
clause
the
provision
the
argue
in
requirements
nonetheless
deduction.
Belks
renders
the
of
the
that
even
Easement
if
find
prevents
170(h)(2)(C),
Easement
we
the
eligible
it
the
from
savings
for
the Trust:
16
Belks
contend
that
if
we
should
determine
that
Section
argue
articulated
that
in
the
the
savings
Easement
clause
--
negates
their
right
right
to
clearly
substitute
The Belks properly acknowledge that the IRS and the courts
have
rejected
condition
subsequent
savings
clauses,
which
that
the
savings
clause
here
is
not
They maintain,
a
condition
to
insure
that
[the
Trust]
makes
no
amendment
to
the
17
Id.
condition
occurrence
of
subsequent
which
rests
terminates
on
or
future
discharges
event,
an
the
otherwise
142
F.2d
at
827;
Estate
of
Christiansen
See
v.
occurrence
purposes.
will
be
disregarded
for
federal
tax
that
if
competent
federal
court
of
last
resort
any
such
device
as
this.
18
Id.
We
explained
that
the
as
clearly
to
a
property
condition
later
held
subsequent,
subject
and
to
involved
the
the
tax,
sort
was
of
They find
significant the fact that the savings clause there altered the
conveyance
following
an
judgment,
while
savings
the
adverse
IRS
clause
determination
here
does
not
or
court
expressly
This is a
those
substitutions
would
result
in
the
Easements
See Rev.
do
contend,
however,
that
their
savings
clause
is
of
the
charitable
deduction.
persuaded.
When
interpretive
parties
tool,
that
the
Easement
Appellants
clause
it
has
is
Br.
39.
been
because
qualify
We
are
recognized
it
simply
as
as
not
an
help[ed]
operation
upon
some
subsequent
adverse
action
by
the
intent
not
to
give
(emphasis added)).
20
disqualifying
power
In
contrast
to
those
situations,
the
Belks
intent
to
There
is
no
open
interpretive
question
for
the
In
fact,
the
to
create
intent[]
Easement
an
reflects
easement
the
that
Belks
permitted
to
jettison
the
substitution
provision
only
if
it
qualified
conservation
contribution
under
Section
170(h).
This we will
not do. 3
VI.
For the foregoing reasons, the judgment of the Tax Court is
AFFIRMED.
22