February 11, 2020 - Douglas Myser

IRS tax court easement case. In our ongoing coverage of Tax Court cases, we highlight this case, which discusses easement issues. The Internal Revenue Service urged taxpayers involved in designated syndicated conservation easement arrangements to consult with their tax advisors following a recent U.S. Tax Court decision and agency plans to continue enforcement efforts in this area. In late 2016, the Internal Revenue Service designated certain syndicated conservation easement arrangements as "listed transactions" in IRS Notice 2017-10. IRS tax court easement case.

The Department of the Treasury and the Internal Revenue Service are aware that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. This notice alerts taxpayers and their representatives that the transaction described in section 2 of this notice is a tax avoidance scheme and identifies this transaction, and substantially similar transactions, as listed transactions for purposes of the Income IRS Tax Regulations and Sections 6111 and 6112 of the Internal Revenue Code.

A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. A qualified real property interest includes a restriction, granted in perpetuity, on the use that may be made. In TOT Property Holdings LLC v. Commissioner, the Tax Court denied the deductions and upheld a 40% gross valuation misstatement penalty. "In denying the deductions and upholding the 40% gross valuation misstatement penalty, the Tax Court confirmed that aggressive syndicated easement transactions simply will not survive scrutiny," said IRS Commissioner Chuck Rettig. "We will not stop in our coordinated pursuit of these abusive transactions while seeking the imposition of all available civil penalties and, when appropriate, various criminal options for those involved." Tax Court trials in four other syndicated easement cases were conducted earlier this year and more than 50 cases are pending. The Tax Court has essentially negated one of the taxpayers main defenses.

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