The Fifth Circuit encourages flexibility for conservation easement deductions in Bosque Mountain Ranch, while the Tax Court makes it difficult for farmers in Rutkoske. 

Two important conservation easement were handed down last week.

Bosque Canyon Ranch [1] is noteworthy for the Fifth Circuit’s conservation-friendly language encouraging a flexible interpretation of the myriad statutory and regulatory requirements for easement deductions. This is a stark departure from a recent series of cases denying conservation easement deductions based on what some would call “foot faults.” More specifically, the appellate opinion in Bosque Canyon Ranch: (1) provides some certainty regarding what should be provided in a baseline documentation report, noting that the IRS should not pick apart each component of a report, and (2) holds that the right to relocate homesites that are carved out of an easement does not violate the perpetuity requirement for conservation easements, when the easement holder has approval rights over the final location and the maximum size of the homesites cannot change.

In a much less taxpayer-friendly opinion, the Tax Court in Rutkoske[2] provides the first judicial interpretation of the statutory rule that permits qualified farmers and ranchers to deduct the value of a conservation easement donation against up to 100% of their adjusted gross income. The Tax Court finds that income from the sale of farming property does not count toward qualifying the farmer and rancher for this benefit.

The cases are discussed in detail below.

Continue Reading New Cases Send Mixed Messages to Conservation Easement Donors

The case of Salus Mundi Foundation et al v. Commissioner

Transferee LiabilityOn August 15, 2016, the Tax Court decided in Salus Mundi Foundation et al v. Commissioner, T.C. Memo. 2016-154, that two foundations were liable as transferees for a corporation’s unpaid federal tax liability after another foundation distributed to the foundations the proceeds of the sale of the corporation’s stock.

The history in this case involves a marital trust that initially owned all of the stock in a C corporation called Double-D Ranch.  Later, a portion of the stock was transferred to the Diebold Foundation in New York.  Subsequent to that, the Diebold Foundation in New York sold the stock and distributed the proceeds from the sale of Double-D Ranch stock to three foundations formed by the Diebold children, pursuant to a New York state-approved plan of dissolution.

Continue Reading Transferee Liability: The [Unlikely] Situation that your Nonprofit Receives a Charitable Gift with Expensive Tax Strings Attached

photo-1445297983845-454043d4eef4The Tax Court, in a case of first impression, has recently ventured into the perpetuity minefield.  One Dr. Douglas Carroll and spouse Deirdre Smith, of Baltimore, Maryland, conveyed a conservation easement in 2005 over approximately 26 acres of open land in Maryland, mostly pastureland zoned for agricultural uses, to the Maryland Environmental Trust (MET) and the Land Preservation Trust (LPT).  The former organization is a quasi-governmental agency, the latter a private, nongovernmental exempt organization.  The protected property consisted of two parcels of unequal size; upon the smaller parcel sat the taxpayers’ two-story primary residence, and, on the larger, a small (1,000-square-foot) house where a farmhand tenant  resided.

Continue Reading Lurching Towards Perpetuity

taxThe IRS Office of Chief Counsel recently released Information Letter 2016-0036 in response to questions regarding the taxation of crowdfunding revenue. In it the IRS concluded that crowdfunding revenue is taxable to the extent it is received in exchange for services or property.

Continue Reading Thinking of Crowdfunding Your Project? Beware – the Taxman Cometh

A promise to give is not a guaranteed charitable gift.

smartphone-586903_1920In an open letter to their newborn daughter last December, Facebook CEO Mark Zuckerberg and wife Priscilla Chan announced they will eventually give 99 percent of their Facebook shares during their lives to a variety of important social causes.  Over the past several months, commentators have expressed both enthusiasm and concern with the manner in which the couple chose to commit their wealth to advancing these causes.  Continue Reading What Does the Chan Zuckerberg Initiative Mean for Modern Philanthropy?

On April 25, 2016, Joan and Sandy Weill announced their donation of $185 million to establish the UCSF Weill Institute for Neurosciences in an ambitious effort to accelerate the development of new therapies for diseases affecting the brain and nervous system, including psychiatric disorders. This is the largest single donation in UCSF History. Learn more in the video below, or read about the donation here.