Bruzewicz v. United States

The District Court ruled for the IRS on summary judgment, holding that the failure to comply with I.R.C. § 170(f)(8) was, in and of itself, fatal to the deduction claim. The court rejected substantial compliance.

The Tax Court disallowed the deduction on failure to comply with I.R.C. 170(f)(8) and that the consideration recitation did not satisfy 170(f)(8)(B)(ii) and (iii), which requires a statement of "whether the donee organization provided any goods or services in consideration, in whole or in part."

The Tax Court followed its holding in Simmons v. Commissioner, T.C. Memo 2009-208 (U.S.T.C. 2009) in ruling that the easement could be a contemporaneous written acknowledgment of no goods or services requirement of I.R.C. sec170(f)(8).

The Tax Court held that the conservation easement was not a 'qualified real property interest' because the substitution provision allowed the grantor to change the protected property and thus the easement was not 'granted in perpetuity' under I.R.C. 170(h)(2)(C).

The Tax Court held that the easement did not meet the requirements of I.R.C. 170(h)(4)(A)(iv) and denied the deduction.

In an unpublished order, the Tax Court denied the IRS’ motion for summary judgment reserving the proceeds issue for trial, found the deemed approval provision as not fatal because of the limitations, and rejected that the building area was “moveable.”

Relying on Addis v. Commissioner, 118 T.C. 528 (2002), affd. 374 F.3d 881 (9th Cir. 2004), the Tax Court disallowed the charitable deduction because the contemporaneous written acknowledgment failed to include part of the consideration HCAC received and rejected the substantial compliance argument.

Tax Court Cases Discussing § 170 And Substantial Compliance

The IRS challenged a façade easement deduction both on 170(f)(8) grounds and on valuation. The donee submitted an amended Form 990 return for the year in which the donation was made. The tax court held that a traditional contemporaneous written acknowledgment was necessary and denied the deduction.

The appellate court affirmed the trial court in holding that the posting requirement was a covenant, and not a condition subsequent, of the easement, and therefore the failure to comply with this requirement was not grounds for rescission.