Butler v. Commissioner of IRS

The Court found the easement complied with the purposes and perpetuity tests but found that the value was much less that taxpayers claimed although not zero as the IRS claimed. Penalties assessed.

Tax Court denied IRS arguments on donative intent, conservation purposes, size of the eased property and reserved rights but sustained IRS position on valuation as the property was considered inventory.

In a lengthy opinion, the Tax Court ruled mostly in favor of the taxpayer (except for valuation) when analyzing inconsistent reserved rights and the conservation purposes on a golf course property.

Taxpayers failed to report income from a conservation easement sale. The IRS assessed deficiences which the Tax Court upheld and assessed penalties.

A sample reserved rights policy from the accredited Southern Appalachian Highlands Conservancy.

Fifth Circuit upheld the Tax Court in finding that the IRS appraiser was qualified and that the IRS appraiser's failure to comply with USPAP did not render his testimony and report inadmissible but reversed on valuation and penalties.

The Tax Court found for the taxpayer on all disputes with the IRS in this quid pro quo and substantial compliance donation case, including valuation and rejected all penalties. Despite several missing appraisal requirements, the appraisals provided enough information to evaluate the contributions.

The Tax Court disallowed the deduction in its entirety because it held that the easement had zero value. The Tax Court found the taxpayers' expert witness appraisers unconvincing, based on numerous methodological flaws.

Trial court ruled in favor of seller and against buyer. As for the public policy argument, the court found that the reserved rights did not prevent buyer from using the property as farmland, but rather only from reaping certain program benefits offered by the Department.

This reserved rights approval form is from the accredited Teton Regional Land Trust.