Railroad Holdings, LLC v. Commissioner

In a proceeds clause case with the improvement deduction language, the Tax Court denied the deductions in full, following Oakbrook Land Holdings LLC, v. Commissioner and Coal Property Holdings, LLC v. Commissioner. The Tax Court declined to consider the IRS' argument on the floating building areas.

In 2005, George Dixson purchased 652 acres of undeveloped land for $486,000 that was later transferred into the TOT Property Holdings, LLC (LLC). In December 2013, an investor purchased 99% of LLC shares for $1,039,000, then claimed a charitable deduction of $6.9 million on a conservation easement.

In Kaufman II, the Tax Court denied Kaufman’s motion for reconsideration, affirming the earlier summary judgment decision in favor of the IRS. In particular, the Court found that the proceeds language in Reg. § 1.170A-14(g)(6)(ii) was an unconditional and absolute requirement

Lumpkin One Five Six LLC v. Commissioner - June 2020.pdf In a proceeds clause case with the improvement deduction language, the Tax Court denied the deductions in full, following Oakbrook Land Holdings LLC, v. Commissioner and Coal Property Holdings, LLC v. Commissioner. The Tax Court declined to consider the IRS' argument on the floating building areas.

The court noted that New York's conservation easement enabling statute (like most enabling statutes) has a specific provision requiring that an easement be recorded for it to be effective thus the deduction failed under Treas. Reg. 1.170A-14(g)(3).

Oconee Landing Property, LLC granted a conservation easement to the Georgia-Alabama Land Trust in 2015 and claimed a $20,670,000 deduction. The easement's termination proceeds provision subtracted any amount attributable to post-conveyance improvements. The IRS challenged the easement.

Tax Court denied the deduction due to the flawed termination proceeds language. 11th Circuit affirmed. IRS claimed that the easement’s forest management provisions were inconsistent reserved rights but this issue was not addressed or decided.