RR 25-258

A taxpayer conveyed real property by a deed of gift to an organization described in section 17Q(c.) (2) of the Code, subject to the reservation of certain interests and rights. The IRS discussed the deductability of the gift.

8108180.pdf This is in reply to a letter requesting a ruling that the contribution by A and B of an easement in gross in perpetuity of a farm and mansion house on X to Y and Z will be deductible under section 170 of the Internal Revenue Code.

IRS advice on deductibility of an easement on 50 acres of vacant, beachfront property to the county in which the property was located to be used solely as a public bathing beach and recreational area operated and maintained by the county.

This was an injunction granted to a lessee to stop the state from attempting to terminate his sugar bush lease.

The District Court, in its opinion of October 24, 2007, held that the State lacked standing under the Texas Conservation Easement Act to challenge the conservation easement, as it did not have an interest in the easement or in the property encumbered by the easement.

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 trial court held that the 1949 deed restriction was an attempted restrictive covenant, but it was invalid because it did not benefit any land owned by the Society either in 1949 or in 1998.

The appellate court affirmed, holding that because the language of the will did not indicate what happens to the property if the State ceases to farm it, such language is not a 'condition subsequent' that results in a forfeiture.

Across the country, from California to New Hampshire, the perpetuity of conservation easements is being challenged at the state level. Most of these challenges arise in the form of bills introduced in state legislatures.

The Tax Court held that the easement did not meet the open space conservation purpose test because it did not preserve any land in its natural state and failed the historic preservation test because it did not protect the property's contribution to the historical nature of the neighborhood.