Seventeen Seventy Sherman Street, LLC v. Commissioner

The Tax Court sustained the IRS’s determinations that the Braens failed to show the value of all consideration received as part of a bargain sale due to quid pro quo issues and the sufficiency of the contemporaneous written acknowledgment.

The Tax Court held that the appraisal was unsupported by any quantitative analysis of the factors leading to the reduction in value, and therefore the taxpayer did not meet his burden of showing the easement's value.

The Appellate Court found that the Donated or Dedicated Property Act applied, that the City had failed to demonstrate that the continued use of the park met conversion tests, and found that the statute did not allow for consideration of any public benefit that might result from the conversion.

The Tax Court denied the deduction because the LLC conveyed the easement with the expectation of receiving a substantial benefit of increased value to the residential lots in the PUD from being located near conserved land thereby outweighing any value of the easement. No penalties.

The Tax Court ruled that the easement failed to satisfy the prohibition and preservation requirement of sec 170(h)(4)(B)(i). The court found that the default approval provision allowed any changes to the Building's exterior if the land trust failed to object within the 45-day window.

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.

In an April 2016 opinion the Tax Court held that the easement failed to qualify for a deduction due to the absence of a timely mortgage subordination. The court also noted that Missouri's statute of frauds requires a written agreement where any interest in land is involved.

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.

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.

The Tax Court followed Kaufman I II and holding that the easement was not protected in perpetuity due to the lender priority provision in the subordination agreement and failed to meet the conservation purposes test because it did not restrict the property more than existing land use regulations.