On June 23, 2021, the U.S. Court of Appeals for the 11th Circuit in TOT Property Holdings upheld the denial of a charitable deduction for a conservation easement on the grounds that the donated  conservation easement was not protected in perpetuity under I.R.C. § 170(h)(5)(A).  The denial was based once again on an improper proceeds clause that the court determined did not comply with 26 C.F.R. § 1.170A-14(g)(6)(ii) because it allowed the donee’s proceeds in the case of condemnation or extinguishment to be reduced by the increase in value of any improvements constructed after the date of the conservation easement.

What is unique about this case is the inclusion in the conservation easement of language requiring the interpretation of the proceeds clause in a manner consistent with 26 C.F.R. § 1.170A-14(g)(6)(ii).  The intent of this language was to override the express language in the proceeds clause, if challenged, in an attempt to demonstrate compliance with the Internal Revenue Code and the Treasury Regulations. The court determined that the attempted savings clause is an impermissible condition subsequent and unenforceable for federal tax purposes.

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Photo of Melinda Beck Melinda Beck

Melinda Beck is a real estate and land use attorney who has more than two decades of experience.  Melinda’s conservation law expertise includes the donation and purchase and sale of conservation easements to land trusts and local governments by private landowners throughout Colorado

Melinda Beck is a real estate and land use attorney who has more than two decades of experience.  Melinda’s conservation law expertise includes the donation and purchase and sale of conservation easements to land trusts and local governments by private landowners throughout Colorado and nationally. She represents land trusts and private landowners regarding all issues related to conservation easement transactions and stewardship, including obtaining discretionary approvals and amendments to conservation easements. She is an emeritus member of the Land Trust Alliance Conservation Defense Advisory Council. Melinda has a degree in Economics from Pomona College and a law degree from the University of Denver, Sturm College of Law.