Ninth Circuit: No deduction for conservation easement

Ninth Circuit: No deduction for conservation easement

The U.S. Court of Appeals for the Ninth Circuit today affirmed a decision of the Tax Court that, for a taxpayer to take a charitable deduction for the donation of a conservation easement, any mortgage on the property must be subordinated to the easement at the time of the donation.


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The case is: Minnick v. Commissioner, No. 13-83234 (9th Cir. August 12, 2015)

Read the Ninth Circuit’s decision [PDF 35 KB]


The taxpayers (husband and wife) took out a loan secured by an undeveloped plot of land in Idaho, for purposes of developing that land, and they then donated a conservation easement on parts of the land that would not be developed. The land was still subject to the mortgage, the mortgage had not been subordinated to the easement, and the bank was not informed of the easement.

The taxpayers claimed a charitable deduction for the easement. The IRS disallowed the deduction for the conservation easement, and the Tax Court agreed and concluded that a mortgage must be subordinated at the time of the gift to be in compliance with the “in perpetuity” requirement of section 170 and specific subordination requirements of Reg. section 1.170A-14(g)(2).

The Ninth Circuit today affirmed, holding that for the donation of a conservation easement to be protected “in perpetuity,” any prior mortgage on the land must be subordinated at the time of the gift.

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