Schrimsher v. Commissioner of Internal Revenue

2011 TC Memo 71, March 28, 2011: Upholds IRS disallowance of façade easement tax deduction because the “Preservation and Conservation Easement Agreement” between the taxpayer and the donee did not satisfy the Internal Revenue Code requirement for a contemporaneous written acknowledgment of the gift from the donee — it did not state whether the donee provided any goods or services in consideration for the preservation easement.

The taxpayer’s Form 8283 was deficient in various ways. The Tax Court decision does not mention any IRS claim that the preservation easement was not a qualified conservation contribution but focused on alleged failures to satisfy the Code section 170 “substantiation requirements” to obtain a contemporaneous written acknowledgment from the recipient of the contribution as required by section 170(f)(8); specifically that the Easement Agreement did not satisfy section 170(f)(8)(B)(ii) because it did not state whether the donee provided any goods or services in consideration for the facade easement. Alternatively, the IRS said the deductions should be disallowed because the taxpayer failed to obtain a qualified appraisal and attach it to their Federal income tax return as required by Code section 170(f)(11).

The taxpayer contended that the Easement Agreement did constitute a contemporaneous written acknowledgment, because the “clear and unambiguous” merger clause of the Agreement “signified that the agreement was the ‘entire agreement’, and consequently ‘it is apparent’ that no cash or compensation was exchanged between petitioners [the taxpayer] and the [donee].”

The Court said that even if the donee actually provided no consideration for the contribution, the written acknowledgment must say so in order to satisfy the requirement of section 170(f)(8)(B)(ii), and the inference that may have been created by the Easement Agreement did not meet that test. Having decided to grant summary judgment for the IRS on that basis, the Court did not address the Form 8283 was deficiencies.

Decision available at http://www.ustaxcourt.gov/InOpHistoric/SCHRIMSHER.TCM.WPD.pdf.

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