Belk v. Commissioner

US Tax Court, 140 T.C. No. 1, January 28, 2013: Conservation easement with swap provision does not protect property in perpetuity; deduction denied.

At issue was the IRS’s denial of a “qualified conservation contribution” tax deduction for donation of a conservation easement on 184.627 acres of a golf course to Smoky Mountain National Land Trust. The legal issue addressed in the court decision was solely based on the provisions in the conservation easement that conditionally reserved the donor’s right to cause new contiguous land to be added to the easement’s protection in exchange for release of an equal or lesser area of land originally subject to the easement. The donor’s conditional right was subject to the Trust’s determinations, inter alia, that: the new land is of the same or better “ecological stability” as the relinquished land; there would be no adverse effect on the conservation purposes of the conservation easement or on any of the significant environmental features; the new land is “selected, constructed and managed so as to have no adverse impact on the Conservation Area as a whole”; and the fair market value of Trust’s interest in the new land is at least equal to or greater than the fair market value of its interest in the relinquished property. The easement also required the swap to be set out in an amendment to the easement. The IRS asserted that this swap provision did not comply with the perpetuity requirements of the Internal Revenue Code and Treasury Regulations.

The court analyzed this situation from a perspective that it said it had not previously addressed, namely the requirement of Code Section 170(h)(2)(C) defining a “real property interest”. The Code requires that a “qualified conservation contribution” be a contribution of a “qualified real property interest” (§170(h)(1)(A)).  That phrase is defined in §170(h)(2)(C) as “a restriction (granted in perpetuity) on the use which may be made of the real property” (among three possible types of interests).

The court concluded that this section creates a requirement that is separate and distinct from the requirement of Code §170(h)(5), which requires that the “conservation purpose is protected in perpetuity”.  The court’s analysis was that even if an easement protects the conservation purpose in perpetuity, it could still fail to protect the property in perpetuity.


The IRS argued that by allowing swaps, regardless of how they may be limited to protect the conservation purposes of the easement, a “conservation easement that does not relate to a specific piece of property” does not protect a specific piece of property in perpetuity and therefore fails the 170(h)(2)(C) test.  The court agreed.

The court acknowledged that a swap may be allowed when continued use of the relinquished property for the conservation purposes of the easement is impossible or impractical.

Decision available at

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