2020 Tax Update - Tax Court strikes down Syndicated Conservation Easement Transaction

In December 2019, the U.S. Tax Court delivered a gift to the IRS and entered its first decision on a syndicated conservation easement transaction. In TOT Property Holdings, LLC v. Commissioner, Docket No. 005600-17, the Tax Court sustained in its entirety the IRS's determination that all tax benefits from a syndicated conservation easement transaction should be denied and that the 40% gross valuation misstatement and negligence penalties applied. The Tax Court found that the transaction failed the legal requirements applicable to donations of land easements and, in imposing the gross valuation misstatement penalty, found that the actual value of the easement donation was less than 10 percent of what was originally reported on the tax return.


"In denying the deductions and upholding the 40% gross valuation misstatement penalty, the Tax Court confirmed that aggressive syndicated easement transactions simply will not survive scrutiny," said IRS Commissioner Chuck Rettig. "We will not stop in our coordinated pursuit of these abusive transactions while seeking the imposition of all available civil penalties and, when appropriate, various criminal options for those involved."


"If you engaged in any questionable syndicated conservation easement transaction, you should immediately consult an independent, competent tax advisor to consider your best available options," Rettig added.


Tax Court trials in four other syndicated easement cases were conducted earlier this year and more than 50 cases are pending. In other recent cases, the Tax Court has rejected arguments that various regulations taxpayers failed to comply with are invalid, essentially negating one of these taxpayers' main defenses.


Anyone considering a conservation easement donation or already involved in one should have the transaction reviewed by an independent tax attorney with experience in this area of law.  Contact Joseph P. Wilson at 949-397-2292 or wilson@wilsontaxlaw.com.  Mr. Wilson represents clients throughout California and the Globe, involving local, state, federal and international civil tax disputes and tax litigation and criminal tax defense. Mr. Wilson is the Managing Shareholder at Wilson Tax Law Group, APLC, former Member of the Executive Committee of the Taxation Section, California Lawyers’ Association, a former IRS Attorney, a former Assistant United States Attorney, and a former Tax Attorney, California Franchise Tax Board.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

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