T.C. Memo. 2013-172
UNITED STATES TAX COURT
KAYLN M. CARPENTER, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent*
Docket Nos. 15589-10, 15590-10, Filed July 25, 2013.
15591-10.
Larry D. Harvey, for petitioners.
Sara Jo Barkley and Luke D. Ortner, for respondent.
1
Cases of the following petitioners are consolidated herewith: Scott A. Van
Wyhe, docket No. 15590-10, and John C. and Sharon L. McSween, docket No.
15591-10.
*
This opinion supplements our prior opinion, Carpenter v. Commissioner,
T.C. Memo. 2012-1.
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[*2] SUPPLEMENTAL MEMORANDUM OPINION
HAINES, Judge: This case is before the Court on petitioners’ motion to
reconsider our opinion in Carpenter v. Commissioner, T.C. Memo. 2012-1
(Carpenter I), pursuant to Rule 161.2 Respondent objects. In their motion
petitioners allege that this Court erred in relying on Kaufman v. Commissioner,
136 T.C. 294 (2011) (Kaufman II), which was affirmed in part, vacated in part,
and remanded in part by the Court of Appeals for the First Circuit in Kaufman v.
Shulman, 687 F.3d 21 (1st Cir. 2012) (Kaufman III).3 Petitioners make various
other claims which we will address below.
2
Unless otherwise indicated, all section references are to the Internal
Revenue Code, as amended and in effect for the years at issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure. Amounts are
rounded to the nearest dollar.
3
The IRS originally filed a motion for summary judgment with this Court on
January 15, 2010. In ruling on the motion for summary judgment in Kaufman v.
Commissioner, 134 T.C. 182 (2010) (Kaufman I), we disallowed any deductions
for the easement contribution but found genuine issues of material fact remaining
with regard to the cash contribution deduction and the IRS’ imposition of
penalties. In a second Opinion after a trial on the reserved issues, this Court on
April 4, 2011, in Kaufman v. Commissioner, 136 T.C. 294 (2011) (Kaufman II),
aff’d in part, vacated in part and remanded in part, 687 F.3d 21 (1st Cir. 2012),
reaffirmed its ruling on the easement but held that the taxpayers were entitled to
deduct their $16,840 cash contribution on their 2004 return (as opposed to their
2003 return) and were liable for only a small penalty for negligence in claiming
the deduction for the earlier year.
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[*3] Background
In Carpenter I we gave a background of the facts, which we incorporate
herein by reference. The facts were based upon the parties’ pleadings, affidavits,
and exhibits in support of and in opposition to the motion for partial summary
judgment. The facts were stated solely for the purpose of deciding the motion and
not as findings of fact in this case. For convenience and clarity, we repeat below
the facts relevant to our disposition of petitioners’ motion for reconsideration, and
we supplement those facts as appropriate to provide a complete background
statement.
The facts of all petitioners’ cases, though not identical, are substantially
similar. On or about December 23, 2003, each petitioner acquired a parcel or
parcels of land in Teller County, Colorado, from Sixty Seven, LLC (Sixty Seven).
Petitioners held their parcels in fee simple. On or about December 24, 2003, each
petitioner conveyed a conservation easement to Greenlands, a charitable nonprofit
Colorado corporation which qualifies as a tax-exempt nonprofit organization
under sections 501(c)(3) and 170(b)(1)(A)(iv).4
4
The McSweens owned two parcels of land in Teller County. They
conveyed a conservation easement over the first parcel of land on or about
December 24, 2003, and conveyed a conservation easement over the second parcel
on or about January 29, 2004.
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[*4] Petitioner Carpenter claimed a $385,600 charitable contribution deduction
on her 2004 Federal income tax return. Petitioner Van Wyhe claimed a $272,998
charitable contribution deduction on his 2004 Federal income tax return, a
$265,247 charitable contribution deduction carryover on his 2005 Federal income
tax return, and a $262,876 charitable contribution deduction carryover on his 2006
Federal income tax return. The McSweens claimed a $336,500 charitable
contribution deduction on their 2003 joint Federal income tax return, a $336,500
charitable contribution deduction on their 2004 joint Federal income tax return, a
$311,776 charitable contribution deduction carryover on their 2004 joint Federal
income tax return, and a $612,844 charitable contribution deduction carryover on
their 2005 joint Federal income tax return. All of the Federal income tax returns
were timely filed.
All of the conservation easement deeds were virtually identical and
contained the following provision for extinguishment of the easement:
Extinguishment--If circumstances arise in the future such that render
the purpose of this Conservation Easement impossible to accomplish,
this Conservation Easement can be terminated or extinguished,
whether in whole or in part, by judicial proceedings, or by mutual
written agreement of both parties, provided no other parties will be
impacted and no laws or regulations are violated by such termination.
* * * [Emphasis added.]
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[*5] A notice of deficiency was mailed to each petitioner disallowing the
charitable contribution deductions. Respondent cited the emphasized language
above in determining that petitioners had not met the requirement of section
1.170A-14(g)(6)(i), Income Tax Regs., that their conservation easements be
granted in perpetuity. Each petitioner timely filed a petition with this Court.
In Carpenter I, respondent moved for partial summary judgment on the
grounds that petitioners’ conservation easements were not protected in perpetuity
and thus were not qualified conservation contributions. Specifically, respondent
argued that petitioners failed to meet the requirements of section 1.170A-
14(g)(6)(i), Income Tax Regs., because petitioners and Greenlands can mutually
agree to extinguish the conservation easements. We held that the provisions of
section 1.170A-14(g)(6)(i), Income Tax Regs., requiring a judicial proceeding to
extinguish a conservation easement may not be avoided and that petitioners had
failed to satisfy the requirements of section 1.170A-14(g)(6)(i), Income Tax Regs.
As a result, we held in favor of respondent and granted the motion for partial
summary judgment.
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[*6] Discussion
I. Motions To Reconsider
A motion to reconsider is governed by Rule 161. Rule 161 establishes a
filing deadline but provides no guidance on when the Court should grant or deny a
motion to reconsider. In the absence of more specific guidance, we look to
caselaw and the Federal Rules of Civil Procedure. See Rule 1(b).
The decision to grant a motion to reconsider lies within the discretion of the
Court. Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998). Motions to
reconsider are generally “intended to correct substantial errors of fact or law and
allow the introduction of newly discovered evidence that the moving party could
not have introduced by the exercise of due diligence in the prior proceeding.”
Knudsen v. Commissioner, 131 T.C. 185, 185 (2008). “Reconsideration is not the
appropriate forum for rehashing previously rejected legal arguments or tendering
new legal theories to reach the end result desired by the moving party.” Estate of
Quick v. Commissioner, 110 T.C. at 441-442.
Importantly, an intervening change in the law can warrant the granting of a
motion to reconsider. See Alioto v. Commissioner, T.C. Memo. 2008-185. In
Alioto v. Commissioner, T.C. Memo. 2006-199, the Court held that it lacked
jurisdiction over “stand-alone” section 6015(f) cases. After Congress expanded
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[*7] the Court’s jurisdiction to include such cases, see Tax Relief and Health Care
Act of 2006, Pub. L. No. 109-432, div. C, sec. 408, 120 Stat. at 3061, the taxpayer
filed timely motions to reconsider and to vacate, which the Court granted, see
Alioto v. Commissioner, T.C. Memo. 2008-185 (“We agree that the Court
correctly applied the caselaw as it existed at the time the Court issued Alioto I;
however, we disagree that the motion for reconsideration should be denied. After
the Court’s decision in Alioto I the law and the Court’s jurisdiction changed.” (Fn.
ref. omitted.)).
Petitioners ask us to grant the motion to reconsider in the light of the partial
vacating of Kaufman II by the Court of Appeals for the First Circuit. See
Kaufman III, 687 F.3d 21.
In their motion for reconsideration petitioners argue that this Court should
follow the approach taken by the Court of Appeals for the First Circuit and
reconsider its decision. Specifically, petitioners argue that: (1) the conservation
easement deeds protected the proceeds to be paid to Greenlands in perpetuity upon
termination of the conservation easement and thus under the approach taken in
Kaufman III the conservation easement deeds satisfied the requirements of section
1.170A-14(g), Income Tax Regs.; and (2) Colorado law creates restrictions that
protect the conservation easement and any proceeds upon termination of such
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[*8] conservation easement and that such protection is greater than the protection
provided for in Kaufman III; thus this Court should reconsider its opinion in
Carpenter I. We take each of these arguments in turn.
II. Legal Background
A. Qualified Conservation Contribution
A taxpayer is generally allowed a deduction for any charitable contribution
made during the taxable year. Sec. 170(a)(1). A charitable contribution is a gift of
property to a charitable organization made with charitable intent and without the
receipt or expectation of receipt of adequate consideration. See Hernandez v.
Commissioner, 490 U.S. 680, 690 (1989); United States v. Am. Bar Endowment,
477 U.S. 105, 116-118 (1986); see also sec. 1.170A-1(h)(1) and (2), Income Tax
Regs. While a taxpayer is generally not allowed a charitable contribution
deduction for a gift of property consisting of less than an entire interest in that
property, an exception is made for a “qualified conservation contribution.” See
sec. 170(f)(3)(A), (B)(iii).
A “qualified conservation contribution” is a contribution (1) of a “qualified
real property interest” (2) to a “qualified organization” (3) which is made
“exclusively for conservation purposes.” Sec. 170(h)(1); see also sec. 1.170A-
14(a), Income Tax Regs. Respondent concedes that there was a contribution of a
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[*9] qualified real property interest and that at the time of the contribution
Greenlands was a qualified organization under section 170(h)(3). Therefore, we
focus on the third requirement; i.e., whether petitioners’ contributions of the
conservation easements to Greenlands were exclusively for conservation purposes.
A contribution is made exclusively for conservation purposes only if it
meets the requirements of section 170(h)(5). Glass v. Commissioner, 124 T.C.
258, 277 (2005), aff’d, 471 F.3d 698 (6th Cir. 2006). Section 170(h)(5)(A)
provides that “[a] contribution shall not be treated as exclusively for conservation
purposes unless the conservation purpose is protected in perpetuity.” Section
1.170A-14(g), Income Tax Regs., elaborates on the enforceability-in-perpetuity
requirement. Paragraph (g)(1) provides generally that in order for a conservation
easement to be enforceable in perpetuity, the “interest in the property retained by
the donor * * * must be subject to legally enforceable restrictions * * * that will
prevent uses of the retained interest inconsistent with the conservation purposes of
the donation.” The various subparagraphs of paragraph (g) set forth many of these
legally enforceable restrictions. Mitchell v. Commissioner, 138 T.C. 324, 33
(2012).
Paragraph (g)(2) addresses mortgages and in pertinent part provides that “no
deduction will be permitted * * * for an interest in property which is subject to a
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[*10] mortgage unless the mortgagee subordinates its rights in the property to the
right of the * * * [donee] organization to enforce the conservation purposes of the
gift in perpetuity.”
Paragraph (g)(3) is entitled “Remote future event” and addresses events that
may defeat the property interest that has passed to the donee organization. It
provides that a deduction will not be disallowed merely because on the date of the
gift there is the possibility that the interest will be defeated so long as on that date
the possibility of defeat is so remote as to be negligible.
Paragraph (g)(6) is entitled “Extinguishment” and recognizes that after the
donee organization’s receipt of an interest in property, an unexpected change in
the conditions surrounding the property can make impossible or impractical the
continued use of the property for conservation purposes. Subdivision (i) of
paragraph (g)(6) provides in pertinent part:
If a subsequent unexpected change in the conditions surrounding the
property that is the subject of a donation under this paragraph can
make impossible or impractical the continued use of the property for
conservation purposes, the conservation purpose can nonetheless be
treated as protected in perpetuity if the restrictions are extinguished
by judicial proceeding and all of the donee’s proceeds * * * from a
subsequent sale or exchange of the property are used by the donee
organization in a manner consistent with the conservation purposes of
the original contribution.
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[*11] Subdivision (ii) of paragraph (g)(6) is entitled “Proceeds” and, in pertinent
part, provides:
for a deduction to be allowed under this section, at the time of the gift
the donor must agree that the donation of the perpetual conservation
restriction gives rise to a property right, immediately vested in the
donee organization, with a fair market value that is at least equal to
the proportionate value that the perpetual conservation restriction at
the time of the gift bears to the value of the property as a whole at that
time. * * * For purposes of this paragraph (g)(6)(ii), that
proportionate value of the donee’s property rights shall remain
constant. Accordingly, when a change in conditions gives rise to the
extinguishment of a perpetual conservation restriction under
paragraph (g)(6)(i) of this section, the donee organization, on a
subsequent sale, exchange, or involuntary conversion of the subject
property, must be entitled to a portion of the proceeds at least equal to
that proportionate value of the perpetual conservation restriction
***
B. Carpenter I
In Carpenter I, petitioners first argued that section 1.170A-14(g)(6)(i),
Income Tax Regs., should be read in tandem with section 1.170A-14(g)(3),
Income Tax Regs. Petitioners claimed that the conditions necessary for
extinguishment of the conservation easements are not possible or the possibility is
so remote as to be negligible. Thus, petitioners argued that the possibility of
extinguishment by mutual agreement of the parties had to be disregarded under the
so-remote-as-to-be-negligible standard in determining whether the conservation
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[*12] easement was enforceable in perpetuity. We relied on our previous holding
in Kaufman II to find that the so-remote-as-to-be-negligible standard does not
modify section 1.170A-14(g)(6)(i), Income Tax Regs.
Second, petitioners argued that the donations created charitable trusts or
restricted gifts which implicate the doctrine of cy pres. Under cy pres, the fact that
termination of the conservation easements would require a judicial proceeding
would prevent the parties from extinguishing the easements by mutual agreement.
We found that petitioners’ contribution of conservation easements did create
restricted gifts under Colorado law; however, we found the doctrine of cy pres
inapplicable to the restricted gifts. Thus, we found that petitioners could terminate
their conservation easements through mutual consent of all the parties.
Finally, we found that such extinguishment by mutual consent of the parties
violates the requirements of section 1.170A-14(g)(6)(i), Income Tax Regs., as
extinguishment by mutual consent of the parties does not guarantee that the
conservation purpose of the donated property will continue to be protected in
perpetuity. We noted that the “‘restrictions [in a deed] are supposed to be
perpetual in the first place, and the decision to terminate them should not be solely
by interested parties. With the decision-making process pushed into a court of
law, the legal tension created by such judicial review will generally tend to create
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[*13] a fair result.’” Carpenter I, slip op. at 18-19 (quoting Small, Federal Tax
Law of Conservation Easements 16-4 (1986)).
C. Kaufman III
In 1999 Lorna and Gordon Kaufman, the taxpayers, bought a single-family
rowhouse in the South End of Boston subject to local restrictions. In 2003 the
taxpayers contributed to a donee organization a facade easement on their single-
family rowhouse. At the time of contribution, the property was subject to a
mortgage. The mortgagee agreed to subordinate the mortgage to the conservation
easement deed in favor of the donee organization; however, the mortgagee
retained a “prior claim” to all proceeds of condemnation and to all insurance
proceeds resulting from any casualty of the property. The taxpayers claimed a
charitable contribution deduction equal to the value they assigned to the facade
easement. The Commissioner disallowed the deduction because the taxpayers had
failed to meet the requirement of section 1.170A-14(g)(6)(ii), Income Tax Regs.,
that the charity receive a proportionate share of proceeds following judicial
extinguishment of the facade easement and a subsequent sale of the property.
In Kaufman II, the taxpayers argued that though the mortgagee may have
had a prior claim to condemnation proceeds over the donee, that did not absolve
Lorna Kaufman of her obligation to make good on the donee’s entitlement to a pro
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[*14] rata share of the proceeds realized from the sale or involuntary conversion of
the property. As a result, the taxpayers claimed the various agreements satisfied
the requirements of section 1.170A-14(g)(6)(ii), Income Tax Regs. This Court
found the donee’s contractual right against the taxpayer to a share of the proceeds
to be insufficient to satisfy the requirements of section 1.170A-14(g)(6), Income
Tax Regs., stating: “[W]e think it the intent of the drafters of section 1.170A-
14(g)(6), Income Tax Regs., that the donee have a right to a share of the proceeds
and not merely a contractual claim against the owner of the previously servient
estate.” Kaufman II, 136 T.C. at 309.
The taxpayers also argued that section 1.170A-14(g)(6), Income Tax Regs.,
should be read in tandem with section 1.170A-14(g)(3), Income Tax Regs. The
taxpayers hypothesized a very low probability of occurrence of a set of events that
would deprive the charity of its proportional share of proceeds following judicial
extinguishment of the facade easement and subsequent sale of the property. They
concluded that the possibility of such deprivation was “so remote as to be
negligible” and, thus, had to be disregarded under the so-remote-as-to-be-
negligible standard in determining whether the facade easement was enforceable
in perpetuity.
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[*15] This Court in Kaufman II found that the so-remote-as-to-be-negligible
standard does not modify section 1.170A-14(g)(6)(ii), Income Tax Regs.
Specifically, we held that
It is not a question as to the degree of improbability of the changed
conditions that would justify judicial extinguishment of the
restrictions. Nor is it a question of the probability that, in the case of
judicial extinguishment following an unexpected change in
conditions, the proceeds of a condemnation or other sale would be
adequate to pay both the bank and * * * [the charity]. As we said in
Kaufman v. Commissioner, 134 T.C. at 186, the requirement in
section 1.170A-14(g)(6)(ii), Income Tax Regs., that * * * [the
charity] be entitled to its proportionate share of the proceeds is not
conditional: “Petitioners cannot avoid the strict requirement in
section 1.170A-14(g)(6)(ii), Income Tax Regs., simply by showing
that they would most likely be able to satisfy both their mortgage and
their obligation to * * * [the charity].”
Kaufman II, 136 T.C. at 313. The Court of Appeals for the First Circuit agreed.
Kaufman III, 687 F.3d at 27.
On appeal, the Court of Appeals for the First Circuit in Kaufman III held for
the taxpayers, finding the Commissioner’s reading of section 1.170A-14(g)(6),
Income Tax Regs., unreasonable. The Court of Appeals noted the superpriority of
tax liens to most prior claims and determined that the Commissioner’s reading of
section 1.170A-14(g)(6), Income Tax Regs., would defeat the purpose of the
statute. Specifically, the Court of Appeals stated:
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[*16] The IRS reads the word “entitled” in the extinguishment
regulation to mean “gets the first bite” as against the rest of the world,
a view the Tax Court accepted in reading “entitled” to mean “ha[s] an
absolute right.” Kaufman II, 136 T.C. at 313. But a grant that is
absolute against the owner-donor is also an entitlement, Black’s Law
Dictionary (7th ed. 1999) (“entitle” defined as “[t]o grant a legal right
to”); Collins English Dictionary (10th ed. 2009) (“to give (a person)
the right to do or have something”), and almost the same as an
absolute one where third-party claims (here, the bank’s or the city’s)
are contingent and unlikely.
Kaufman III, 687 F.3d at 27.
The Commissioner also argued that the taxpayers failed to meet the
requirements of section 1.170A-14(g)(1), Income Tax Regs. A provision in the
agreement between the taxpayers and the donee stated that nothing in the
conservation easement deed of trust shall be construed to limit the donee’s right to
give its consent to changes in the conservation easement deed or to abandon some
or all of its rights thereunder. The Commissioner argued that this provision was a
blank check to the donee to consent to any type of change, irrespective of its
compatibility with the donation’s conservation purpose; thus, the easement failed
to include the necessary restrictions that would prevent uses inconsistent with the
conservation purpose as required by section 1.170A-14(g)(1), Income Tax Regs.
The Court of Appeals rejected the Commissioner’s argument, citing a
similar argument made in Commissioner v. Simmons, 646 F.3d 6, 10 (D.C. Cir.
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[*17] 2011). The Court of Appeals held that “[t]he language of paragraph (g)(1)
nowhere suggests the stringent outcome that the IRS seeks to ascribe to it and the
consequences of the reading would be to deprive the donee organization of
flexibility to deal with remote contingencies.” Kaufman III, 687 F.3d at 28.
III. Whether Kaufman III Requires This Court To Reconsider Its Opinion in
Carpenter I
Petitioners argue that the Court of Appeals for the First Circuit’s opinion in
Kaufman III is an intervening change in law and requires this Court to reconsider
its opinion in Carpenter I. Specifically, petitioners argue that in the light of the
Court of Appeals for the First Circuit’s emphasis on the destination of proceeds
upon extinguishment of a conservation easement in Kaufman III, this Court should
take an overall approach in analyzing the in-perpetuity requirement of section
170(h)(5)(A) and section 1.170A-14(g), Income Tax Regs., and focus on any
proceeds resulting from an extinguishment of the conservation easements.
Petitioners argue that if there were extinguishments in this case, Greenlands would
receive its proportionate share of any proceeds from such extinguishment, that
Greenlands is bound by law to discharge its exempt purpose upon receipt of such
proceeds, and thus any such proceeds are protected in perpetuity, which is the goal
of the law. Respondent argues that Kaufman III does not apply to this case.
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[*18] Specifically, respondent argues that Kaufman III does not represent an
intervening change in law for purposes of this case, that petitioners have misread
Kaufman III, and that Kaufman III is not binding in the present case.5 We agree
with respondent.
Kaufman III addressed legal issues different from the one present in this
case. As pertinent to this case, Kaufman III addressed the proper interpretation of
section 1.170A-14(g)(6)(ii), Income Tax Regs., and, in particular, the breadth of
the donee organization’s entitlement to proceeds from the sale, exchange, or
involuntary conversion of property following the judicial extinguishment of a
perpetual conservation restriction burdening the property. The court held that it
was sufficient that the donee organization have a right to postextinguishment
proceeds that was absolute against the owner-donee of the burdened property.
Kaufman III, 687 F.3d at 27. Greenlands’ right to postextinguishment proceeds
5
Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d
985 (10th Cir. 1971), the Court will follow the clearly established position of a
Court of Appeals to which a case is appealable. However, we will give effect to
our own views in cases appealable to courts that have not yet decided the issue.
Id. This case is appealable to the Court of Appeals for the Tenth Circuit absent
stipulation otherwise. See sec. 7482(b)(1)(A). The Court of Appeals for the Tenth
Circuit has not yet ruled on the issue of whether a taxpayer may mutually agree
with a donee organization to terminate a conservation easement when it becomes
impossible to carry out the purpose of the conservation easement and still meet the
requirements of sec. 1.170A-14(g)(6)(i), Income Tax Regs.
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[*19] was not at issue in Carpenter I and has not been raised by respondent as a
challenge to whether petitioners satisfied the in-perpetuity requirement of section
170(h)(5)(A) and section 1.170A-14(g), Income Tax Regs.
The Court of Appeals for the First Circuit also rejected the Commissioner’s
argument that the provisions of section 1.170A-14(g)(1), Income Tax Regs., were
violated by terms in the relevant agreement allowing the donee organization to
give its consent to changes in the facade in question or to abandon some or all of
its rights under the agreement. Kaufman III, 687 F.3d at 27-28. The Court of
Appeals for the First Circuit agreed with the Court of Appeals for the D.C. Circuit,
which has said that type of clause is necessary to allow the donee organization “‘to
accommodate such change as may become necessary to make a building livable or
usable for future generations while still ensuring the change is consistent with the
conservation purpose of the easement.’” Id. at 28 (quoting Commissioner v.
Simmons, 646 F.3d at 10). No similar provision is at issue in this case.
Petitioners would draw a general rule with respect to the perpetuity
requirement from the analysis of the Court of Appeals for the First Circuit in
Kaufman III. Petitioners state:
Under paragraph (g)(6)(i), the conservation purpose of a preservation
easement will “be treated as protected in perpetuity”--
notwithstanding that changed circumstances might thwart that
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[*20] purpose and result in extinguishment of the easement--if the
restriction agreement provides that such a change in circumstances will be
treated in a manner consistent with paragraph (g)(6).
They elaborate:
Paragraph (g)(6) essentially provides that if an easement agreement
entitles the donee to a share of proceeds equivalent to the
proportionate value of the easement, to be used to carry out the
general charitable purpose of the easement contribution in the event
changed conditions require the easement’s extinguishment, the
conservation purpose will be treated as if it were protected in
perpetuity.
Petitioners concede that the language of their conservation easement deeds
departs from the situation described in section 1.170A-14(g)(6), Income Tax Regs.,
by allowing extinguishment of the easement by mutual agreement of the parties to
the deeds. They suggest that that provision be disregarded; i.e., that “any
resolution of the ‘in perpetuity’ requirement should not be determined based upon
extraneous language contained in the conservation easement deed.” (Emphasis
added.) But petitioners have failed to show that the by-mutual-agreement
provision is extraneous; i.e., “Unrelated to the * * * matter at hand.” The American
Heritage Dictionary of the English Language 628 (5th ed. 2011). It is related to the
matter at hand; it allows the parties to the conservation deed to determine for
themselves whether conditions have changed and whether any change in conditions
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[*21] makes impossible or impractical the continued use of the property for
conservation purposes.
Petitioners also argue that we stated in Carpenter I that “the regulation in
paragraph (g)(6) merely creates a safe harbor.” We stated in Carpenter I that “the
extinguishment regulation provides taxpayers with a guide, a safe harbor, by which
to create the necessary restrictions to guarantee protection of the conservation
purpose in perpetuity.” Id., slip op. at 18. To make our position clear,
extinguishment by judicial proceedings is mandatory. Therefore, we reject
petitioners’ argument that section 1.170A-14(g)(6), Income Tax Regs.,
contemplates any alternative to judicial extinguishment.
Nor do we read Kaufman III as sanctioning petitioners’ argument of putting
into the hands of the parties to a conservation agreement the authority to determine
when to extinguish the conservation easement so long as the donee organization
gets its share of the proceeds of a subsequent sale. In fact, the First Circuit noted
that “paragraph (g)(6) only applies when the easement is ‘extinguished by judicial
proceeding’”. Kaufman III, 687 F.3d at 26 n.3. Indeed, petitioners concede the
indispensableness of a judicial determination in the penultimate paragraph of their
memorandum in support of their motion: “Paragraph (g)(6) ultimately requires that
the organization to which a preservation easement is donated must be entitled to a
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[*22] share of proceeds from any future sale of the property that occurs after a
court extinguishes the easement because changed circumstances have made it
impossible to carry out the easement’s preservation purpose.” (Emphasis added.)
As a result of the foregoing, we find that the holding in Kaufman III does not
apply to this case and thus does not constitute an intervening change in law which
would justify granting the motion to reconsider.
IV. Colorado Law
Petitioners also argue that Colorado law creates restrictions that protect the
conservation easement and any proceeds upon termination of such conservation
easement and that because such protection is greater than the protection provided
for in Kaufman III, this Court should reconsider its opinion in Carpenter I. We
addressed petitioners’ argument with respect to Colorado law’s effect on the
conservation easement deeds in Carpenter I. Petitioners are now simply trying to
argue a new legal theory with respect to Colorado law. As we previously stated:
“Reconsideration is not the appropriate forum for rehashing previously rejected
legal arguments or tendering new legal theories to reach the end result desired by
the moving party.” Estate of Quick v. Commissioner, 110 T.C. at 441-442.
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[*23] V. Conclusion
Petitioners have not presented any newly discovered evidence or cited an
intervening change in the law that would warrant granting this motion for
reconsideration.
In reaching our holdings herein, we have considered all arguments made,
and, to the extent not mentioned above, we conclude they are moot, irrelevant, or
without merit.
To reflect the foregoing,
Appropriate orders will be
issued.