Partnership Challenges Denial of Charitable Contribution Deduction

a. By willfully ignoring the contents of his own file including the Conservation Deed, the only contemporaneous appraisal, the environmental baseline report, and the Form 8283 — all attached to the return at the time he issued his FPAA;

b. By applying an unlawful national policy of issuing an arbitrary, capricious, unreasonable, excessive, and erroneous FPAA that disregards every penny of every partnership conservation contribution (and most significant family contributions) in the nation for all of 2016 on a carte blanche basis at a sum total of ZERO and then reflexively applies a 40 percent overvaluation penalty to the entire adjustment — without regard to the facts;

c. By asserting a downward adjustment in any amount to the conservation contribution by Jackson Crossroads signed on December 16, 2016 (“Conservation Contribution”) when the facts require an upward adjustment to the understated value;

d. By asserting penalties in any amount;

e. By asserting that Jackson Crossroads somehow failed to establish that it made a noncash charitable donation in 2016;

f. By resorting to the extraordinarily vague self-serving conclusion that Jackson Crossroad somehow failed to satisfy the elements of the Section 170 elements when the legally enforceable terms of the Conservation Deed and other contents of Respondent's files specifically satisfied those elements;

g. By asserting, in the alternative, that if Jackson Crossroads did satisfy the requirements of Section 170 for the charitable contribution, it did not establish that the value of the contributed property interest was greater than $588,000;

h. By asserting that the adjustments are attributable to a listed transaction under Section 6707A(c);

i. By asserting that the adjustments result in a reportable transaction understatement under Section 6662A (b);

j. By demonstrating a hostility toward conservation easements that destroys the Congressional purpose in enacting Section 170(h) — that is, the Congressional purpose of encouraging landowners to preserve their land in its natural state through conservation easements barring development in perpetuity;

k. By failing to obtain a qualified appraisal or an independent appraisal of any description to support the amount in the FPAA;

l. By asserting that a 40 percent penalty should apply on the (unsupported) contention the adjustments result in underpayments attributable to a gross valuation misstatement;

m. By asserting, alternatively, that a 20 percent penalty should apply on the unsupported contention the adjustments result in (i) a substantial understatement of tax, (ii) a substantial valuation misstatement, or (iii) negligence;

n. By asserting that Jackson Crossroads has not shown that it possessed reasonable cause, acted in good faith, or qualifies for any other penalty exception; and

o. By thwarting an accurate measure of the perpetual gift and thereby deliberately discouraging protection of green space.

a. Jackson Crossroads is a limited liability company organized under the laws of the State of Georgia.²

b. Jackson Crossroads is treated as a partnership for federal tax purposes.

c. Greencone Investments, LLC serves as the Tax Matters Partner of Jackson Crossroads for federal income tax purposes.

d. The founders of Jackson Crossroads believed at the time of the Conservation Contribution and still believe in protecting land against development eating most farm and timberland in the Atlanta area, the seventh largest metropolitan area in the nation.

e. Section 170(h) encourages conservation contributions of:

f. The Conservation Deed satisfies each of these three elements.

g. As a matter of public record, Jackson Crossroads held fee simple ownership of 228.61 acres (more or less) in Morgan and Walton Counties, Georgia prior to December 16,2016.

h. By Conservation Deed signed on December 16, 2016, Jackson Crossroads, as grantor, contributed a real property interest in the 228.61 acres in Morgan and Walton Counties, Georgia to the Oconee River Land Trust ("Oconee River LT").

i. Jackson Crossroads recorded the Conservation Deed on December 19, 2016 with the Offices of the Clerks of the Superior Courts in Morgan and Walton Counties, Georgia.

j. State law determines property rights for federal tax purposes.

k. That Conservation Deed is controlled by Georgia law (Art. 17.A.) and is legally enforceable under Georgia law.

l. By statute, Georgia law permits, encourages, and enforces conveyances of easements such as the Conservation Deed.

m. The Conservation Deed explicitly restricts mining, subdivision, and other uses of the 228.61 acres.

n. The Conservation Deed constitutes a "restriction (granted in perpetuity) on the use which may be made of the real property."

o. As noted, the grantee under the Conservation Deed is the Oconee River LT, headquartered in Athens, Georgia.

p. Since its inception in 1993, the Oconee River LT has been a publicly supported nonprofit organization, created primarily for the conservation of the environment by dedicated biologists, professors, environmentalists, and others concerned with conservation. See www.oconeeriverlandtrust.com.

q. Oconee River LT is and was at that time it accepted the Conservation Contribution a “qualified (charitable) organization” under Sections 501(c)(3) and 509(a)(2).

r. The Conservation Deed filed December 19, 2016 constitutes “a contribution . . . exclusively for conservation purposes.”

s. The Conservation Deed identifies various conservation purposes, including, without limitation, protection of a relatively natural habitat of fish, wildlife, plants, and their ecosystems and preservation of open space (including farm land and forest land) pursuant to clearly delineated government conservation policies which provide significant public benefit.

t. Jackson Crossroads need only satisfy one of those purposes to satisfy the Section 170(h) conservation purpose requirement.

u. The Conservation Deed specifies the purposes of that Deed.

v. Article 1 of the legally enforceable Conservation Deed specifies its purpose as follows:

ARTICLE 1. PURPOSE

It is the exclusive purpose of the Conservation Easement to assure that the Property will be retained forever in its predominantly relatively natural, forested, open space, and relatively undeveloped condition, and to preserve and protect the Conservation Values of the Property, including productive forestry and agricultural resources, the water quality of streams, and a variety of significant natural habitats, and to prevent any use of the Property that will impair or interfere with the Conservation Values of the Property (collectively, the “Purposes”).

w. The Premises of the Conservation Deed (i.e., foundational Recitals) specify “the Conservation easement ensures 'the preservation of open space (including farmland/forest land) where such preservation is . . . pursuant to a clearly delineated Federal, State, or local government conservation policy and will yield a significant benefit."'

x. The Premises identify some of the significant governmental conservation policies that benefit the public and that served by the Jackson Crossroads Conservation Contribution serves — including state and federal clean water policies, priority habitats under the region-specific Georgia State Wildlife Action Plan, and prime soils under federal and state conservation plans.

y. The Premises incorporate the Environmental Baseline Report.

z. Article 2 of the legally enforceable Deed of Conservation Easement specifies its perpetual duration as follows:

ARTICLE 2. DURATION OF EASEMENT

The Conservation Easement shall be perpetual. It is an easement in gross, constitutes a real property interest, runs with the land, and is enforceable by Grantee against Grantor, its personal representatives, heirs, successors, assigns, lessees, agents, and licensees.

aa. Article 3 of the Jackson Crossroads Conservation Deed specifies the legally enforceable rights of the grantee, the Oconee River LT, as follows:

ARTICLE 3. RIGHTS OF GRANTEE

To accomplish the Purposes, the following rights are conveyed to Grantee by the Conservation Easement:

A. To preserve and protect the Conservation Values of the Property pursuant to the terms hereof;

B. To enter upon the Property at reasonable times and. upon prior reasonable notice in order to. monitor compliance with, and otherwise enforce the terms of, the Conservation Easement in accordance With Article 9, except in cases where Grantee determines in its reasonable discretion, that immediate entry is required to prevent, terminate, or mitigate an existing or imminent violation of the Conservation Easement which would significantly damage the Conservation Values of the Property;

C. To prevent any activity on, or use of, the Property that is inconsistent with the Purposes of the Conservation Easement and to require the restoration of such areas or features of the Property that may be damaged by any inconsistent activity or use to their condition as of the date of the Conservation Easement; and

D. To post signs and other boundary markers within the Conservation Easement identifying the boundary of lands subject to the Conservation Easement, provided such signs are no larger than eight (£) inches in height by eight (8) inches in width and professionally prepared.

ab. The Oconee River LT, as grantee, recognizes its stewardship responsibilities on this Conservation Contribution.

ac. The terms of the Deed together indicate that the mutual intent of the parties was (and is) to perpetually protect the property.

ad. Article 4 of the Jackson Crossroads Conservation Deed imposes limitations on the “RESERVED RIGHTS OF THE GRANTOR."

ae. Most, if not all, of the limitations in Article 4 protect the Conservation Purposes and/or Values.

af. Article 5 of the Jackson Crossroads Conservation Deed specifies 13 “PROHIBITED AND RESTRICTED ACTIVITIES”.

ag. Most, if not all, of the prohibitions and restrictions in Article 5 protect the Conservation Purposes and/or Values.

ah. The Conservation Deed prohibits any activity or use of the Conservation Contribution that is inconsistent with the purposes of the easement and requires restoration of areas or features that may be damaged by any inconsistent activity or use.

ai. In defining “PROHIBITED AND RESTRICTED ACTIVITIES”, Article 5 of the legally enforceable Conservation Deed begins:

Notwithstanding anything herein to the contrary, any activity on, or use of, the Property inconsistent with the Purpose of the Conservation Easement, or that would significantly and adversely impair or interfere with the Conservation Values of the Property, is prohibited.

aj. As noted, Article 3 of the legally binding Conservation Deed grants the Oconee River LT (i) the right to monitor compliance with and otherwise enforce the terms of the Conservation Easement in accordance with Article 9, (ii) the right to prevent any activity on, or use of, the Property that is inconsistent with the Purposes of the Conservation Easement, and (iii) the right to require restoration of such areas or areas that may be damaged by any inconsistent use to their condition as of the date of the Conservation Easement.

ak. Consistent with Article 5, Article 4 of the legally enforceable Conservation Deed limits the “RESERVED RIGHTS OF GRANTOR” and provides “notwithstanding any other provision of the Conservation Easement, the rights set forth in this Article shall only be exercised to the extent they do not destroy or impair the Conservation Values and Purposes.”

al. That Conservation Deed bestows upon the grantee the right to enforce that and other protections of the Conservation Values and Purposes.

am. Article 9 of the legally binding Conservation Deed prescribes “GRANTEE'S REMEDIES” including notice to grantor of violation, demand for corrective action, and demand restoration to the condition existing at the time of the contribution.

an. Absent adequate corrective action, Article 9 then authorizes the Oconee River LT (as grantee) to bring an action of law or in equity in a court of competent jurisdiction to enforce the terms of the Conservation Easement, seek injunctive relief, and the recovery, of damages.

ao. Article 9 also provides for “Emergency Enforcement,” broad cumulative relief, and waiver of defenses by the grantor (forbearance, laches, estoppel, prescription).

ap. Under the binding terms of Articles 4, 5, and 9 of the Conservation Deed, the Conservation Deed(i) prohibits activities and uses inconsistent with the Purposes and Conservation Values, and (ii) provides remedies to the Oconee River LT to enforce those prohibitions.

aq. The Oconee River LT acknowledges in its December 27, 2016 letter that it accepts stewardship responsibilities as to the Conservation Contribution.

ar. Under its non-profit charitable organizational documents, the Oconee River LT remains obligated to protect and enforce the conservation purposes and values under the Conservation Deed.

as. Kristina Sorensen prepared a Baseline Documentation Report relating to the 228.61 acre subject property ("Baseline Report") dated August 2, 2016 for Oconee River LT.

at. As confirmed by her report in Respondent's possession, Ms. Sorensen is a wildlife biologist who:

au. Ms. Sorensen was (and is) qualified to prepare the Baseline Documentation Report on the 228.61 acres.

av. Ms. Sorenson inspected all major portions of the 228.61 acres.

aw. The regulations do not require the presence of “rare, endangered, or threatened” species or that the baseline report include a species delineation study.

ax. A species delineation study would confirm that protected species can and do use the habitat at Jackson Crossroad.

ay. Among other points, Ms. Sorenson accurately determined:

az. At least three times, the Oconee River LT timely acknowledged receipt of the Jackson Crossroads Conservation Contribution.

ba. First, the Oconee River LT confirmed the contribution, the absence of any consideration, and its status as a Section 501(c)(3) organization — in the Conservation Deed itself.

bb. Second, the Executive Director of the Oconee River LT wrote to Jackson Crossroads on December 27, 2016 and confirmed:

On behalf of the Oconee River Land Trust, I am writing to thank you for Jackson Crossroad's gift of a conservation easement, recorded on December 19, 2016 that permanently protects 228.61 acres of beautiful conservation land in Morgan County and Walton County. We are very grateful for the opportunity to participate in a project with such immense public benefit, and we will work hard to make sure that your vision for this property is upheld.

As you know, the Oconee River Land Trust has accepted important stewardship responsibilities with this conservation easement. Carrying out these responsibilities will include annual monitoring of the land and working with each successive landowner to protect the property's conservation values. We will contact you or successor landowners to arrange a convenient time for these visits, and will do our best to stay in touch with you throughout the year. Please feel free to contact us with any questions, or concerns you might have.

The Oconee River Land Trust is a 501(c)(3) nonprofit, and in accordance with IRS regulations, this letter confirms that no goods or services were given to you in return for your donation of a conservation easement.

bc. Third, the Executive Director of the Oconee River LT again acknowledged the Contribution by signing the May 8, 2017, Form 8283 Summary of Appraisal (filed with the return).

bd. On the Form 8283, the Oconee River LT “acknowledges that it is a qualified organization under Section 170(c) and that it received the donated property as described in Section B, Part I, above on the following date: December 19, 2016 (filing).”

be. At least one of the acknowledgments satisfy the requirement of a written acknowledgement by the charitable donee.

bf. This triangulation of the three written acknowledgements that the Oconee River LT provided Jackson Crossroads corroborate the mutual intent of the parties to the Conservation Deed to preserve the 228.61 acres in a manner that comports with Georgia and federal conservation rules.

bg. The partnership investigated the mineable minerals.

bh. Jackson Crossroads core drilled the granite reserves.

bi .Jackson Crossroads hired Black Rock Consulting, Inc. which prepared a Development Assessment of the property.

bj. Jackson Crossroads hired Dr. Paul A. Schroeder of the University of Georgia who prepared a Geologist Report.

bk. By appraisal issued on April 7, 2017 (“Appraisal”), Robert J. Fletcher, CCIM, GA State Certified General Real Estate Appraiser with Fletcher Realty, valued the Jackson Crossroads Conservation Contribution as of the recording of the Deed, December 19,2016.

bl. The value of the Conservation Contribution in the Appraisal is conservative, if not substantially understated.

bm. No other qualified or independent appraisal of the Jackson Crossroads Conservation Contribution is proximate in time with the contribution or relates to the contribution date value.

bn. That contemporaneous Appraisal is a “qualified appraisal” prepared by a licensed “qualified appraiser” with almost 50 years of experience in valuing real estate in Georgia, Tennessee, Kentucky; North Carolina, and South Carolina.

bo. That Appraisal specifically told Jackson Crossroads that the contemporaneous valuation by Mr. Fletcher constituted a qualified appraisal by a qualified appraiser.

bp. That contemporaneous Fletcher Realty Appraisal confirms at page 6 that it is a “qualified appraisal by IRS standards.”

bq. That representation here by a licensed appraiser provides reasonable cause to believe the Appraisal is qualified.

br. The date of that valuation is not earlier than 60 days prior to the date the conservation easement was conveyed/contributed nor later than the date the conservation easement was reported.

bs. The Appraisal does not involve a prohibited fee and is not based on a percentage of the value or amount of the donation.

bt. The licensed appraiser was and is qualified to value Georgia real estate and mining quarries:

bu. In addition to the summary letter, prefatory materials, and 296 pages of addenda and exhibits, Mr. Fletcher's appraisal report is 52 pages in length.

bv. Robert J. Fletcher, CCIM is and was in 2016 a licensed qualified appraiser of Georgia real estate.

bw. Mr. Fletcher “has earned an appraisal designation from a recognized professional appraiser organization.”

bx. Mr. Fletcher was at the time of the Appraisal and is still is a Certified Commercial Investment Member with almost 50 years of experience in appraising real estate (through 2016), having appraised a variety of properties in Georgia and nearby states.

by. In addition to his almost 50 years of appraisal experience and his CCIM designation, Mr. Fletcher, completed the Appraisal Institute's Course Valuation of Conservation Easements, had experience appraising conservation easements, and had experience valuing potential residential tracts (such as the 228.61 acres) prior to this engagement.

bz. Mr. Fletcher was not the donee of the conservation easement on the Conservation Contribution.

ca. Mr. Fletcher was not an employee of (i) Jackson Crossroads, (ii) a direct or indirect partner of Jackson Crossroads, or (iii) a party to Jackson Crossroads purchase of the Property.

cb. Mr. Fletcher was not "related" under Section 267(b) to any of the persons described above.

cc. Mr. Fletcher had experience in valuing land in the local area.

cd. Mr. Fletcher had training and experience in valuing conservation easements.

ce. The contemporaneous Appraisal by Mr. Fletcher contains:

cf. Mr. Fletcher used the "before and after" method of valuing conservation easements per Treas. Reg. § 1.170A-14(h)(3)(i).

eg. That method constitutes both an accepted method and the most common method used to value conservation contributions.

ch. Mr. Fletcher's Appraisal is the only contemporaneous appraisal of the 228.61 acre property interest Jackson Crossroads contributed to the Oconee River LT by Deed signed December 16, 2016.

ci. In the Form 8283 filed with the Jackson Crossroads return, the Appraiser certified that (i) he performs appraisals on a regular basis, (ii) he is qualified to make appraisals of the type of property being valued, (iii) the fee charged for the appraisal is not based on a percentage of the appraised property value, (iv) he are not one of the persons described in Treas. Reg. § 1.170A-13(c)(5)(iv), (v)he understands that an intentionally false or fraudulent overstatement of the value of the property may subject him to a civil penalty under Section 6701, and (vi) his not barred from presenting evidence or testimony by the Office of Professional Responsibility.

cj. The Form 8283 certification by the Appraiser was accurate.

ck. Mr. Fletcher was neither Petitioner nor a direct or indirect partner of Jackson Crossroads.

cl. Mr. Fletcher did not claim or report a deduction under Section 170 for the contribution of the conservation easement on the Property.

cm. Mr. Fletcher was not a party to the transaction in which Jackson Crossroads acquired the Property.

cn. Oconee River LT is entitled to a proportionate share of any proceeds that may result from a sale, exchange, or involuntary conversion of the Conservation Contribution, if the conservation easement is extinguished in future legal proceedings.

co. The Conservation Deed provides a formula for calculating Oconee River LT's proportionate share of extinguishment proceeds in accordance with Treas. Reg. § 1.170A-14(g)(6)(ii).

cp. Consistent with the terms of the Conservation Deed, Georgia law governs its construction.

cq. Georgia law construes deeds and other contracts based on the mutual intent of the parties as reflected by the terms they chose.

cr. The mutual intent of the parties reflected in the Conservation Deed was (at the time and remains) to perpetually preserve the 228.61 acres consistent with its Conservation in the manner that satisfies the requirements for conservation easements.

cs. Georgia law permits parties to a deed or other contract to specify the construction they intend.

ct. Consistent with their mutual intent, both parties to the Conservation Deed agreed that the Deed should be construed as follows:

ARTICLED GENERAL PROVISIONS

A. Controlling Law. The interpretation. and performance of the conservation Easement shall be governed by the laws of the State of Georgia

B. Liberal construction. Notwithstanding any general rule construction to the contrary, the Conservation Easement shall be liberally construed in order to Accomplish the Purposes of the Conservation Easement and the policy arid purpose of O.C.G.A. §44-10-1, et seq. If any provision in this, instrument is; found to foe ambiguous; then an interpretation consistent with the Purposes of the Conservation Easement that would render the provision, valid shall be favored over any interpretation that would render it invalid.

C. Severability. If any provision of the Conservation Easement or-the application thereof to any person circumstances, is found to be invalid, tire remainder of the provisions of the Conservation Easement, or the application Of such provision to, persons Or circumstances Other than those as to which it is found to be invalid, as the case may be, shall not be affected thereby.

D. Entire Agreement. This instrument and the. documents incorporated herein by reference forth the entire agreement of the Parties with. respect to the Conservation Easement and supersede all prior discussions, negotiations, understandings, or agreements relating to the Conservation Easement all of which are merged herein.

cu. The Premises of the Conservation Deed (i.e., foundational Recitals) accurately state the facts on which the Deed is premised.

cv. The Premises of the Conservation Deed accurately cite the statutory and regulatory authorities on which that Deed is premised — specifically including O.C.G.A. §§ 44-10-1, et seq. and 48-7-29.12; Ga. R. and Regs. 391-1-6-03(5)(a), (b), and (d); I.R.C. §§ 170(b)(1)(A)(vi) and (h)(4)(A)(ii) and 501(c)(3); and Treas. Reg. § 1.170A-14(c) and(g).

cw. Jackson Crossroads exercised extraordinary care in obtaining the properly prepared Conservation Deed, extensive Appraisal by highly qualified appraisers, Environmental Baseline Report by a knowledgeable wildlife biologist, a Geologist Report by a qualified Geologist, and a Development Assessment by an experienced mining, civil, and environmental engineering firm.

cx. Jackson Crossroads acted in good faith and with reasonable cause by, inter alia, hiring an experienced, qualified appraiser who applied accepted valuation methodologies in determining the fair market value of the contribution.

cy. Jackson Crossroads possessed substantial legal and factual authority for all reported positions.

cz. Based on substantial legal and factual authority, Jackson Crossroads possessed reasonable cause for believing:

da. Petitioner cooperated in the underlying audit.

db. Subject to receipt of the requested FOIA materials, the accuracy-related penalties asserted by Respondent were not personally approved in writing on a timely basis by an appropriate supervisor pursuant to Section 6751.

a. The issuance and contents of the FPAA — particularly the contentions that Jackson Crossroads has not satisfied any of the requirements of Section 170 and that the value of the Conservation Contribution on the 228.61± acres TOTAL ZERO — remain erroneous, unreasonable, arbitrary, and capricious.

b. Respondent lacked any rational basis for (i) for ignoring the contents of his own files and (ii) following an unlawful policy of pretending that the total amount of every partnership (and family) conservation contribution in the nation for the entire year of 2016 totaled ZERO and no Congressionally-encouraged conservation contributions established a single element of Section 170.

c. Respondent lacks competent evidence contradicting any fact in this Petition.

d. Jackson Crossroads cooperated during the examination.

e. Respondent bears the burden of proof as to all matters under, inter alia, Hickman v. Taylor, 329 U.S. 495 (1947); Caracci v. Commissioner, 456 F.3d 444 (5th Cir. 2006); and Section 7491.

(i) The 2016 Jackson Crossroads Return understates the value of the Conservation Contribution and should be adjusted upwards;

(ii) No penalties apply to any positions on the 2016 Return;

(iii) Respondent Hears the burden of proof as to all issues; and

(iv) The Court should grant such other and further relief that it deems appropriate.