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 mineral reserves, the baseline report, and the Form 8283 — all in Respondent's possession when 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 amount of ZERO and then reflexively applies a 40 percent overvaluation penalty — without regard to the facts;

c. By asserting a downward adjustment in any amount to the conservation contribution by Turner Tract 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 resorting to the extraordinarily vague self-serving conclusion that Turner Tract did not establish that it made a contribution or gift of a conservation easement during the tax year ended December 31, 2016;

f. By asserting that Turner Tract somehow failed to satisfy unspecified 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 claiming that even if it is established that a noncash charitable contribution is allowed, the deduction should somehow be limited to $200,000;

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 penalty under Section 6662A(c);

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 any qualified or independent appraisal to support the FPAA valuation;

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 Turner Tract 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. Turner Tract is a limited liability company organized under the laws of the State of Georgia.

b. Turner Tract is treated as a partnership for income tax purposes.

c. Walter C. Rocker, Jr. serves as the Tax Matters Partner of Turner Tract for income tax purposes.

d. The Rocker family has always wanted to conserve the land in this area that has been in their family for over 100 years.

e. The members of Turner Tract believed at the time of the contribution and still believe in protecting land against mining or other development.

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

g. The Conservation Deed satisfies each of these elements.

h. As a matter of public record, Walt and his brother William held fee simple title to the Turner Tract family land in their names for over 30 years.

i. Walt and his brother William contributed 200 acres (more or less) of their family land in Hancock County, Georgia to Turner Tract on October 21, 2016.

j. By the Conservation Deed signed on December 16, 2016, Turner Tract, as grantor, contributed a real property interest in the 200± acres in Hancock County, Georgia to the Oconee River Land Trust ("Oconee River LT").

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

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

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

n. The Conservation Deed perpetually restricts mining, subdividing the property, and other uses of the 200± acres.

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

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

q. 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.

r. 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).

s. The Conservation Deed filed December 20, 2016 constitutes “a contribution . . . exclusively for conservation purposes.”

t. 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 productive forest and agricultural land and pursuant to clearly delineated government conservation policies which provide significant public benefit

u. Turner Tract need only satisfy one of those purposes to satisfy the Section 170(h) conservation purpose requirement. 

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

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

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

y. The Premises identify some of the significant governmental conservation policies that benefit the public and that served by the Turner Tract Conservation Contribution serves — including clean water policies, high priority habitats under the region specific Georgia State Wildlife Action Plan, and prime soils under conservation plans.

z. The Premises incorporate the Environmental Baseline Report.

aa. The Conservation Deed perpetually protects its Purposes:

ab. Article 3 of the Turner Tract Conservation Deed specifies the legally enforceable rights of the grantee, the Oconee River LT, as follows:

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

ad. Article 4 of the Turner Tract 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 Turner Tract Conservation Deed specifies 12 “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 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 (laches, estoppel, prescription).

ap. Under the binding terms of, inter alia, Articles 4, 5, and 9 of the Conservation Deed enforceable under the controlling Georgia law, 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 that prohibition.

aq. The Oconee River LT acknowledges in its December 30, 2016 letter that it accepts its 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. Though not required, a thorough species delineation study would confirm use of the habitat by protected species.

at. Michael Ransom prepared an Environmental Baseline Report relating to the 200± acre subject property (“Baseline Report") dated November 4, 2016 for Oconee River LT.

au. Mr. Ransom holds a Bachelor of Science in Forest Resources from the Warnell School of Forestry and Natural Resources at the University of Georgia.

av. Mr. Ransom has been principal and owner of Southern Timber Solutions, LLC since 2010, with experience in forestry and land management.

aw. Mr. Ransom was (and is) qualified to prepare the Environmental Baseline Report on the 200± acres.

ax. Mr. Ransom inspected all major portions of the 200± acres.

ay. Mr. Ransom concluded the Property as a wetland/stream buffer will protect the Ogeechee River basin, designated as a high priority watershed, and will provide high-quality natural wildlife habitat.

az. Mr. Ransom found the Contribution will also protect the High Priority wildlife and plant habitats on the Property designated by the Georgia DNR State Wildlife Action Plan.

ba. At least three times, the Oconee River LT timely acknowledged receipt of the Turner Tract Conservation Contribution.

bb. 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.

bc. Second, the Executive Director of the Oconee River LT wrote Turner Tract on December 30, 2016 and confirmed:

On behalf of the Oconee River Land Trust, I am writing to thank you for Turner Tract's gift of a conservation easement, recorded on December 20, 2016 that permanently protects 200 acres of beautiful conservation land in Hancock 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.

bd. Third, the Executive Director of the Oconee River LT again acknowledged the Conservation Contribution by signing the February 23, 2017, Form 8283 Summary of Appraisal (filed with the return).

be. Under “Donee Acknowledgement,” 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 20, 2016. ”

bf. At least one, if not all three, of the acknowledgments satisfy the requirement of a written acknowledgement by the charitable donee.

bg. This triangulation of the three written acknowledgements that the Oconee River LT provided Turner Tract corroborate the mutual intent of the parties to the Conservation Deed to preserve the 200+ acres in a manner that comports with Georgia and federal conservation rules.

bh. Since acknowledging its stewardship responsibilities under the Conservation Contribution, the Oconee River Land Trust has carried out those responsibilities through annual conservation monitoring of the 200± acres.

bi. Turner Tract core drilled the granite reserves.

bj. Turner Tract hired a land surveyor licensed in Georgia to survey the property.

bk. The partnership then investigated the mineable minerals.

bl. Turner Tract hired Nova Engineering and Environmental, LLC which prepared a Geotechnical Report of the property.

bm. Turner Tract hired Geowave Solutions, Inc. which performed a Seismic Refraction Report on the property.

bn. Turner Tract hired Dr. Paul A. Schroeder of the University of Georgia who prepared a Geologist Report.

bo. Turner Tract hired Dan C. Carroll Associates (“DCA”), which prepared a Market Research Report.

bp. Finally, Turner Tract hired Dale W. Hayter, Jr. , MAI, AI-GRS, with Independent Appraisals, LLC (“Independent Appraisals”).

bq. Mr. Hayter relied upon the Geotechnical Report, Seismic Refraction Report, Geologist Report, and DCA Market Research Report in preparing his Appraisal.

br. By appraisal issued on December 26, 2016, Mr. Hayter valued the Turner Tract Conservation Contribution as of the signing of the Deed, December 20, 2016.

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

bt. No other qualified or independent appraisal of the Turner Tract Conservation Contribution is proximate in time with the contribution or relates to the contribution date value.

bu. That Appraisal specifically told Turner Tract that the contemporaneous valuation by the Independent Appraisals, LLC constituted a qualified appraisal by a qualified appraiser.

bv. That contemporaneous Independent Appraisals Appraisal confirms at page 2 that it is a “qualified appraisal” by 1RS standards.

bw. In addition to being accurate, that representation here by a MAI real estate licensed appraiser licensed in Georgia constitutes reasonable cause under Section 170(f)(11).

bx. That contemporaneous Appraisal is a “qualified appraisal” prepared by a licensed “qualified appraiser” with over 25 years of experience in valuing Georgia mineral properties.

by. 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 contributed.

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

ca. Dale Hayter was and is qualified to value Georgia real estate:

cb. As an MAI, Mr. Hayter is and was in 2016 a licensed qualified appraiser of Georgia real estate.

cc. Mr. Hayter “has earned an appraisal designation from a recognized professional appraiser organization. ”

cd. Mr. Hayter was at the time of the Appraisal and still is a Member of the Appraisal Institute and a Certified General Real Property Appraiser with 25 years of experience in appraising Georgia real estate (through 2016), having appraised a wide variety of properties, including mineral properties.

ce. The MAI designation is the highest and most rigorous designation a real estate appraiser can obtain.

cf. Mr. Hayter possessed the competency to develop and report the market value indications and opinions in his Appraisal.

eg. In addition to his 25 years of appraisal experience and MAI designation, Mr. Hayter completed a variety of courses on conservation easements, had experience appraising conservation easements, and had experience valuing potential mining tracts (such as the 200+ acres) prior to this engagement.

ch. Mr. Hayter was not the donee of the conservation easement on the Conservation Contribution.

ci. Mr. Hayter was not an employee of (i) Turner Tract, (ii) a direct or indirect partner of Turner Tract, or (iii) a party to the transaction in which Turner Tract acquired the Property.

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

ck. Mr. Hayter had training and experience in valuing land, mineral properties, and conservation easements in the area.

cl. The contemporaneous Hayter Appraisal contains:

cm. Mr. Hayter used the "before and after" easement valuation method, authorized by Treas. Reg. § 1. 170A-14(h)(3)(i).

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

co. In the Form 8283 filed with the Turner Tract return, the Appraiser certified that (i) he performs appraisal on a regular basis, (ii) is qualified to make an appraisal 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 is 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) he is not barred from presenting evidence or testimony by the Office of Professional Responsibility.

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

cq. The Form 8283 included in the 2016 Partnership Return (Form 1065) contained all required information for Turner Tract.

cr. Turner Tract reasonably relied on its Appraiser and Donee to properly complete the Form 8283.

cs. Turner Tract and its members in fact filed their proper Form 8283 with their partnership return for the taxable year 2016.

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

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

cv. The mutual intent of the parties reflected in the Conservation Deed was (at the time and remains) to perpetually preserve the 200± acres consistent with its Conservation Purpose in the manner that satisfies the requirements for conservation easements.

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

cx. As reflected in the terms of the Conservation Contribution, Turner Tract as grantor and Oconee River Land Trust as grantee confirmed their mutual intent to perpetually protect the conservation values and purposes at different points in the Deed.

cy. They explicitly confirmed their mutual intent that the Conservation Deed be construed to that end.

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

da. The Premises of the Conservation Deed accurately state the facts on which the Deed is premised.

db. The Premises of the Conservation Deed accurately cite the statutory and regulatory authorities on which that Deed is premised — specifically including the 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).

dc. Turner Tract obtained and relied upon the properly prepared Conservation Deed, a land survey, an extensive Appraisal prepared by a qualified MAI appraiser, three mining reports produced by experienced engineers and geologists, a market research report by consultants and engineers at Dan Carroll and Associates, and Environmental Baseline Report by a knowledgeable biologist.

dd. Turner Tract acted in good faith based on reasonable cause.

de. Based on substantial legal and factual authority, Turner Tract possessed reasonable cause for believing:

df. Petitioner cooperated in the underlying audit.

dg. The accuracy-related penalties asserted by Respondent were not personally approved on a timely basis by an appropriate supervisor pursuant to Section 6751.

a. The issuance and contents of the FPAA — particularly the contentions that Turner Tract has not satisfied unspecified requirements of Section 170 and that the amount of the Conservation Contribution on the 200± acres TOTALS ZERO — remain erroneous, unreasonable, arbitrary, and capricious.

b. Respondent lacked any rational basis for (i) for ignoring the contents of his own files and (iii) following an unlawful policy of pretending the total value 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 unspecified Section 170 elements.

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

d. 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.

e. Respondent cannot carry his burden of proof.

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

(ii) No penalties apply with respect to the 2016 Return;

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

(iv) Grant such other and further relief that the Court deems appropriate.