Dubious IRS, Resolute Claimants Fuel Conservation Easement Cases

The IRS isn’t showing any signs of backing down from its skeptical attitude toward conservation easements, and practitioners expect that next year even more legal battles over the deduction will further clog the US Tax Court’s docket.

The deductions, which involve donating an easement encumbering development of a property in exchange for tax benefits, have for years been a “listed” transaction subject to aggressive IRS examination.

The resulting agency determinations in many cases either significantly reduce the taxpayer’s valuation of the easement or deny the deduction altogether, spurring litigation. Many cases result in long, fact-intensive trials laced with procedural issues, ...