Former NFL Star Sapp Wins Tax Court Conservation Easement Fight

Former NFL star Warren Sapp notched a win at the U.S. Tax Court, with the judges accepting that the value of a tax-advantaged land donation was worth at least as much as he claimed.

Sapp played in the NFL for 13 seasons as a defensive tackle with the Tampa Bay Buccaneers and Oakland Raiders, and was part of Tamba Bay’s Super Bowl XXXVII winning team in 2003.

Sapp and Kumar Rajagopalan purchased 120 acres of land in Haywood County, N.C. for just under $3 million in the mid-2000s through a partnership. They later donated 89 acres to the North American Land Trust. The move is what’s known as a conservation easement—a donation of property rights for the purpose of conservation, which can come with a charitable contribution deduction if IRS requirements are met.

Sapp claimed a donation of $2.1 million on his tax return, while Kumar claimed $190,000. The IRS asserted that both owed more in taxes, and should also pay accuracy penalties. The Tax Court didn’t rule on the final value of the easement, but said they can keep their deductions and don’t owe penalties

In the Thursday opinion, Judge Mark V. Holmes wrote that the fair market value of the easement was worth at least as much as what they claimed, as it fit into a broader land deal at the time it was donated.

“The Kumars and Sapps benefit from timing their donation at what turned out to be very nearly the frothiest point on a local real-estate bubble that was even bubblier than it was in most parts of the nation,” Holmes said.

Sapp, a member of the Pro Football Hall of Fame, signed contracts totaling $77 million during his NFL career, but filed for bankruptcy in 2012, in part due to bad real estate deals.

Gregory P. Rhodes of Sirote & Permutt, P.C., representing the plaintiffs, said his team is happy that they are “able to have a deduction for the very valuable property right they gave up.”

The IRS didn’t immediately return a request for comment.

The cases are Kumar Rajagopalan v. Commissioner, T.C., No. 21394-11, 11/19/20 and Warren Sapp v. Commissioner, T.C., No. 21575, 11/19/20.