IRS Arbitrarily Denied $42 Million Easement Deduction, Suit Says

The IRS should allow a $42 million charitable contribution tax deduction for a conservation easement donation, a New York-based donor told the US Tax Court.

Freshwater Farms LLC conveyed a conservation easement encumbering its 207-acre real property in southern Louisiana to the Georgia nonprofit Barn Group Land Trust Inc., then claimed a deduction for the easement’s alleged $42.9 million. The IRS denied the deduction, prompting Freshwater Farms to sue on July 29.

The IRS violated the Administrative Procedure Act because the agency misconstrued the facts of its case to conclude that its conservation easement conveyance didn’t constitute a noncash charitable ...