Kenneth and Anita Brooks v. Comm., TCM 2022-122

On Dec. 15, 2006, the Kenneth and Anita Brooks Family LLC purchased 85 acres of real property known as Cotton Row Farm in Liberty County, Georgia, for $1,350,000. On the same day, the LLC subdivided the property into two parcels of 44 and 41 acres. The LLC granted and recorded a conservation easement over the 41-acre parcel on Dec. 27, 2007, to Liberty County.

The LLC claimed a charitable contribution deduction of $5,100,000 on its 2007 Form 1065 for the contribution of the easement to Liberty County. A Form 8283, Noncash Charitable Contributions, with an appraisal summary was attached to the LLC’s 2007 tax return.  The Form 8283 reported that the donated property was a qualified conservation contribution on a 41-acre tract of vacant land; that the donation was valued at $5,100,000; and that the property was purchased on Dec. 15, 2006. The adjusted or cost basis of the donated property was reported as $1,350,000, the cost basis of the entire 85-acre contiguous parcel, instead of the cost basis of only the 41-acre encumbered parcel.

Deed not the same as donee receipt. While there was dispute between the taxpayers’ appraiser and the IRS appraiser over the fair market value of the conservation easement, the Court disallowed the entire deduction (and subsequent carryover of contribution deductions) based on the lack of a “contemporaneous written acknowledgement” (CWA) of the constitution by the donee organization as required by §170(f)(8)(A). The Court ruled that the Easement Deed did not meet the requirements of §170(f)(8) and, consequently, cannot serve as the CWA required by the statute.