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Lord v. Commissioner: Minor Errors Deprive Taxpayer of Significant Charitable Contribution Deduction for Conservation Easement

September 24, 2010

Introduction: Conservation Easements

In general, a landowner can make a tax deductible charitable contribution by creating a conservation easement on its land and transferring that easement to a conservation trust. To qualify as a conservation trust, the trust generally must restrict development of the land. The land remains the property of the landowner, subject to those development restrictions. The landowner is allowed a tax deduction equal to the value of the easement contribution, subject to applicable limitations.

Lord v. Commissioner: Failure to Strictly Comply with the Law Results in Denial of Deduction

In Lord v. Commissioner, the IRS determined that the taxpayer, Henry Lord, was not entitled to a charitable contribution for his conservation easement because of relatively minor issues with the appraisal he used to value the easement contribution.

In typical situations, taxpayers who claim a deduction for a non-cash charitable contribution of more than $5,000 must have an appraisal done in order to validate the value of the contribution. Tax Regulations specify the elements that are required to be included in a "qualified" appraisal, including the date of the contribution, the date on which the property was appraised, and the value of the contribution on the date of contribution.

In Lord, the taxpayer failed to obtain an appraisal that met these strict requirements. Instead of indicating the date of the contribution and the date of the appraisal, the Lord appraisal referenced an "effective date" and a "report date." The Tax Court Memorandum opinion indicated that the Tax Court was unable to determine the meaning of these labels and, as a result, it was unable to substantiate the easement contribution. Because the taxpayer failed to satisfy the requirements of a qualified appraisal, it was not entitled to a charitable contribution deduction.

Practical Implications

As the Lord decision reaffirms, failure to comply with tax regulations in their entirety can result in a total loss of tax benefits. This case serves as a reminder that, in the context of a charitable deduction for a conservation easement, as with other tax matters, attention to detail is critical.

Taxpayers and real estate owners with questions about conservation easements or other tax or real estate matters may contact Wayne D. Roberts at 616-776-7514, Brian J. Page at 616-776-7509, or Anthony Ilardi at 248-203-0863.


As part of our service to you, we regularly compile short reports on new and interesting developments in taxation and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Readers should seek specific legal advice before acting with regard to the subjects mentioned here. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments on this newsletter, or any Dykema publication, are always welcome. © 2010 Dykema Gossett PLLC. 

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2018 Dykema Gossett PLLC.