June 15, 2006 | Read Time: 1 minute
TAX WATCH
IThe IRS has won a round in its efforts to crack down on abuses of a legal tool designed to protect private land from development. The U.S. Tax Court has ruled that a Virginia couple’s gift of a development restriction on a 29-acre piece of land does not qualify for a charitable deduction because the restriction did not truly limit development of the property.
James D. Turner and Beverly H. Turner said they were entitled to a tax deduction for their gift of a “conservation easement” to a local government for land near Mount Vernon, the home of George Washington. Under the terms of the easement, the Turners pledged to restrict development to 30 houses rather than the 62 homes they argued would be allowed by local zoning laws. The couple valued the easement at $3.1-million when they donated it to Fairfax County, Va., in 1999, and claimed a charitable deduction of $178,168.
But the IRS said the easement was meaningless because half of the donated land was on a floodplain where development was already prohibited by the county. Thus, current zoning rules allowed the development of only 30 homes, the tax agency said.
Chief Judge Joel Gerber ruled that the Turners must pay back the amount of the charitable deduction to the IRS. Because the Turners were aware of the floodplain restriction and knew that it limited development of the property, they also must pay a penalty of $56,537 for inaccurately claiming a deduction, the judge said.
The case, (James D. Turner et ux. v. Commissioner, 126 T.C. No. 16), is available on the court’s Web site at http://www.ustax court.gov.
