140

1 Unless otherwise indicated, all section references are to the Internal 

Revenue Code (Code) in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. 

PATRICK J. WACHTER AND LOUISE M. WACHTER, PETITIONERS

v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

MICHAEL E. WACHTER AND KELLY A. WACHTER, PETITIONERS

v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket Nos. 9213–11, 9219–11. Filed March 11, 2014. 

For 2004 through 2006 Ps reported charitable contributions 

that flowed to them from a partnership and an LLC, both of 

which were treated as partnerships for tax purposes. For each 

year the LLC reported charitable contributions of cash and 

the partnership reported bargain sales of conservation easements as charitable contributions of property. R issued notices 

of deficiency to Ps disallowing all of the charitable contribution deductions and determining accuracy-related penalties. R 

filed a motion for partial summary judgment asserting that Ps 

did not satisfy the ‘‘contemporaneous written acknowledgment’’ requirement for the cash contributions. For the property contributions, respondent asserted that the easements 

were not granted in perpetuity as a result of a North Dakota 

State law that limits the duration of a real property easement. Held: North Dakota State law limits the duration of an 

easement to not more than 99 years, thus precluding a North 

Dakota conservation easement from qualifying as granted ‘‘in 

perpetuity’’ under I.R.C. sec. 170(h)(2)(C) and (5)(A). Held, 

further, material facts remain in dispute regarding whether 

Ps satisfied the ‘‘contemporaneous written acknowledgment’’ 

requirement of I.R.C. sec. 170(f )(8) and sec. 1.170A–13(f )(15), 

Income Tax Regs., and thus summary judgment is not appropriate on this issue. 

Jon J. Jensen, for petitioners. 

David L. Zoss and Christina L. Cook, for respondent. 

BUCH, Judge: These cases are before the Court on respondent’s motion for partial summary judgment. The issues for 

decision are: 

(1) whether a State law that limits the duration of an easement to not more than 99 years precludes petitioners’ conservation easements from qualifying as granted ‘‘in perpetuity’’ under section 170(h)(2)(C) or (5)(A). 1 We hold that 

it does; and 

(140) WACHTER v. COMMISSIONER 141

(2) whether the documents petitioners provided to the IRS 

satisfy the ‘‘contemporaneous written acknowledgment’’ 

requirement of section 170(f)(8) and section 1.170A–13(f)(15), 

Income Tax Regs. We hold that material facts remain in dispute and thus summary judgment is not appropriate for this 

issue. 

FINDINGS OF FACT 

The transactions at issue involve members of the Wachter 

family and entities that they controlled. Michael and Kelly 

Wachter filed joint income tax returns for all the years in 

issue: 2004 through 2006. The same is true for Patrick and 

Louise Wachter. During the years in issue, Michael, Patrick, 

and Louise each held varying interests in two entities: WW 

Ranch, a partnership, and Wind River Properties LLC (Wind 

River), a limited liability company that is treated as a partnership for tax purposes. Wind River at times operated 

under the name Windsor Storage. For convenience, we will 

refer to petitioners individually by their given names or to 

Michael, Patrick, and Louise (as owners of WW Ranch and 

Wind River) collectively as the Wachters. 

Farm and Ranch Lands Protection Program 

Section 2503 of the Farm Security and Rural Investment 

Act of 2002, Pub. L. No. 107–171, 116 Stat. at 267, authorized the Secretary of Agriculture to purchase conservation 

easements in order to protect topsoil by limiting nonagricultural uses of certain lands and authorized funding for 

such purchases. The United States, acting through the Commodity Credit Corporation (CCC), entered into cooperative 

agreements in order to implement the Farm and Ranch 

Lands Protection Program and used the Natural Resources 

Conservation Service (NRCS) of the Department of Agriculture to administer the program. The parties provided to 

the Court a copy of a 2003 cooperative agreement between 

the CCC and the American Foundation for Wildlife (AFW) 

with an attachment referencing land owned by WW Ranch. 

The cooperative agreement listed the requirements for such 

an easement, including that the easement ‘‘[r]un with the 

land in perpetuity or a minimum of thirty years, where State 

law prohibits a permanent easement.’’ As a part of the 

142 142 UNITED STATES TAX COURT REPORTS (140) 

cooperative agreement, the NRCS listed its prerequisites for 

easement purchases before the Federal Government would 

release the Federal funds to reimburse AFW for up to 50% 

of the easement purchase price. The cooperative agreement 

included a provision whereby a landowner could donate up to 

25% of the appraised fair market value of the easement and 

that such a donation may be considered as part of AFW’s 

contribution to the purchase price. However, in order for the 

landowner’s donation to be considered part of AFW’s contribution, AFW was required to get a current appraisal of the 

contribution. In the event the landowner made such a donation, NRCS required a copy of the landowner’s IRS Form 

8283, Noncash Charitable Contributions, before the NRCS 

would release the federal funds. 

Cash Contributions 

On its returns for the years in issue, Wind River reported 

the following cash charitable contributions, which it allocated 

amongst its members: 

2004 ............................................................ $170,000 

2005 ............................................................ 171,150 

2006 ............................................................ 144,500 

On behalf of Wind River, Michael and Patrick signed an 

agreement dated February 26, 2004, with North Dakota Natural Resource Trust (NRT) agreeing to donate $170,000 by 

March 1, 2004. Michael signed a check dated February 26, 

2004, from Windsor Storage payable to NRT for $170,000. 

NRT provided a letter dated March 23, 2004, to Michael and 

Patrick ‘‘dba WW Ranch’’ acknowledging the cash gift and 

stating that NRT provided no goods or services in exchange 

for the donation. 

Michael signed a check dated March 23, 2005, from 

Windsor Storage payable to NRT for $171,150. The Wachters 

provided the IRS with a letter from NRT dated March 21, 

2005, to Windsor Storage acknowledging the cash gift and 

stating that NRT provided no goods or services in exchange 

for the donation. The only copy of this letter in the record is 

unsigned. 

Someone prepared a check dated May 9, 2006, from 

Windsor Storage payable to NRT for $144,500. The only copy 

of this check in the record is unsigned, but the parties do not 

(140) WACHTER v. COMMISSIONER 143

2 Each parcel at issue is located in one or more sections of Township 140 

North, Range 81 West of Morton County, North Dakota. The parties refer 

to the properties at issue as the ‘‘sections 5 and 6 parcel’’, the ‘‘section 8 

parcel’’, and the ‘‘sections 16 and 18 parcels’’, and we adopt their terminology. 

appear to dispute that the payment was made. NRT provided 

a letter dated May 10, 2006, to Windsor Storage acknowledging the cash gift and stating that NRT provided no goods 

or services in exchange for the donation. 

Bargain Sale Charitable Contributions 

On its partnership returns for the years in issue, WW 

Ranch reported bargain sales of conservation easements as 

charitable contributions as follows: 

2004 ............................................................ $349,000 

2005 ............................................................ 247,550 

2006 ............................................................ 162,500 

For each year, the parties to the transaction obtained two 

appraisals of the property that was to be contributed. Each 

appraisal valued the property according to a different land 

use, and the Wachters used the difference in appraised 

values to determine the value of the conservation easement 

and thus the amounts of their charitable contributions. 

NRT obtained an appraisal of WW Ranch’s sections 5 and 

6 parcel 2 as of April 30, 2003, determining a value of 

$31,000 for use as agricultural property. A second appraisal 

dated May 14, 2003, was prepared for the sections 5 and 6 

parcel, determining a value of $1,400,000 for use as ‘‘rural 

residential sites’’. On March 8, 2004, WW Ranch sold a conservation easement on its sections 5 and 6 parcel to AFW for 

$1,020,000 (of which $170,000 was supplied by NRT). The 

Wachters subtracted the sale price of $1,020,000 from the 

difference in value of the two appraisals of $1,369,000 to 

arrive at their charitable contribution deduction of $349,000. 

NRT obtained two appraisals of WW Ranch’s section 8 

parcel as of February 21, 2005, one for use as agricultural 

property determining a value of $10,000 and one for ‘‘full 

developmental value’’ determining a value of $915,000. On 

March 24, 2005, WW Ranch sold a conservation easement on 

the section 8 parcel to AFW for $657,450 (of which $171,150 

was supplied by NRT). The Wachters subtracted the sale 

144 142 UNITED STATES TAX COURT REPORTS (140) 

price of $657,450 from the difference in value of the two 

appraisals of $905,000 to arrive at their charitable contribution deduction of $247,550. 

NRT obtained two appraisals of WW Ranch’s sections 16 

and 18 parcels as of August 25, 2005, one subject to a proposed conservation easement determining a value of $46,000 

and one for rural residential development determining a 

value of $696,000. On May 11, 2006, WW Ranch sold a conservation easement on its section 16 and 18 parcels to AFW 

for $487,500 (of which $144,500 was supplied by NRT). The 

Wachters subtracted the sale price of $487,500 from the difference in value of the two appraisals of $650,000 to arrive 

at their charitable contribution deduction of $162,500. 

Individual Reporting 

Patrick and Louise reported charitable contributions on 

their joint Federal income tax returns as follows: 

2004 Cash—Wind River $85,000 

Noncash—WW Ranch 174,500 

2005 Cash 85,575 

Noncash 123,775 

2006 Cash 72,250 

Noncash 81,250 

Michael and Kelly reported charitable contributions on 

their joint Federal income tax returns as follows: 

2004 Cash—Wind River $85,000 

Noncash—WW Ranch 174,500 

2005 Cash 85,575 

Noncash 123,775 

2006 Cash 72,250 

Noncash 81,250 

On April 8, 2011, respondent issued notices of deficiency to 

both couples disallowing the charitable contribution deductions related to WW Ranch and Wind River and determining 

accuracy-related penalties under section 6662. Each couple 

timely filed a petition disputing their notice of deficiency, 

and the Court consolidated the cases for trial, briefing, and 

opinion. Respondent filed a motion for partial summary judgment and a memorandum of facts and law in support of his 

motion for partial summary judgment, the Wachters filed a 

response, and respondent filed a reply. 

(140) WACHTER v. COMMISSIONER 145

OPINION 

Either party may move for summary judgment regarding 

all or any part of the legal issues in controversy. See Rule 

121(a). We may grant summary judgment only if there are 

no genuine disputes of fact. See Rule 121(b); Naftel v. 

Commissioner, 85 T.C. 527, 529 (1985). Respondent, as the 

moving party, bears the burden of proving that no genuine 

dispute exists as to any material fact and that respondent is 

entitled to judgment as a matter of law. See Sundstrand 

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff ’d, 17 

F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, the factual materials and the inferences 

drawn from them must be considered in the light most favorable to the nonmoving party. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 

T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. at 529. 

When a motion for summary judgment is made and properly 

supported, the nonmoving party may not rest on mere allegations or denials but must set forth specific facts showing that 

there is a genuine dispute for trial. See Celotex Corp. v. 

Catrett, 477 U.S. 317, 324 (1986); Sundstrand Corp. v. 

Commissioner, 98 T.C. at 520; see also Rule 121(d). 

Respondent filed the motion for partial summary judgment; 

therefore we construe all factual disputes and draw all 

inferences in favor of the Wachters. 

A deduction is allowed for any charitable contribution for 

which payment is made within the taxable year if the contribution is verified under regulations prescribed by the Secretary. Sec. 170(a)(1). The Wachters claimed charitable contribution deductions for both cash and noncash contributions 

for each year. We discuss each in turn. 

Noncash Contributions 

Generally, a charitable contribution deduction is not 

allowed for a charitable gift of property consisting of less 

than the donor’s entire interest in that property. Sec. 

170(f)(3)(A). However, there is an exception for a ‘‘qualified 

conservation contribution.’’ Sec. 170(f)(3)(B)(iii). A contribution of real property is a qualified conservation contribution 

if (1) the real property is a ‘‘qualified real property interest’’, 

(2) the contributee is a ‘‘qualified organization’’, and (3) the 

146 142 UNITED STATES TAX COURT REPORTS (140) 

contribution is ‘‘exclusively for conservation purposes.’’ Sec. 

170(h)(1); see also sec. 1.170A–14(a), Income Tax Regs. For 

the purposes of the motion for partial summary judgment, 

respondent argues that the State law restricting easements 

to 99 years prevents the conservation easements from being 

qualified real property interests and prevents the conservation easements from being exclusively for conservation purposes. 

North Dakota Law 

We look to State law to determine the nature of property 

rights, whereas Federal law determines the appropriate tax 

treatment of those rights. United States v. Nat’l Bank of 

Commerce, 472 U.S. 713, 722 (1985); see also 61 York 

Acquisition, LLC v. Commissioner, T.C. Memo. 2013–266, at 

*8. 

Beginning in 1915, the United States signed several treaties agreeing to protect migratory birds and their habitats. 

See North Dakota v. United States, 460 U.S. 300, 309–310 

n.12 (1983), aff ’g 650 F.2d 911 (8th Cir. 1981). Between 1931 

and 1977 the United States acquired easements covering 

nearly 1 million acres of land in North Dakota for use as 

migratory bird refuges. Id. at 304–305. However, cooperation 

between the Federal Government and the State of North 

Dakota broke down such that in 1977 the State enacted a 

law, which it amended in 1979 and 1981, (1) requiring 

approval for all wetland acquisitions first by the board of 

county commissioners and only then by the governor, (2) 

allowing the landowner to negotiate the terms of the easement and ‘‘‘drain any after-expanded wetland or water area 

in excess of the legal description’’’, and (3) restricting all 

easements to a maximum of 99 years. Id. at 306–308 & n.8 

(quoting N.D. Cent. Code sec. 20.1–02–18.2 (1981)). 

The United States brought a declaratory judgment action 

in the U.S. District Court for the District of North Dakota, 

seeking judgment that, inter alia, the State law was hostile 

to Federal law in certain respects and could not be applied. 

Id. at 309. The District Court granted the United States 

summary judgment, and the United States Court of Appeals 

for the Eighth Circuit affirmed. Id. The Supreme Court 

determined that because of the migratory bird treaties and 

the ‘‘ ‘certainty and finality’ that we have regarded as ‘critical 

(140) WACHTER v. COMMISSIONER 147

when * * * federal officials carrying out the mandate of Congress irrevocably commit scarce funds’ ’’, the North Dakota 

statute was hostile to Federal interests and may not be 

applied to the easements for which the Federal Government 

had already received consent. Id. at 320 (quoting United 

States v. Little Lake Misere, 412 U.S. 580, 596 (1973)). 

The Supreme Court in North Dakota v. United States 

invalidated the 99-year restriction only insofar as it related 

to easements on wetlands for which the Federal Government 

had already received consent. The Supreme Court did not 

invalidate the 99-year restriction in all situations in which 

the Federal Government is a party, directly or indirectly, to 

an easement purchase. 

For the years in issue, N.D. Cent. Code sec. 47–05–02.1 

(1999 & Supp. 2013) provided in pertinent part: 

Real property easements * * * which become binding after July 1, 1977, 

shall be subject to the requirements of this section. These requirements 

are deemed a part of any agreement for such interests in real property 

whether or not printed in a document of agreement. 

* * * * * * * 

2. The duration of the easement * * * on the use of real property must 

be specifically set out, and in no case may the duration of any interest 

in real property regulated by this section exceed ninety-nine years. * * * 

Both parties allege that the State law at issue here is 

unique because this is the only State that has a law that provides for a maximum duration that may not be overcome by 

agreement. The parties agree that, by operation of State law, 

the easements at issue will expire 99 years after they were 

conveyed. The parties do not draw a distinction where the 

donee of the easement is the Federal Government or an 

entity acting on behalf of the Federal Government. Nor do we 

see a distinction. 

Respondent asserts that the State law restriction prevents 

the easements from being granted in perpetuity, which in 

turn prevents them from being both qualified real property 

interests under section 170(h)(2) and contributions exclusively for conservation purposes under section 170(h)(5). Petitioners, however, assert that the 99-year limitation should be 

considered the equivalent of a remote future event or the 

retention of a negligible interest because at present the 

remainder is ‘‘essentially valueless.’’ There are two separate 

148 142 UNITED STATES TAX COURT REPORTS (140) 

and distinct perpetuity requirements, and the failure to satisfy either of them will prevent the easements from being 

qualified conservation contributions. See Belk v. Commissioner, 140 T.C. 1, 12 (2013). 

Qualified Real Property Interest 

Under section 170(h)(2)(C), a qualified real property 

interest means ‘‘a restriction (granted in perpetuity) on the 

use which may be made of the real property.’’ The Wachters 

assert that the possibility that the land would revert back to 

them, WW Ranch, or their successors in interest is the 

equivalent of a remote future event that will not prevent the 

easements from being perpetual. Section 1.170A–14(g)(3), 

Income Tax Regs., provides: 

(3) Remote future event.—A deduction shall not be disallowed under 

section 170(f)(3)(B)(iii) and this section merely because the interest 

which passes to, or is vested in, the donee organization may be defeated 

by the performance of some act or the happening of some event, if on 

the date of the gift it appears that the possibility that such act or event 

will occur is so remote as to be negligible. * * * 

This Court has construed ‘‘so remote as to be negligible’’ as 

‘‘ ‘a chance which persons generally would disregard as so 

highly improbable that it might be ignored with reasonable 

safety in undertaking a serious business transaction’ ’’, 885 

Inv. Co. v. Commissioner, 95 T.C. 156, 161 (1990) (quoting 

United States v. Dean, 224 F.2d 26, 29 (1st Cir. 1955)), or ‘‘ ‘a 

chance which every dictate of reason would justify an intelligent person in disregarding as so highly improbable and 

remote as to be lacking in reason and substance’ ’’, Graev v. 

Commissioner, 140 T.C. 377, 394 (2013) (quoting Briggs v. 

Commissioner, 72 T.C. 646, 657 (1979), aff ’d without published opinion, 665 F.2d 1051 (9th Cir. 1981)). ‘‘[A] conservation easement fails to be ‘in perpetuity’ * * * if, on the date 

of the donation, the possibility that the charity may be 

divested of its interest in the easement is not so remote as 

to be negligible.’’ Id. at 393. 

‘‘Remote’’ has various commonly accepted meanings. For 

example, remote can mean ‘‘far distant in space’’, ‘‘secluded’’, 

‘‘distant in time’’, ‘‘distant in relationship’’, or ‘‘slight or faint; 

unlikely’’. Webster’s New Universal Unabridged Dictionary 

1630 (2d ed. 2003). As is relevant here, ‘‘remote’’ could refer 

to a temporal sense (distant, remote in time) or in a probable 

(140) WACHTER v. COMMISSIONER 149

3We note that, in isolated situations, a long-term lease may be treated 

as the equivalent of a fee simple interest. See, e.g., secs. 1.1031(a)–1(c), 

1.1033(g)–1(b)(4), Income Tax Regs. But unlike section 170(h)(2)(C), those 

isolated situations address exchanges for ‘‘like’’ or ‘‘similar’’ property and 

do not involve an express statutory requirement that an interest be ‘‘in 

perpetuity’’. 

4We express no opinion on petitioners’ argument that at present the remainder is essentially valueless; to do so would require that we resolve a 

question of fact regarding value. 

sense (unlikely, a remote possibility). Id.; see also The American Heritage Dictionary of the English Language 1476 (4th 

ed. 2000). Both the regulation and our caselaw focus on the 

term ‘‘remote’’ in terms of likelihood. 

As used in the regulation and as interpreted by our 

caselaw, the event is not remote. On the dates of the donations it was not only possible, it was inevitable that AFW 

would be divested of its interests in the easements by operation of North Dakota law. Therefore, the easements were 

not restrictions granted in perpetuity and were thus not 

qualified conservation contributions. 3 As a result, we will 

grant respondent’s motion for partial summary judgment 

insofar as the State law prevents a charitable contribution 

deduction for a conservation easement conveyed under the 

State law. 4

Cash Contributions 

For any cash charitable contribution of $250 or more, the 

taxpayer must obtain a contemporaneous written acknowledgment from the donee. Sec. 170(f)(8)(A). Section 170(f)(8)(B) 

provides that the contemporaneous written acknowledgment 

must include the following: 

(B) CONTENT OF ACKNOWLEDGEMENT.—An acknowledgment meets the 

requirements of this subparagraph if it includes the following information: 

(i) The amount of cash and a description (but not value) of any property other than cash contributed. 

(ii) Whether the donee organization provided any goods or services 

in consideration, in whole or in part, for any property described in 

clause (i). 

(iii) A description and good faith estimate of the value of any goods 

or services referred to in clause (ii) or, if such goods or services consist 

solely of intangible religious benefits, a statement to that effect. 

150 142 UNITED STATES TAX COURT REPORTS (140) 

5 At minimum, respondent asserts that the goods or services provided 

were the appraisals NRT obtained and the partial funding it supplied for 

the bargain sales. 6 Respondent also contests the authenticity of this document. 

Section 170(f)(8)(C) provides that a written acknowledgment is contemporaneous when the taxpayer obtains it on or 

before the earlier of: (1) the date the taxpayer files a return 

for the taxable year of contribution or (2) the due date, 

including extensions, for filing that return. 

Respondent asserts that none of the letters the Wachters 

provided to the IRS constitutes a valid contemporaneous 

written acknowledgment. Respondent asserts (1) that none of 

the letters was addressed to Wind River, the entity that 

made the cash contributions, (2) NRT provided goods or services to the Wachters each year that were not mentioned in 

the letters, 5 and (3) the values of the goods or services were 

not mentioned in the letters. Further, respondent asserts the 

2005 letter fails to qualify as a contemporaneous written 

acknowledgment because the letter is unsigned and it predates the check by two days. 6

With respect to the assertion that the Wachters received 

some benefit that was not disclosed or valued in the letters, 

respondent has not proven on this record that the Wachters 

expected or received a benefit in exchange for their cash 

donations. If a taxpayer receives or expects to receive a benefit that is not disclosed in the contemporaneous written 

acknowledgment, the entire cash contribution deduction is 

disallowed. See Addis v. Commissioner, 118 T.C. 528 (2002), 

aff ’d, 374 F.3d 881 (9th Cir. 2004); see also Viralam v. 

Commissioner, 136 T.C. 151, 170–171 (2011); Averyt v. 

Commissioner, T.C. Memo. 2012–198. Because the receipt of 

an expected or actual benefit is a material fact that remains 

in dispute, summary judgment is not proper on this issue. 

The Wachters assert that the checks and letters for each 

year as well as the 2004 agreement can be taken together to 

meet the requirements of a contemporaneous written 

acknowledgment. In Irby v. Commissioner, 139 T.C. 371, 389 

(2012), the Court held that a series of documents may constitute a contemporaneous written acknowledgment, and the 

Wachters may yet be able to authenticate disputed documents and provide additional documents to supplement those 

(140) WACHTER v. COMMISSIONER 151

they have included with the stipulation of facts. Because we 

must construe all factual inferences in favor of the nonmoving party, we must deny summary judgment regarding 

the cash charitable contribution deductions. 

Conclusion 

We conclude that respondent is entitled to partial summary judgment disallowing the charitable contribution 

deductions for the bargain sales of the conservation easements because North Dakota law prohibits real property 

easements from being granted in perpetuity. Thus a conservation easement conveyed subject to the statute cannot 

result in a charitable contribution deduction under section 

170(f)(3)(B)(iii). However, because material facts remain in 

dispute as to whether the Wachters expected to receive or 

actually received goods or services in exchange for their cash 

contributions and the Wachters may yet be able to supplement the record to meet all of the requirements of a contemporaneous written acknowledgment, we will deny the motion 

for partial summary judgment on the issue of the cash contributions. 

To reflect the foregoing, 

f 

An appropriate order will be issued.