T.C. M em o . 2 0 1 7 -2 4 5

UNITED STATES TAX COURT

SALT POINT TIM BER, LLC, J OHN B. HOOD, TAX M ATTERS PARTNER, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 8 0 57 -1 4
. Fi l edDecem b er 1 1 , 2 01 7
. St an to n P. Gel l er an dW i l l i am C. El l io t tJ r., fo r p et i t i o n er. Sco t t Ly o ns , fo r res p on d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION
M ORRISON, J u d g e: Th e res p o nd en t (referred t o h ere as th e “ IRS”) i s s u ed
a n o t i ce o f fi n al p art n ers h ip ad m i n i s t rat i v e ad ju s t m en tfo r t h e 2 0 09 t ax ab l e y ear o f Sal tPo i n tTi m

ber, LLC. Th e n o t i ce d i s al l o w eda $ 2,1 30 ,0 0 0 d edu ct i o n th atSal t Po i n t Ti m

b er h adrep o rt edfo r t h e ch ari t ab l e co n t ri b u t io n o f a co n s erv at io n
eas em en t . Th e t ax m at t ers p art n er o f Sal t Po i n tTi m b er, J oh n Ho o d , t i m el y

fi l eda- 2
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[* 2 ] p et i t i o n fo r a read

ju s tm en to f p art ners h i p i t em s u n d er s ect i o n 6 2 2 6 (a). 1 W e h av e juri sd i ct i o n u n d er s ect i o n 6 2 2 6 (f). 2 W e h o ldth atn o d educt i o n i s al l owab l e b ecau s e t h e co ns erv at i o n eas em en t i s n o ta “ qu al i fi edco ns erv at i on co n t ri b u ti o n ” as d efi n edi n s ect i on 1 7 0 (h )(1 ). A d efi n i n g ch aract eri s t ic o f a “ qu al i fi edco n s erv at i o n co n t ri b u t i o n ” i s t h ati ti s a
co n tri b u t i o n t o a “ qu al i fi edo rg an i zat i o n ”. Sec. 1 7 0 (h )(1 ). Th e eas em en twas i n i t i al l y co n tri b u t edt o a “ qu al i fi edo rg an i zat i o n”. Ho wev er, t h e eas em en t p ro v id es th ati f cert ai n co n d i ti on s are m et , th e eas em en twi l l b e rep laced b y an
eas em en ten cu m

b eri n g an ad

jacen tp ro p ert y . Th e h o l d er o f t h e rep l acem en t
eas em en ti s n o t req u i redt o b e a “ qu al ifi edo rg an i zat i o n ”. See p art4 .a o f t he
o p i n i o n , b el o w. Al t h o u g h Ho o darg u es th atth e p os s i b i l i t y t h atth e eas em en twi l l b e rep l aced i s n eg l i g i b l e, we h o l d t h atth e p o ss i b i l i t y i s m ore t han n eg l i g i b l e. See p art4 .b o f t h e o p i n i o n, b el o w.

1 Un l es s o t h erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev en u e Co de o f 1 98 6 , as am en d edan di n effect fo r th e ap p ro p ri at e t i m es , an dal l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an d Pro cedu re.

2 Sal tPo in tTi m

b er i s a l im i t ed l i ab i l i t y

co m p an y wh o s e p ri n ci p al p l ace o f b u s i n es s , wh enth e p et it i o n was fi l ed , was So u t h Caro l i n a. Th erefo re, an ap p eal o f o u r d eci s i o n i n th is cas e wo u l dg o t o th e U.S. Co u rto f Ap p eal s fo r t h e Fo u rt h Ci rcu i t , s ee s ec. 7 4 8 2 (b )(1 ), u n l es s th e p art i es d es i g nat e t h e Co urto f Ap p eal s fo r an o th er ci rcu i t , s ee i d . p ara. (2 ).- 3
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[* 3 ] FINDINGS OF FACT In 1 9 8 7 , Sal tPo i nt Ti m

b er b o u g h ta 1 ,0 3 2 -acre p l oto f l an di n Berk el ey Co u n t y , So u t h Caro l i n a. Th i s l an dwi l l b e referred t o as “ t h e 1 ,0 00 acres ”. On J u ne 3 0 , 2 00 9 , Sal tPo i n tTi m b er an dth e Lo rdBerk el ey Co n s erv at i o n Tru s t(h erei n aft er th e “ Lo rdBerk el ey t ru s t ”) ex ecu t eda co n s erv at i o n eas em en t
en cu m b eri n g th e 1 ,0 0 0 acres . Sal tPo i ntTi m b er recei v ed$ 4 0 0 ,0 0 0 fo r t h e
co n tri b u t i o n o f t h e eas em en t . Th e Lo rd Berk el ey tru s ti s a “ qu al i fi ed
o rg an i zat i o n ” as th att erm i s d efi n edb y

s ect i o n 1 7 0 (h )(1 )(B). Sal tPo i ntTi m

ber h ad o ri g i n al l y

ag reed t o co n tri b u t e t h e eas em en tt o
an o th er en t i ty , th e Tru s t fo r Pub l i c Lan d . Ho wev er, t h i s ag reem en t was
s up p lan tedb y

s ubs eq u en tag reem en t s am o n g Sal t Po i n tTi m b er, th e Tru stfo r Pub l ic Lan d , an dth e Lo rdBerk el ey tru s t . Th es e ag reem en t s p ro v i d edth atSal t Po i n t Ti m

b er wo u l di n st eadco n t ri b u t e t h e eas em en tt o th e Lo rd Berk el ey tru s t . On J u ly 1 , 2 0 0 9, t he eas em en twas reco rd edi n Berk el ey Co un t y . W e d es cri b e b el ow t h e rel ev an tt erm s o f t h e eas em en t . Th e p art i es t o th e eas em en twere Sal tPo in tTi m b er, as th e “ Gran to r”, an d t h e Lo rd Berk el ey

tru s t, as th e “ Gran t ee”. Pro v i s i o ns o f t h e eas em en td efi n e t h e ri gh t s an do b li g at i o n s o f: (1 ) t h e “ Gran to r”, (2 ) t he “ s u cces s o rs an d as si g n s ” o f- 4
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[* 4 ] th e “ Gran t or”, an d (3 ) t h e “ Gran t ee”. Al l referen ces t o “p art s ” i n th is o p i n i o n are t o p ro v is i o n s o f t h e eas em en t , u n l es s o t h erwi s e i n d i cat ed
. Part 1 s tat es : 1 . PURPOSE. Iti s th e p u rp os e o f t hi s Eas em en tt o as s u re t h atth e Pro p ert y wi l l b e ret ai n edfo rev er p red o m i n an t ly i n i t s n atural , s cen ic, an do p en s p ace co n d it i o n fo r co n s erv at io n p urp o s e an dt o p rev en tan y u s e o f t h e Pro p ert y t h atwi l l s i g n i fi can t l y an d m at eri al l y

i m p ai r t h e co n s erv at io n v al u e o f t h e Pro p ert y . Th e t erm “ Pro p ert y ” i s d efi n edi n th e eas em en tas th e 1 ,0 0 0 acres . Part 6
. 7 p ro v i d es th atth e eas em en tp erp etual l y b u rd en s t he 1 ,0 0 0 acres an d t h atth e eas em en t can b e as s i g n edo n l y t o an “ el i g i bl e d o n ee”: 6 .7 Perp etu i t y . Th e b urd en s o f t h i s Co n s erv at io n Eas em en ts h al l ru n wi t h t he l an dan ds h al l b e en fo rceab l e ag ai n s tth e Gran t o r an d al l fu tu re o w ners i n p erp etu i t y . Th e b en efi ts s h al l b e i n g ro s s an d as s i g n ab l e, b uto n l y

t o an el i g i b l e d o n ee as d efi n edi n In t ern al Rev en u e Co de Sect i on 1 .1 7 0 A-1 4 (c)(1 ) [s i c] as th e s ect i on m ay b e am en d edfro m

t im e t o t i m e. Part 6 .9 al s o co n cern s th e as s i g n m en to f t h e eas em en t : 6 .9 As s i g n m en t b y

Gran t ee. Th e b en efi t s o f t h i s Co n s erv at io n Eas em en tare co l l ect iv e an dcan n ot b e s ep arat edo r d i v i d ed . Th e b en efi t s o f t h i s Co n s erv at i o n Eas em en ts h al l n otb e v o l u n t ari l y as s i g n ab l e b y

th e Gran t ee wi th o utth e Gran t o r’ s co n s en t . Inth e ev en t t h atGran t ee ceas es t o ex i s to r ex i s t s b utn o l o n g er as a t ax ex em p t n o n -p ro fi to rg an i zat i on , qu al i fi edu n d er Sect i o n s 5 0 1 (c)(3 ) an d 1 7 0 (h )(3 ) o f t he In t ern al Rev en u e Co d e o f 1 98 6 , as am en ded , th en th e eas em en ts h al l au t o m at i cal l y b eco m e v es t edi n a t ax -ex em p tn o n p ro fi to rg an i zat i o n wh i ch i s d es i g n at edb y th e Gran t o r an dwh i ch as s i g n ee h as ex p eri en ce i n h o l d i ng s i m i l ar co n s erv at i o n eas em en t s .- 5
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[* 5 ] Part 6
. 2 2 p ro v id es : 6 .2 2 Bo u n daryLi n e Ad

ju s t m en t s . No t wi t h s t an d i n g an y p ro v i s i o n t o t h e co nt rary , i n th e ev en tth at(i ) an y o f t h e Pro tect edPro pert y i s t ran s ferred t o th e o wn er o f an ad jacen tp ro p ert y * * * , (i i ) t h e ad jacen t p ro p ert y i s en cu m b ered b y a co m p arab l e co n serv at i o n eas em en t an d (i ii ) t h e o wn er o f t h e ad

jacen tp ro p ert y

an d t h e h o l d er o f t h e co n s erv at io n eas em en tag ree t o m o d i fy th e co n s erv at i o n eas em en to n t h e ad j acen tp ro p ert y t o en cu m b er t h e t ran s ferred p ro p ert y b y th e ad jacen tp ro pert y ’ s co n s erv at io n eas em en t , th e p art i es ag ree t o am en d t h i s eas em en tt o rel eas e t h e t ran s ferred p ro p ert y fro m th i s eas em en t . Th e t erm “ Pro t ect edPro p ert y ”, wh i ch i s u s ed i n p art6 .2 2 , i s n o td efi n ed . Bu t t h ere i s n o d is pu t e t h ati t m ean s th e s am e th i n g as th e t erm “ Pro p ert y ”--i .e. t h e 1 ,0 00 acres . Part6 .2 2 can b e s u m m ari zedas fo l l o ws : Reg ard l es s o f t h e o t h er p ro v is i o n s o f t h e eas em en t , i f (1 ) Sal tPo i n tTi m b er t ran s fers an y

p arto f t h e 1 ,0 00
acres t o an o wn er o f an ad jacen tp ro p ert y , (2 ) t h e ad jacen t p ro p ert y

i s en cu m b ered b y a “ co m p arab l e co n s erv at i o n eas em en t ”, an d(3 ) t h e o wn er o f t h e ad jacen t p ro p ert y an dth e h o l d er o f t h e ad

jacen teas em en tag ree t o am en d t h e t erm s o f t h e ad jacen teas em en tt o en cu m b er t h e t ran s ferred p o rt i on o f t h e 1 ,0 0 0 acres , th en th e t ran s ferred p o rt i o n o f t h e 1 ,0 0 0 acres wi l l b e rel eas edfro m th e o ri g in al
co n serv at i on eas em en t . Th e eas em en td o es n o t d efi n e a “ co m p arab l e co n serv at io n
eas em en t ”. On M arch 8 , 2 01 0 , Sal tPo i n t Ti m b er t i m el y

fi l edi t s Fo rm

1 0 6 5 , “ U.S. Ret u rn o f Part n ers h i p In co m e”, fo r t h e 2 0 0 9 t ax y ear. It rep o rt eda $ 2,1 3 0 ,0 0 0- 6
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[* 6 ] d educt i o n fo r t h e co n t ri b u t i o n o f t h e eas em en t . Th atam o un t i s eq ual t o th e $ 2 ,5 3 0 ,0 0 0 ap p rai s edv al u e o f t h e eas em en tm i n u s t h e $ 4 0 0 ,0 0 0 cas h recei v edb y Sal tPo i n tTi m

ber. On M ay 5 , 2 0 1 4 , th e IRS i s s u edth e n o t i ce o f fi n al p art n ers h i p ad m i n is t rat i v e ad

ju st m en t. Ho o dfi l edth e p et i t i o n . A tri al was h el di n Co l u m b i a, So u t h Caro l in a. OPINION 1
. Bu rd en o f p ro of Th e p et i t i o n er o rd i nari ly

h as th e b u rd en o f p ro o f. Ru le 1 42 (a); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 15 (1 9 33 ). In th is cas e th e p et i t io n er i s Ho o d . Th e b u rd eno f p ro of i s i m

p o s edo n t h e IRS i f t he co n d i ti o n s o f s ect i o n 7 4 9 1 are m et . Th e reco rdd o es n o t s h o w, n o r d o es Ho o d co n t en d , th atth es e co n d i t i o n s are m et . Th erefo re, Ho o db ears t h e b u rd en o f p ro o f. 2
. Law an dreg u l at i o n s Sect io n 1 7 0 (a)(1 ) p ro v i d es th at“ [t ] here s h al l b e al lo wedas a d edu ct i o n an y ch ari t ab le co n t ri b u t i on .” Sect i o n 1 7 0 (f)(3 )(A) g en eral l y b ars a d edu ct i o n fo r t h e ch ari t ab le co n t ri b u t i on o f a p art i al i n t eres ti n p ro p ert y --i .e., “ an i n t eres ti n p ro p ert y wh i ch co n s i st s o f l es s th an th e t ax p ay er’ s en t i re i nt eres t i n s u ch p ro p ert y ”. Th ere
are ex cep t i o ns t o th i s g en eral ru l e fo r co n t ri bu t io n s o f cert ai n ty p es o f i nt eres t s .- 7
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[* 7 ] Sec. 1 7 0 (f)(3 )(B). As p ro v i d edb y s ect i o n 1 7 0 (f)(3 )(B)(i i i ), o n e o f t h es e t y p es o f i n t eres t s i s a “ qu al i fi edco n s erv at i o n co n tri b ut i o n ”. A “ qual i fi ed
co n serv at i on co n t ri b u t i on ” i s d efi nedb y s ect i o n 1 7 0(h )(1 ): In g en eral .--Fo r p u rp o s es o f s ub s ect i on (f)(3 )(B)(i i i ), t he t erm “ qu al i fi edco n s erv at i o n co n t ri b u ti on ” m ean s a co n t ri b u t i o n-- (A) o f a q ual i fi ed real p ro p ert y i n t eres t, (B) t o a qual i fi edo rg an izat i o n , (C) ex cl u s i vel y

fo r co n s erv at io n p urp o s es . Th e t erm “ qu al i fi edreal p ro p ert y

i n t eres t ” i s d efi n edb y

s ect io n 1 70 (h )(2 ): Qu al i fi ed real p ro p ert y

i n t eres t.--Fo r p u rp os es o f t h i s s ubs ect i on , th e t erm

“ qu al i fi ed real p ro p ert y

i n t eres t ” m ean s an y

o f t h e fo l l o wi ng i n t eres t s i n real p ro p ert y :

(A) t h e en t i re i n t eres to f t h e d o no r o t h er th an a qu al i fi ed m i n eral i n t eres t , (B) a rem ai n d er i n t eres t , an d (C) a res t ri ct i o n (g ran t edi n p erp etu i t y ) o n t h e u se wh i ch m ay b e m ad e o f t h e real p ro p ert y . Th e t erm “ qu al i fi edo rg an i zat i o n ”, as th e t erm i s u s edi n s ect i o n 1 7 0 (h )(1 )(B), i s d efi n edb y

s ect i o n 1 7 0 (h )(3 ). Sect i o n 1 7 0(h )(3 ) p ro v i d es :- 8
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[* 8 ] Qu al i fi ed o rg an i zat i o n .--Fo r p u rp os es o f p arag rap h (1 ), t h e t erm “ qu al i fi edo rg an i zat i on ” m ean s an o rg an i zat i on wh i ch
--

(A) i s d es cri b edi n cl au s e (v ) o r (v i) o f s ub s ect i o n (b )(1 )(A), o r (B) i s d es cri b edi n s ect i o n 5 0 1 (c)(3 ) an d
-- (i ) m eet s th e req u i rem en t s o f s ect i o n 5 09 (a)(2 ), o r (i i ) m eet s th e req u i rem en t s o f s ect i o n 5 0 9 (a)(3 ) an di s co n t ro l l edb y an o rg an i zat i o n d es cri b edi n s ub p arag rap h (A) o r i n cl au s e (i ) o f t h i s s ub p arag rap h. Sect i o n 1 7 0 (b )(1 )(A)(v ) refers t o cert ai n g o v ern m en t al u n i t s . Sect i o n 1 7 0 (b )(1 )(A)(v i ) refers t o n o n g o v ern m en t al o rg an i zat io n s thatare creat edo r
o rg an i zedex cl u s i v el y

fo r cert ai n p u rp o s es (rel i g i o u s , ch ari t ab l e, s ci en t i fi c, l i terary , edu cat i o n al , am at eu r s p o rt i n g an dan t i -cru el t y ), t hatrecei v e a s ub s t an t i al p arto f t hei r s up p ortfro m g o v ern m en tg ran t s an dco n t ri b u t io n s fro m th e p ub l i c, wh o s e n etearn i n g s d o n o tb en efi ta s h areh o l d er o r i n di v i du al , an dth atd o n o t(1 ) l o b b y o r (2 ) i n t erv en e i n p o l i t i cal cam p ai g ns . See s ec. 1 7 0(c)(2 ). Sect i on 5 0 1 (c)(3 ) refers t o n o n g ov ern m en t al o rg an i zat i o n s t h atare o rg an i zedan do p erat ed
ex cl u s i v el y

fo r cert ai n p u rp o s es (rel i g i o u s , ch ari t ab le, s ci en t i fi c, p ub l i c-s afet y t es t i n g , l i t erary , edu cat i on al , am at eu r s p ort s , an dan t i -cru el t y ), wh o s e n etearn i n g s d o n o t b en efi tan y

s h areh o l d er o r i nd i v i du al , an dthatd o n o t(1 ) l ob b y o r (2 )- 9
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[* 9 ] i n t erv en e i n p o l it i cal cam p ai g n s . Sect i o n 5 0 9(a)(2 ) refers t o o rg an i zat i o n s t h atm eetcert ai n t es t s o f fi n an ci al s up p o rt . Sect i on 5 0 9 (a)(3 ) refers t o cert ai n t y p es o f o rg an izat i o n s th atare o p erat edo r co n t ro l l edb y cert ai n o t h er t y

p es o f
o rg an i zat i o n s . Sect io n 1 .1 7 0 A-1 4 (c)(2 ), In co m e Tax Reg s ., “ t h e t ran s fer-b y -d o n ee reg u l at i o n ”, p ro v i d es : A d edu ct io n s h al l b e al l o wedfo r a co n t ri b u t i on u n d er th i s s ect i o n [i .e. s ect i o n 1 .1 7 0 A-1 4 , In co m e Tax Reg s ., wh i ch d efi n es a “ qu al i fi ed co n s erv at io n co n t ri b u t i on ”] o n l y i f i n th e i n s t ru m en to f co n v ey an ce t h e d o n o r p ro h i b i t s the d o n ee fro m s ub s eq u en t l y

tran s ferri n g t h e eas em en t(o r, i n t h e cas e o f a rem ai n d er i nt eres t o r th e res erv at i o n o f a qu al ifi edm i n eral i n t eres t , th e p ro p ert y ), wh eth er o r n otfo r co n s i d erat i o n , u n l es s th e d o n ee o rg an izat io n, as a co n d i ti o n o f th e s ub s eq u en ttran s fer, req u i res th atth e co n s erv at i o n p u rp o s es wh i ch th e co n t ri b u t i o n was o ri g i n al l y i n t en dedt o ad v an ce co n ti n u e t o b e carri ed o u t . M o reo v er s ub seq uen ttran s fers m us tb e res t ri ct edt o o rg an i zat i o n s qu al i fy i n g , atth e t i m e o f t h e s ub s equ en t t ran s fer, as an el i g i b l e d o n ee u n d er p arag rap h (c)(1 ) o f t h i s s ect i o n . * * * Sect i o n 1 .1 7 0 A-1 4 (c)(1 ), In co m e Tax Reg s ., s et s fo rth th e req u i rem en t s fo r an
en t i t y t o b e an “ el i gi bl e d on ee”: To b e co n s i d ered an el i g i b l e d o n ee u nd er t h i s s ect i o n, an o rg an izat io n m u s tb e a qu al i fi ed o rg an i zat i o n , h av e a co m m i t m en tt o p ro t ectth e co n s erv at io n p urp o s es o f t h e d o n at i o n , an dh av e t h e res o u rces t o en fo rce t h e res t ri ct i o n s. A co n s erv at i o n g ro up o rg an izedo r o p erat ed p ri m ari l y o r s ub s t an t i al l y fo r o n e o f th e co n s erv at io n p u rp o s es s p eci fi edi n s ect io n 1 7 0 (h )(4 )(A) wi l l b e co n si dered t o h av e t h e co m m i t m en treq u iredb y

th e p reced i n g s en t en ce. A qu al i fi ed o rg an i zat i o n n eed n o ts etas i d e fu n d s t o en fo rce t h e res t ri ct i o n s th at- 1 0 -

[* 1 0 ] are t h e s ub

j ect o f t h e co n t ri b u t i o n . Fo r p u rp o s es o f t h i s s ect i o n, t he t erm qual i fi edo rg an i zat io n m ean s : (i ) A g o vern m en t al u n i td es cri b ed i n s ect i o n 1 70 (b )(1 )(A)(v ); (i i ) An o rg an i zat i o n d es cri b edi n s ect i o n 1 7 0 (b )(1 )(A)(v i ); (i i i ) A ch ari t ab l e o rg an i zat i o n d es cri b ed i n s ect io n 5 01 (c)(3 ) t h atm eet s t he p ub l i c s upp o rtt es to f s ect i o n 5 09 (a)(2 ); (i v ) A ch ari t ab l e o rg an i zat io n d es cri b edi n s ect i o n 5 0 1(c)(3 ) t h atm eet s t he req u irem en t s o f s ect i o n 5 0 9 (a)(3 ) an di s co nt ro l l edb y an o rg an i zat i o n d es cri bedi n p arag rap h s (c)(1 )(i ), (i i ), o r (i i i ) o f t h i s s ect i o n . Bo t h s ect i o n 1 .1 7 0 A-1 4 (c)(1 ), In co m e Tax Reg s ., an ds ect i o n 1 7 0 (h )(3 ) d efi n e

“ qu al i fi edo rg an i zat i on ”. Th o u g h t h es e d efi n i ti o n s are d i fferen ti n fo rm at , th ey are
s ub s t an t i vel y

the s am e. Sect io n 1 .1 7 0 A-1 4 (g )(6 )(i ), In co m e Tax Reg s ., th e “ ex t i n gu i s h m en t reg u l at i o n ”, p ro v i d es : If a s ub seq uen tu n ex p ect edch an g e i n th e co n d it i o n s s u rro u n d i n g t h e p ro p ert y th at i s th e s ub

jecto f a d o n at i on u n d er thi s p arag rap h can m ak e i m p o ss i b l e o r i m

p ract i cal th e co n t i n u edu se o f t h e p ro p ert y fo r co n s erv at io n p urp o s es , th e co n s erv at i o n p u rp o s e can n o n et h el es s b e t reat edas p ro t ect edi n p erp etu i t y i f t he res tri ct i o n s are ex t i n gu i sh ed b y ju d i ci al p ro ceed i n g an dal l o f t h e d o nee’ s p ro ceed s (d et erm i n ed u n d er p arag rap h (g )(6 )(i i ) o f t h i s s ect i o n ) fro m a s ub s equ en ts al e o r ex ch an g e o f t h e p ro p ert y are u sedb y

th e d on ee o rg an i zat i o n i n a m an n er co ns i s t en twi t h th e co n s erv at i o n p u rp o s es o f th e o ri g i nal co n t ri b u t i o n .- 1 1 -

[* 1 1 ] Sect io n 1 .1 7 0 A-1 4 (g )(3 ), In co m e Tax Reg s , th e “ n eg l i g i bl e-p o ss i bi l i t y reg u l at i o n ”, p ro v i d es : A d edu ct io n s h al l n o tb e d i s al l o wed u n d er s ect i o n 1 7 0 (f)(3 )(B)(i i i ) [t he p ro vi s io n ex cep t i ng a qu al i fi edco n s erv at i o n co n tri b ut i o n fro m t h e an ti -p art i al -i n teres tru l e o f s ect i o n 1 7 0 (f)(3 )(A)] * * * m erel y b ecau s e t he i n t eres twh i ch p as s es t o , o r i s v es t edi n , th e d o n ee o rg an i zat i o n m ay

b e d efeat edb y

th e p erfo rm an ce o f s o m e act o r t h e h ap p en in g o f s o m e ev en t , i f o n t he d at e o f t he g i fti tap pears t h atth e p o s s i b i l i t y

th ats u ch acto r ev en twi l l o ccu r i s s o rem o t e as t o b e n eg l ig i b l e. * * * 3
. Po s i ti o n s o f th e p art i es Ho o d, t he t ax m at t ers p art n er o f Sal tPo in t Ti m b er, as s ert s th atth e
co n tri b u t i o n o f t h e eas em en ti s d edu ct i b l e b ecau s e i ti s a “ qu al i fi ed co ns erv at i o n
co n tri b u t i o n ” u n d er s ect i o n 1 7 0 (h )(1 ). Inp art i cu l ar, h e co nt en d s t h atth e eas em en t i s a “ qual i fi edreal p ro p ert y i nt eres t ” b ecau s e t he eas em en ti s an i n t eres ti n real p ro p ert y th at i s (i n th e wo rd s o f s ect i o n 1 70 (h )(2 )(C)) “ a res t ri ct i o n (g ran t edi n p erp etu i t y ) o n t h e u s e o f wh i ch m ay b e m ad e o f t h e real p ro p ert y . ” Th e IRS m ak es s ev eral arg u m en t s wh y th e eas em en ti s n o t a “ qu al i fi ed
co n serv at i on co n t ri b u t i on ”. W e d i s cu s s two o f t h em . Fi rs t , the IRS co n t en d s th at p art6 .2 2 o f t h e eas em en t p erm i t s th e o ri g i n al eas em en tt o b e rep l aced b y an
eas em en th el d b y

an en t i t y th ati s n o t a “ qu al ifi edo rg an i zat i o n”. Seco nd , th e IRS- 1 2 -

[* 1 2 ] arg u es th atp art6 .2 2 al lo ws t h e 1 ,0 0 0 acres t o b e rel eas ed fro m th e o ri g i n al
eas em en twi t h o utth e ex t i ng u i s h m en t reg u lat i o n ’ s b ei n g s at i s fi ed
. Ho o d arg u es thatp art 6.2 2 req u i res th atth e rep l acem en teas em en tb e h el d b y a “ qu al i fi edo rg an i zat i o n ”. Fu rt h er, Ho o darg u es t h atth e p o s s i bi l i t y o f t h e
eas em en t ’ s b ei n g rep l aced u n d er p art6 .2 2 i s n eg l i gi b le an d t h erefo re s h o u l dn o t
cau s e t h e eas em en t t o fal l o u t s i d e t h e d efi n i t i o n o f a “ qu al i fi edco n s erv at i on
co n tri b u t i o n ”. Aft er t h e p art i es fi l edth ei r b ri efs , th e Co urto rd ered th em t o s ubm i t
m em o ran d a ad dres s i n g th e effect o f t h e t ran sfer-b y -d o nee reg u l at i on . Inth e IRS’ s
v i ew, t h e rep l acem en to f th e o ri g i n al eas em en t wi t h an eas em en to n an ad jacen t p ro p ert y u n d er p art6 .2 2 i s n o ta “ t ran s fer” o f th e o ri g i nal eas em en t . See s ec. 1 .1 70 A-1 4 (c)(1 ), In co m e Tax Reg s . Rat h er, t h e IRS co n ten d s p art6
. 2 2 i s a
m ech an i s m

wh ereb y th e o ri g i n al eas em en two ul db e ex t in g u i s h edan d rep l aced wi t h a n ew eas em en t . Ho odal so d o es n o tco n t en d t h atth e rep lacem en to f t h e
eas em en tu n d er p art6
. 2 2 s h o u l db e co n s i d ered a “ t ran s fer” o f t h e o ri g in al
eas em en t . Ho wev er, h e co n t en d s t h atp art6 .2 2 req u i res th atth e h o ld er o f a rep l acem en teas em en tb e an “ el i g i b l e d o n ee” (an dh en ce a “ qu al i fi ed
o rg an i zat i o n ”, s ee s ec. 1 .1 7 0 A -1 4 (c)(1 ), In co m e Tax Reg s .).- 1 3 -

[* 1 3 ] 4
. An al y s i s Ho o d d o es n otco nt en dth ati f p art6 .2 2 o f t he eas em en tp erm i t s th e o ri g i n al
eas em en tt o b e rep l acedb y an eas em en t h el db y

s o m eo n e o t h er t h an a “ qu al i fi ed
o rg an i zat i o n ”, an di f t here i s a g reat er t h an n eg l ig i b l e p o s s i b il i ty o f t h e o ri g i n al
eas em en t ’ s b ei n g rep l aced u n d er p art6 .2 2 , th e eas em en tcan s t i l l b e a “ qual i fi ed
co n serv at i on co n t ri b u t i on ”. Ino t h er wo rd s , Ho o des s en t ial l y co nced es th atth e
eas em en ti s n o t a “ qu al i fi edco n s erv at i o n co n t ri b u ti o n” i f (1 ) p art6 .2 2 p erm i t s t h e h o l d er o f a rep l acem en teas em en tt o b e an en t i ty o t her t h an a “ qu al i fi ed
o rg an i zat i o n ” an d (2 ) t h ere i s a n o n-n eg l i g i b l e p o s s i b i l i t y th atthe eas em en twi ll b e rep l aced u n d er p art6 .2 2 . Fo r reas o n s ex pl ai n edb el o w, we h o l dth at(1 ) p art6 .2 2 p erm i t s the h o ld er o f a rep l acem en teas em en tt o b e an en ti t y o t h er t h an a

“ qu al i fi edo rg an i zat i on ”, s ee p art4 .a o f th e o pi n i o n , b el o w, an d(2 ) th ere i s a n o n n eg li g i b l e p o s s i bi l i t y

th atth e eas em en t wi l l b e rep l aced u nd er p art6 .2 2 , s ee p art 4 .b of t h e o p i n i o n , b el ow. Th erefo re we co n cl ud e t h at t h e eas em en t i s n o ta

“ qu al i fi edco n s erv at i o n co nt ri b u t i o n ”.
a. Part 6
. 2 2 o f t h e eas em en tp erm i t s th e h ol d er o f a rep l acem en t eas em en tt o b e an en t i t y

o t her t h an a “ qu al i fi ed o rg an i zat i o n ”. Part 6
. 2 2 o f t h e eas em en tco n t ai ns n o ex p res s co nd i ti o n t h atth e h ol d er o f t h e rep l acem en teas em en tb e a “ qual i fi ed o rg an i zat i o n ”. Part 6 .2 2 h as th ree- 1 4 -

[* 1 4 ] ex pres s co n d i t i o ns , th at , wh en s at i s fi ed , req u i re t he p art ies t o t he eas em en t t o ag ree t o rep l ace t h e eas em en twi t h th e ad jacen teas em en t. No n e o f t h e
co n di t i o n s are t h atth e h o l d er o f t h e ad jacen teas em en tb e a “ qu al i fi ed
o rg an i zat i o n ”. Ho o d arg u es thatthe Lo rdBerk el ey tru s th as th e p o w er t o v et o th e rep l acem en to f t h e eas em en tu n d er p art6 .2 2 an d , fu rt h erm o re, th atthe t ru s two u l d
u s e t h i s p o wer t o p rev en t t h e o ri g i n al eas em en tfro m b ei n g rep l aced b y

an
eas em en th el d b y

an en t i t y th ati s n o t a “ qu al ifi edo rg an i zat i o n”. In o ur v i ew, p art 6 .2 2 co n fers n o s u ch p o wer up o n th e Lo rdBerk el ey tru s t . Part6 .2 2 p ro vi d es th at

“ i n t h e ev en t ” t h atth e th ree co n d i t io n s are m et , th e “ p art ies [Sal tPo in tTi m b er an d t h e Lo rd Berk el ey

tru s t] ag ree t o am en dth i s eas em en t t o rel eas e t h e t ran s ferred p ro p ert y fro m t h i s eas em en t”. Th u s , wh enthe t h ree co nd i ti o ns are m et , th e Lo rd Berk el ey tru s ti s req u i redb y

p art6 .2 2 t o rel eas e t h e t ran s ferred p o rt i o n o f t h e 1 ,0 00 acres fro m th e eas em en t . It s du t y t o d o s o i s m an d at o ry , n o td i s cret i o n ary . Th e t h ird co n d i t io n i n p art6 .2 2 i s t h at“ t h e o w n er o f t h e ad jacen tp ro p ert y
an d t h e h o ld er o f t h e co n s erv at i o n eas em en t ag ree t o m o d i fy th e co n s erv at i o n
eas em en to n th e ad

jacen tp ro p ert y

t o en cu m b er t h e t ran s ferred p ro p ert y b y th e ad jacen tp ro pert y ’ s co n s erv at i on eas em en t ”. As Ho o d co n ced es i n h i s o pen i n g b ri ef, t h e t erm

“ h o l der o f t h e co n s erv at i o n eas em en t ” refers t o th e h o ld er o f t h e- 1 5 -

[* 1 5 ] co ns erv at i o n eas em en to n th e ad jacen tp ro p ert y , n o t t h e h o l d er o f th e
eas em en to n th e 1 ,0 0 0 acres --i .e. t h e Lo rdBerk el ey tru s t. Th u s , th e s at i sfact i o n o f t h i s co n d i t i o n d oes n o treq u i re t h e Lo rd Berk el ey tru s t ’ s co ns en t . Ho o d arg u es thatthe So u t h Caro l i n a Co ns erv at i o n Eas em en tActo f 1 9 9 1, S.C. Co de An n . s ecs . 2 7 -8 -1 0 t o 2 7 -8 -1 2 0 (1 9 9 1 ), d efi n es th e “ h o l d er” o f a

“ co n s erv at i o n eas em en t ” i n s u ch as way as t o i n cl u d e o n ly

a “ qu al i fi ed
o rg an i zat i o n ”. Th e p ro v i s i o n o f t h e act t o wh i ch Ho o drefers i s S.C. Co d e An n . s ec. 2 7 -8 -2 0 . Itp ro v i d es : As u s edi n th i s ch ap t er, u n l es s th e co n t ex to t h erwi s e req u i res : (1 ) “ Co n s erv at i o n eas em en t ” m ean s a n o np o ss es s o ry i n t eres to f a h o l d er i n real p ro p ert y i m p o s i n g l im it at i o n s o r affi rm at i v e o b l i gat i o n s , th e p u rp o s es o f wh i ch i ncl u d e o n e o r m o re o f t he fo l l owi n g : (a) ret ai n in g o r p ro t ect i n g n atu ral , s cen i c, o r o p en -s p ace as p ect s of real p ro p ert y ; (b ) en su ri n g th e av ai l ab i l i t y o f real p ro p ert y

fo r ag ri cu l tu ral , fo res t , recreat i on al , edu cat i o n al , o r o p en -s p ace u s e; (c) p ro t ect i ng n atu ral res o u rces ; (d ) m ai nt ai n i n g o r en h an ci n g ai r o r wat er q u al i t y ; (e) p res erv i n g th e h i s t o ri cal , arch i t ect u ral , arch aeo l o g i cal , o r cu l tu ral as p ect s o f real p ro p ert y .- 1 6 -

[* 1 6 ] (2 ) “ Ho ld er” m ean s :

(a) a g o v ern m en t al b o d y

em po weredt o h o l dan i n t eres ti n real p ro p ert y u n d er th e l aws o f t h i s St at e o r t he Un i t edSt at es ; o r (b ) a ch ari t ab l e, n ot -fo r-p ro fi to r edu cat i o nal co rp o rat i o n , as s o ci at i o n, o r t ru stth e p u rp o s es o r p owers o f wh i ch i n cl u de o n e o r m o re o f t h e p u rp o s es l i s tedi n s ub s ect i on (1 ). S.C. Co de An n . s ec. 2 7-8 -2 0 (2 ) d efi n es a “ h o l d er” o n ly fo r t h e p u rp o s es o f “ t h i s ch ap ter”, i .e. ch ap t er 8 o f t i t l e 2 7 o f t h e Co d e o f Laws o f So u t h Caro l i n a. Th at ch ap ter i s th e So u t h Caro l i n a Co n s erv at i on Eas em en t Act , a s eto f l aws th at reg u l at es co ns erv at i o n eas em en t s . Ev en i f we as s u m e th e d efi n i t io n o f a “ h o l d er” i n S.C. Co d e An n . s ec. 2 7 -8 -2 0 (2 ) g o v ern s wh o can h o l da rep lacem en teas em en t
u n d er p art6 .2 2 of t h e eas em en t , th e wo rd“ ho l der” as d efi n edb y S.C. Co d e An n . s ec. 2 7 -8 -2 0 (2 ) i s n o tres t ri ct edt o a “ qu al i fi edo rg an i zat i o n ”. To b e a “ qu al i fi ed
o rg an i zat i o n ” as th att erm i s d efi n edb y

s ect i o n 1 7 0 (h )(3 ), a n o n g o vern m en t al
o rg an i zat i o n m

u s tb e d es cri b edi n ei t h er s ect i o n 5 0 1 (c)(3 ) o r s ect i on 1 7 0 (b )(1 )(A)(v i ). Sec. 1 7 0(h )(3 ). Bo t h s ect i o n s 5 0 1 (c)(3 ) an d1 7 0 (b )(1 )(A)(v i) i m p o s e req u i rem en t s wh i ch are n o ts at i s fi edb y v i rtu e o f an o rg an i zat i o n ’ s b ei n g a

“ h o l d er” u n d er S.C. Co d e An n . s ec. 2 7 -8 -2 0 (2 ). Fo r ex am p le, s ect i o n s 5 0 1 (c)(3 )
an d 1 7 0 (b )(1 )(A)(v i ) (t h e l at t er, t h ro u g h a cro s s -referen ce t o s ect i o n 1 7 0 (c)(2 )(D)) req u i re t hatthe o rg an i zat i o n refrai n fro m (1 ) l o bb y i n g o r (2 ) i n terv en i n g i n- 1 7 -

[* 1 7 ] p o l i t i cal cam

p ai g n s . See s ec. 1 7 0 (b )(1 )(A)(v i), (c)(2 )(D). Th e d efi n i t i o n o f a “ h o l d er” i n S.C. Co d e An n . s ec. 2 7 -8 -2 0 (2 ) co n t ai n s n ei t h er req u i rem en t . Nex t , Ho o dm ai n tai n s t h atan y eas em en tn o th el d b y

a “ qu al i fi ed
o rg an i zat i o n ” wo u l d n o tb e co m p arab l e t o t h e o ri gi nal eas em en tan dh en ce n o t el i g i b l e t o rep l ace t h ateas em en tu n d er p art6 .2 2 o f t h e eas em en t. In s up p o rto f t h i s co n t en t i o n , Ho o dco n t en d s t h atp art s 6
. 7 an d6
. 9 o f t h e eas em en t --p ro vi s i o ns wh i ch g o v ern th e as s i g n m en to f t h e eas em en t --s h o w th atth e p art i es t o t h e
eas em en ti n t en d edth ata “ co m p arab l e co n s erv at i o n eas em en t ” u n d er p art 6 .2 2
co u ldb e h el do n l y

b y a “ qu al i fi edo rg an i zat i o n ”. W e t h i n kth e o p po s i te i s tru e. Part 6 .2 2 d o es n o td efi n e t h e t erm “ co m p arab l e co n s erv at io n eas em en t ”. No r d o es i t res t ri ctwh o can h o l da “ co m p arab l e co n serv at i on eas em en t”. It s o m i s s i o n o f
an y res t ri ct i o n reg ard i n g th e ty p e o f en t i ty

th atcan h ol dth e rep l acem en teas em en t
s u g g es t s th atth ere i s n o s u ch res t ri ct i o n . By co n t ras t , p art6 .7 p ro vi d es t h atth e
eas em en tcan b e as si g nedt o an “ el i g i b l e d o n ee” (an dh en ce o n l y t o a “ qu al i fi ed
o rg an i zat i o n ” b ecau s e o n ly a “ qu al i fi edo rg an i zat i o n ” can b e an “ el i g i b l e d o n ee”
u n d er s ect i o n 1 .1 70 A-1 4(c)(1 ), In co m e Tax Reg s .). Anas s i g nm en t o f t h e
eas em en tu n d er p art6
. 7 i s d i fferen tfro m a rep lacem en t o f t h e eas em en t u n d er p art 6 .2 2. Becau s e t he eas em en tl i m i t s tho s e wh o can b e as s ig n ed t he eas em en tu n d er p art6 .7 an dd o es n o t l i m i twh o can h o l da rep l acem en teas em en tu n d er p art6 .2 2 ,- 1 8 -

[* 1 8 ] we b el i ev e t h atn o l i m i t at i o n was i n t en d edt o b e p l aced o n the t y p e o f en t i t y t h atcan h o l d a rep l acem en t eas em en t . Part 6
. 9 p ro v i d es th ati f t h e Lo rdBerk el ey tru s tceas es t o ex i s to r qu al i fy as
an o rg an i zat io n d es cri bedi n s ect i o n s 5 0 1 (c)(3 ) an d1 7 0 (h )(3 ), th en t h e eas em en t wi l l au t o m at i cal l y

p as s t o a “ t ax ex em

p tn o n -p ro fi t ” o rg an i zat i o n wi t h ex p eri en ce i n h o l d i n g s i m i l ar co ns erv at i o n eas em en t s . Part6
. 9 t hu s ad d res s es wh ath ap p en s i f t h e Lo rd Berk el ey

tru s tceas es t o ex i s to r ceas es t o b e an o rg an i zat i o n qu al i fy i n g
u n d er s ect i o n s 5 01 (c)(3 ) an d 1 7 0 (h )(3 ). Itd o es n o tad d res s wh ath ap p en s wh en t h e t h ree co n d i t io n s i n p art6 .2 2 are s at is fi ed . Becau s e p art 6 .9 l i m i t s th e t y p e o f
o rg an i zat i o n i n wh ich th e eas em en twi l l au t o m at i cal l y v es ti f t h e Lo rdBerk el ey t ru s tg oes o u to f ex i s t en ce o r i s d i s qu al i fi ed , an db ecau s e p art6 .2 2 d o es n o tl i m i t t h e h o ld er o f a rep l acem en t eas em en t , we b el i ev e t h atn o l i m i tat i o n was i n t en d ed t o b e p laced o n th e t y

p e o f en t i t y

th atcan h ol da rep l acem en teas em en t . W e
co n cl u d e th atn ei t h er p art6 .7 n o r p art6 .9 s u g g es t s t h atth e h o l d er o f a rep l acem en t
eas em en tu n d er p art6
. 2 2 m u s t b e a “ qu al ifi edo rg an i zat i on ”. Th ere are o th er reas o n s we d o n o ti nt erp retth e p hras e “ co m p arab le
co n serv at i on eas em en t ” i n p art6 .2 2 t o refer o n ly t o an eas em en th el db y

a

“ qu al i fi edo rg an i zat i on ”. Fi rs t, th e referen ce t o “ co m p arab l e” eas em en t s i s m o s t
n atu ral l y i n t erp ret edas a referen ce t o th e co m p arab i l i t y o f t he t erm s o f th e- 1 9 -

[* 1 9 ] eas em en t s , n otth e o wn er o f t h e eas em en t s . Fu rt h erm o re, ev en i f o n e th i nk s t h ata “ co m

p arab l e” eas em en tcan b e h el d o n l y b y an en t i t y t h ati s “ co m

p arab l e” t o t h e Lo rd Berk el ey

tru s t, i t i s d i ffi cu l tt o s ay wh i ch o f t he Lo rdBerk el ey tru s t ’ s qu al i t i es an o t h er en t i t y

m us t s hare t o m ak e t h e o t h er en t it y i t s “ co m p arab l e”. Th e Lo rdBerk el ey

tru s ti s d es cri b edb y

th e eas em en t as a “ n o n -p ro fi t ch ari t ab l e
co rp o rat i o n i n co rp o rat edu n d er t h e l aws o f So u t h Caro l i n a, wh o se ad d res s i s 1 0 0 5 Hi g hway 5 2 , M o n ck s Co rn er, SC 2 9 4 6 1 ” b u tth e eas em en td o es n o treq u i re t h e h o l d er o f a rep l acem en teas em en tt o h av e s o m e o r al l o f t h es e ch aract eri s t i cs . Ev en i f we as s u m e th atth e eas em en treq u i res th e h ol d er o f a rep l acem en t
eas em en tt o b e a “ n on -p ro fi t ch ari t ab le co rp o rat i o n ”, i n k eep in g wi t h t h e d es cri p t io n o f t h e Lo rdBerk el ey tru s t , th atwo u l dn o tb e t h e s am e t hi n g as a

“ qu al i fi edo rg an i zat i on ”. Had t h e p art ies t o th e eas em en ti n t en d eda rep l acem en t
eas em en tt o b e h el do n l y by a “ qu al i fi edo rg an i zat i o n ”, t h ey co u l dh av e eas i l y wri t ten s u ch a res t ri ct io n i n t o p art6
. 2 2 o f th e eas em en t . Th ey d i dn o td o s o . If t he p art i es t o th e eas em en t ex p ect edth e wo rd“ co m p arab l e” t o i n co rp o rat e s u ch a
s p eci fi c req u i rem en t , we d o n otth i n k s uch an ex pect at i on was o b ject i v el y
reas on ab l e.- 2 0 -

[* 2 0 ] b
. Th e p o s s i b i l i t y th atth e eas em en twi l l b e rep l aced u n d er p art6 .2 2 o f t h e eas em en t i s n o n -n eg l i g i b l e. Ho o d arg u es thatthe p o s s i b i l i t y th atthe eas em en tm i g h t b e rep l aced u n d er p art6 .2 2 o f t h e eas em en t i s n eg l i g i b l e an dth erefo re s ho u l dn o tres u l ti n th e d i s al lo wan ce o f t h e d edu ct io n . Ho o d rel i es o n th e n eg l i g i b l e-p o s s i b i l it y reg u l at i o n , s ect i o n 1 .1 70 A-1 4(g )(3 ), In co m e Tax Reg s . In t erp ret i n g th at reg u l at i o n , th e Co u rth as d efi n eda n eg l i gi b l e p o s s i b i li t y as “ a ch an ce wh i ch p ers o n s g en eral l y

wo u l dd i sreg ardas s o h i g h l y i m p ro b ab l e th ati tm i g h tb e i g n o red wi t h reas o n ab l e s afet y

i n u n d ert ak i n g a s eri o u s b u s i n es s t ran s act io n ,” Graev v . Co m m i s s i o n er, 1 4 0 T.C. 3 7 7 , 3 9 3 (2 0 1 3) (q uo t i n g 8 8 5 In v . Co . v . Co m m i s s i o n er, 9 5 T.C. 1 5 6 , 1 6 1 (1 9 9 0 )), o r, s t at edd ifferen t l y , “ a ch an ce wh i ch ev ery d i ct at e o f
reas on wo u l d ju s t i fy

an i n t el l i g en t p ers o n i n d i sreg ard i n g as s o h i g h l y i m p ro b ab l e
an d rem ot e as t o b e l ack i n g i n reas o n an ds ub s t an ce,” i d . at3 9 4 (qu o t i ng Bri g g s v . Co m m i s s i o n er, 7 2 T.C. 6 47 , 6 5 7 (1 9 7 9 )). Ho o d h as fai l ed t o ad du ce p ers u as i ve ev i d en ce t h at t h e t hree co n d i t i o n s fo r rep l aci ng th e eas em en tu n d er p art6 .2 2 are s o h i g h ly i m p ro b ab l e o r rem ot e t h at t h ey wo ul db e i g n o red
. No th i n g i n th e reco rdi n d i cat es th atSal tPo i n tTi m b er
wo u l db e av ers e t o t ran s ferri ng th e 1 ,0 0 0 acres . Al t h o u gh th e reco rdd o es n o t
rev eal wh et h er an y

l an dad jacen t t o th e 1 ,0 00 acres i s en cu m b ered b y co n s erv at i o n- 2 1 -

[* 2 1 ] eas em en t s , s ev eral p ro p ert i es cl o se t o (b u tn otad jacen tt o ) th e 1 , 0 0 0 acres
are en cu m

b ered b y co n s erv at i on eas em en t s . Th es e i n cl ud e p ro p ert ies th at , l i k e t h e 1 ,0 00 acres , are l arg e l an d h o l d i n g s i n Berk el ey Co u n t y wi t h ri v er fro n t ag e an d wet l an d hab it at s . When the Tru s tfo r Pub l i c Lan do ri g i n al l y ap p l i edfo r a fed eral g ran tu n d er t he No rth A m eri can W et l an d s Co n s erv at i o n Act , 1 6 U.S.C. s ecs . 4 4 0 1 -4 4 1 4 (Sup p . II 2 0 0 2 ), t h atwo u l dh av e fu n dedi t s acq u is i ti o n o f t h e
co n serv at i on eas em en t , th e t ru sts t at edth at i tex pect edth atth e d o n at i o n o f t h e
co n serv at i on eas em en two u l d“ en co u rag e n ei g h bo ri n g l an d o wn ers t o co m m i tth ei r p ro p ert i es t o co ns erv at i o n i n a d o m i n o -effect fas h i o n ”. St at e an d l o cal en t i t i es
s t il l en co u rag e an d s ub s id i ze t he d on at i o n o f co n s erv at io n eas em en t s i n t h i s p art i cu l ar g eo g rap h i c area. It i s al s o s i g ni fi can tth atSal tPo i n t Ti m b er an dth e Lo rdBerk el ey

tru s tb o th ered t o p utp art6 .2 2 i n t h e eas em en t . Inco n cl u s i o n , we fi ndth atth e p os s i b i l i t y

th atth e eas em en two u ld b e rep l aced u n d er p art6 .2 2 o f t h e
eas em en ti s m o re t h an n eg l i g i b l e.
c. Ot h er arg um en t s Th e IRS’ s s eco nd arg u m en t t h atwe d es cri b edi s th atp art6 .2 2 o f t he
eas em en tp erm i t s the res t ri ct io n s o f t he o ri g i n al eas em en t o n th e 1 ,0 0 0 acres t o b e
ex t i n g u i s h ed
. W e n eed n o treach th e m eri ts o f t h i s arg u m en tb ecau s e (1 ) p art6 .2 2 p erm i t s the eas em en tt o b e rep laced wi t h an eas em en t h el db y an o rg an i zat i o n- 2 2 -

[* 2 2 ] o t h er t h an a “ qu al ifi edo rg an i zat i o n ”, (2 ) th e p os s i b il i ty th atth e eas em en t wi l l b e rep laced u n d er p art 6 .2 2 i s n o tn eg l i g ib l e, an d(3 ) Ho o dd o es n o targ u e t h at t h e eas em en t i s a “ qu al i fi edco n s erv at i o n co n t ri b ut i o n ” i f ci rcu m s t an ces (1 ) an d (2 ) ex i s t . Nei t her p art y

co n t en ds th atth e rep l acem en to f th e eas em en tu nd er p art 6 .2 2 i s a t ran s fer o f t h e eas em en tb y the d o n ee u n d er t h e tran s fer-b y -d o n ee reg u l at i o n . Thu s , we d o n o tco n s i d er t h e effect o f t h atreg ul at i o n . 5
. Co n cl u si o n W e h o ldth atth e IRS co rrect l y d i s al l o wedth e $ 2 ,1 3 0 ,0 0 0 d edu ct i o n fo r t h e d o n at i o n o f t h e co n s erv at i o n eas em en t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t .