of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-119013-09 uil the honorable carolyn b maloney u s house of representatives washington dc dear ms maloney thank you for your letter of date about guidance on the tax consequences to victims of the investment fraud mr bernard l madoff perpetrated on date we issued guidance revrul_2009_9 and revproc_2009_20 on the tax treatment of losses from so-called ponzi schemes similar to that mr madoff operated i am enclosing copies for your information revrul_2009_9 explains the income_tax law that applies to an investor who loses money in a fraudulent investment arrangement it provides that an investor who was the victim of a fraudulent investment arrangement is entitled to a theft_loss deduction that is not limited by the rules that apply to capital losses investment theft losses are not subject_to limitations that apply to personal casualty and theft losses the theft_loss is deductible in the year the fraud is discovered except to the extent the investor has a reasonable_prospect_of_recovery the amount of the theft_loss includes not only the investor's unrecovered investment but also amounts reported as income from the investment in prior years and reinvested in the fraudulent investment arrangement an investor can carry back and forward a theft_loss deduction that creates a net_operating_loss according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years conex-119013-09 to claim a theft_loss deduction in any taxable_year an investor must prove that the loss was due to theft and that no reasonable prospect exists of recovering the investment investors often cannot make highly factual determinations with certainty in the year the loss is discovered for this reason we published revproc_2009_20 to provide a simplified_method for investors to compute and report their losses from fraudulent investment schemes this revenue_procedure generally allows an investor who was a victim of mr madoff’s fraud to claim a theft_loss in the amount the investor may deduct is up to percent of the loss less the amount of reimbursement he or she expects to receive as an advance for customer claims from the securities investor protection corporation sipc or from private insurance or other contractual arrangements that guarantee the investor against loss i hope this information is helpful if you have any questions please call me or -------------------------- office_of_chief_counsel income_tax and accounting division at --- --------------------- sincerely ---------------------- chief branch income_tax and accounting enclosures


internal_revenue_service info number release date uiln date conex-163573-02 cc ita b4 dear i am responding to your letter dated date on behalf of your constituent suggested a change to the tax status of governmental grants to businesses that were tenants of the world trade center you asked about the actions the irs will take to ensure those tenants receive assistance in recovering the losses they incurred due to the attack on the world trade center we expect to publish guidance on the income_tax treatment of governmental grants to businesses in response to the date attacks on the world trade center in the near future this letter summarizes well-established principles of current law on the income_tax treatment of governmental grants paid to individuals and businesses our published guidance will be consistent with these principles gross_income generally means all income from whatever source derived and encompasses all accessions to wealth clearly realized over which taxpayers have complete dominion gross_income is subject_to tax unless specifically exempted 348_us_426 the irs has ruled however that payments made under legislatively provided social benefit programs for the promotion of the general welfare are not included in a recipient’s gross_income rev_rul 1974_1_cb_20 revrul_98_19 c b to qualify the payments must i be made from a governmental fund ii be for the promotion of general welfare ie based on need and iii not represent compensation_for services rev_rul 1982_1_cb_16 revrul_75_246 c b governmental grants to businesses generally do not qualify for exclusion from income under the general welfare exclusion because that exclusion relates to payments based on individual need rather than business need see revrul_80_330 1980_2_cb_29 obsoleted by revrul_82_195 1982_2_cb_34 revrul_76_131 c b in addition governmental grants to businesses do not qualify for exclusion from income as qualified_disaster relief payments in part because that exclusion applies only to payments to individuals sec_139 governmental grants to businesses in response to a disaster generally do not qualify for exclusion from income as gifts because the government’s intent in making the payments proceeds from its duty to relieve the hardship caused by the disaster also part of the government’s reason in providing the grants is to spur an economic recovery that would increase the government’s tax_base see kroon v united_states civ no a-90-71 u s dist lexis d alaska under current law individuals and businesses must include in gross_income payments representing lost profits or income replacement however even if a governmental grant is part of business income the business will generally not pay tax on the entire amount of the grant because the business may offset its deductible business_expenses or net operating losses against the grant proceeds other provisions of law allow businesses to exclude governmental grant proceeds from income or defer tax on receipt of the grant proceeds depending on the facts and circumstances the purpose of the grant and the character of the expenditures_for example businesses that are corporations do not include in gross_income amounts including governmental grants received as nonshareholder contributions to capital sec_118 and businesses may defer recognizing gain on proceeds including governmental grant proceeds they receive in connection with the destruction of property if they invest the proceeds in property similarly related in service or use to the destroyed property sec_1033 in addition if property is destroyed in a presidentially_declared_disaster such as the world trade center disaster businesses may use the grant proceeds to purchase any tangible business property for any service or use and still defer the recognition of gain sec_1033 the irs has consistently applied these principles to governmental grants to businesses including community development block grants to summarize current provisions of tax law allow businesses to exclude governmental grant proceeds from income or defer tax on the receipt of the proceeds in certain circumstances legislative action however would be required to ensure that proceeds of all governmental grants received by businesses affected by the world trade center disaster are treated as nontaxable i hope this information is helpful if you have any questions please call me or sincerely lewis j fernandez deputy associate chief_counsel income_tax accounting


internal_revenue_service number release date index numbers ------------------------ -------------------------------------- ----------------------------------------------------------- ---------------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc corp b04 plr-118468-07 date date ------------------------------------------------------------------- --------------------------------------------------------------------------- legend distributing -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------- controlled -------------------------------------------------------------------------------- shareholder a -------------------------------------------------------------- ------------------------------------------------------------ business x state a state b state c state d state e state f x ------------------------------------------- -------------------- --------------- ------------- ------------- ------------ -------- ------ plr-118468-07 dear ---------------- this letter responds to your date letter requesting rulings on certain the rulings contained in this letter are based on facts and representations federal_income_tax consequences of a proposed transaction the information provided in that letter and in later correspondence is summarized below submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the distribution defined below in step ii i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code the code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing is a calendar_year corporation engaged in business x distributing conducts business x directly through its wholly owned subsidiaries and through contracts with other entities distributing conducts business x in state a b c d e and f distributing has one class of stock outstanding that is owned equally by six shareholders financial information submitted by distributing indicates that business x has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years proposed transaction shareholder a and the remaining distributing shareholders disagree on a number of fundamental matters relating to distributing’s business x in state a the conflict between the shareholders is having an adverse effect on the day-to-day operations of distributing to eliminate the shareholder disputes distributing has proposed the following series of steps collectively the proposed transaction i distributing will form controlled and contribute to controlled all the assets and liabilities used in connection with business x located in state a in exchange for all of the outstanding controlled stock the contribution plr-118468-07 ii distributing will distribute all of its controlled stock to shareholder a in exchange for all of the distributing stock held by shareholder a the distribution iii in connection with the distribution distributing and controlled will enter into certain continuing transactions at fair_market_value limited to the use by controlled of distributing’s training facilities and x department services representations distributing controlled and shareholder a each has made the following representations with respect to the proposed transaction a will be approximately equal to the fair_market_value of the distributing stock surrendered a the fair_market_value of the controlled stock to be received by shareholder b no part of the consideration distributed by distributing will be received by shareholder a as a creditor employee or in any capacity other than that of a distributing shareholder c distributing controlled and shareholder a each will pay their own expenses if any incurred in connection with the distribution d the five years of financial information submitted on behalf of distributing is representative of its present operations and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted e following the distribution distributing and controlled will each continue the active_conduct of its respective business independently and with its separate employees except as set forth in step iii above f except for obligations for payment from transactions or expense sharing arrangements between distributing and controlled no intercorporate debt will exist between distributing and controlled at the time of or after the distribution any such indebtedness will not constitute stock_or_securities g the distribution is being carried out for the following business_purpose to end shareholder disputes over the operation of distributing and to resolve management systemic and other problems that have arisen because of irreconcilable differences between shareholder a and the remaining shareholders of distributing the distribution is motivated in whole or substantial part by this corporate business_purpose plr-118468-07 h the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more person will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in either distributing or controlled including any predecessor or successor of any such corporation i no person will hold a 50-percent_or_greater_interest in the stock of distributing or controlled after the distribution within the meaning of sec_355 who did not hold such an interest immediately before the transaction j neither distributing nor controlled is a disqualified_investment_corporation as defined in sec_355 k for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing 50-percent or more of the total combined voting power of all classes of distributing stock entitled to vote or 50-percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution l for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold stock possessing 50-percent or more of the total combined voting power of all classes of controlled stock entitled to vote or 50-percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five- year period determined after applying sec_355 ending on the date of the distribution m the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities assumed as determined under sec_357 by controlled plus any liabilities to which the transferred assets are subject n the liabilities to be assumed as determined under sec_357 in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred o no two parties to the transaction are investment companies as defined in sec_368 and iv plr-118468-07 p the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both q payments made in connection with all continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length r the total fair_market_value of the assets transferred from distributing to controlled will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution s earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 t for federal_income_tax purposes the single class of distributing common_stock is stock of distributing and is not stock of controlled or any other wholly owned subsidiary of distributing rulings based solely on the information submitted and the representations set forth above we rule as follows the contribution followed by the distribution will qualify as a reorganization under sec_368 distributing and controlled will each be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled will equal the basis of that asset in the hands of distributing immediately before the contribution sec_362 the holding_period of each asset received by controlled in the contribution will include the period during which distributing held that asset sec_1223 plr-118468-07 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of shareholder a on the distribution sec_355 the aggregate basis of the controlled stock in the hands of shareholder a immediately after the distribution will equal shareholder a's aggregate basis in the distributing stock surrendered in the distribution allocated in the manner described in sec_1_358-2 the holding_period of the controlled stock received by shareholder a will include the holding_period of the distributing stock surrendered by the shareholder in exchange therefore provided such stock is held as a capital_asset on the date of the distribution sec_1223 a proper allocation of earnings_and_profits between distributing and controlled will be made in accordance with sec_312 and sec_1_312-10 caveats no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding whether the distribution i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 and sec_1_355-2 and iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely __________________________ richard k passales senior counsel branch associate chief_counsel corporate plr-118468-07


t c memo united_states tax_court nick r hughes petitioner v commissioner of internal revenue respondent docket no filed date p granted a conservation_easement to a qualified conservation organization and claimed a dollar_figure charitable_contribution_deduction on his federal_income_tax return r determined a deficiency on the basis that p overstated the amount of his charitable_contribution by dollar_figure held p is liable for the deficiency joseph h thibodeau and vincent m lane for petitioner sara j barkley and tamara l kotzker for respondent memorandum findings_of_fact and opinion wherry judge on date petitioner granted a conservation_easement to the valley land conservancy a colorado nonprofit corporation locally referred to and doing business under a filed trade_name as the black canyon regional land trust inc he claimed a dollar_figure charitable_contribution_deduction on his form_1040 u s individual_income_tax_return for doing so in a date notice_of_deficiency respondent disallowed dollar_figure of the deduction resulting together with some other small adjustment sec_2 in the determination of an alleged dollar_figure federal_income_tax deficiency for petitioner’s tax_year this case is before the court on a petition for redetermination of that deficiency the issue for decision is the amount of petitioner’s charitable_contribution for federal_income_tax purposes 1see colo rev stat sec see also sec_1_170a-14 income_tax regs a qualified_conservation_contribution is the contribution of a qualified_real_property_interest to a qualified_organization exclusively for conservation purposes 2respondent also determined that petitioner had dollar_figure of unreported interest_income dollar_figure of unreported dividend income and dollar_figure of other income and that a dollar_figure itemized_deduction limitation_adjustment to schedule a itemized_deductions was necessary petitioner has conceded these issues findings_of_fact some of the facts have been stipulated and the stipulated facts and accompanying exhibits are hereby incorporated by reference into our findings at the time he filed his petition petitioner resided in colorado petitioner granted the conservation_easement at issue over two nearby properties a big_number acre property referred to by the parties as the bull mountain parcel and a 35-acre property referred to by the parties as the sylvester parcel both parcels are in a mountainous region in gunnison county colorado approximately miles northeast of panonia colorado the properties’ elevation ranges from approximately big_number feet to big_number feet above sea level gunnison county is approximately big_number square miles in size making it about twice the size of rhode island the u s census for indicated a population of big_number which results in an overall population density of people per square mile in approximately half of the county’s population was in the city of gunnison and the town of crested butte which together 3u s census bureau united_states summary population and housing unit count sec_29 see 97_f3d_982 7th cir taking judicial_notice of census information with respect to life expectancy 4u s census bureau colorado 2000--population and housing unit counts constituted less than square miles the census also found that the 51-square-mile area in which the bull mountain and sylvester parcels are located has a population of resulting in a population density of less than person per square mile the federal government owns much of the county’s land the bull mountain and sylvester parcels lie southwest of the intersection of the two public roads that service their immediate area state highway north-south and county road east- west county road dead-ends at its intersection with state highway the sylvester parcel abuts county road commonly known as buzzard divide on its northern border the bull mountain parcel is located south of the sylvester parcel and is separated from it by a 4-mile-wide strip of property owned by an unrelated third party the bull mountain parcel does not abut either of the two roads property in the area has historically been used for agricultural purposes with some isolated residential use the bull mountain and sylvester parcels have historically been used for cattle ranching and recreational purposes 5id 6id i the bull mountain parcel the bull mountain parcel features rolling brush-covered hills and two permanent streams a national forest borders the parcel to the west and views of the ragged mountains are available to the north and east petitioner purchased the parcel from million agricultural investment ltd million on date for dollar_figure or dollar_figure per acre when petitioner purchased the bull mountain parcel it did not have direct access to either state highway or county road however petitioner could use access easements that had been acquired by previous owners of the parcel to travel to and from both roads to access state highway petitioner could use an easement along a road through property owned by the theodore r eck trust eck petitioner’s neighbor to the east to access county road petitioner could use two easements along the narrows road which runs north from the parcel through property owned by spadafora ranches inc spadafora and continues northeast through property owned by mcintyre livestock corp mcintyre the easement over mcintyre’s property was limited to agricultural use 7the parties dispute whether the easement over spadafora’s property was also limited to agricultural use to resolve the issue petitioner attempted to introduce at trial a document dated date in which spadafora granted mcintyre--which continued ii the sylvester parcel the sylvester parcel is essentially an irregular long brush-covered ridge which like the bull mountain parcel has views of the ragged mountains to the north and east petitioner purchased the sylvester parcel from gerald and connie rentz on date for dollar_figure or dollar_figure per acre the sylvester parcel had direct access to county road along its northern border in addition petitioner could use easements acquired by the previous owner to travel to and from continued owned the bull mountain parcel at the time--and mcintyre’s successors and assigns forever an unrestricted access easement over spadafora’s property respondent objected to the admissibility of the document on the basis that petitioner did not provide a copy to respondent at least days before trial as required by the court’s standing_pretrial_order we reserved judgment on the issue despite respondent’s objection we will admit the document into evidence first the gunnison county clerk and recorder has certified the document as a true and exact copy of a document recorded in gunnison county’s publicly available real_estate records as such we can take judicial_notice of it see 554_f2d_1140 ndollar_figure d c cir see also 211_f3d_560 10th cir abrogated on other grounds by 248_f3d_946 10th cir see also sec_7453 fed r evid rule a unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure second on the record before us we cannot conclude that respondent was prejudiced by not receiving the document at least days before the trial see 125_tc_14 n in any event the language in the document is vague and does not totally resolve the issue moreover as we will see petitioner’s access over spadafora’s property is inconsequential to our ultimate conclusion county road an easement over spadafora’s property permitted petitioner to travel west from the parcel to the narrows road and then to travel north along the road to mcintyre’s property another easement permitted him to continue northeast along the narrows road through mcintyre’s property neither of these easements was restricted to any particular use the sylvester parcel’s access easements mostly overlapped the bull mountain parcel’s easements with two exceptions the sylvester parcel’s easement over spadafora’s property did not permit petitioner to travel south along the narrows road to the bull mountain parcel and the bull mountain parcel’s easement over spadafora’s property did not permit petitioner to travel east to the sylvester parcel iii the conservation_easement in a date deed of conservation_easement in gross petitioner granted the valley land conservancy the development rights as defined by sec_2031 sic except as specifically reserved herein over the bull mountain and sylvester parcels as a result petitioner and his successors and assigns forever were prohibited from among other things subdividing the parcels constructing buildings or other 8all section references are to the internal_revenue_code_of_1986 as amended an in effect for the tax_year at issue there is no sec_2031 in the internal_revenue_code however for the purposes of this case we shall assume the intended reference was to sec_2031 structures except for a single-family residential dwelling on each parcel and using the parcels for any commercial residential or industrial uses not specifically permitted the deed refers to the bull mountain and sylvester parcels as two legally distinct and separately deeded properties in connection with preparing and filing his federal_income_tax return petitioner engaged appraisal associates of colorado inc and its coowner pamela m sant to appraise the conservation_easement ms sant is a residential member of the appraisal institute and a certified general appraiser licensed by the state of colorado she prepared an appraisal report dated date in which she determined that the combined value of the bull mountain and sylvester parcels was dollar_figure before petitioner granted the easement and dollar_figure million after she concluded that the amount of the charitable_contribution was therefore dollar_figure and to that effect signed an irs form_8283 noncash charitable_contributions which petitioner attached to his return on date respondent sent petitioner a notice_of_deficiency respondent disallowed dollar_figure of the charitable_contribution_deduction and determined that petitioner was liable for a dollar_figure federal_income_tax deficiency on date petitioner filed a timely petition with the court among other things he argues that respondent has incorrectly determined that he is not entitled to the full dollar_figure deduction a trial was held on november in denver colorado i applicable law opinion under sec_170 a taxpayer may claim a deduction for any charitable_contribution including a qualified_conservation_contribution made within the taxable_year sec_170 f b iii h the parties agree that petitioner’s grant of the conservation_easement over the bull mountain and sylvester parcels was a qualified_conservation_contribution under sec_170 and that he is entitled to a deduction under sec_170 the only issue before us is the amount of the charitable_contribution and thus the allowable deduction deductions are a matter of legislative grace and a taxpayer bears the burden of proving entitlement to any claimed exemptions or deductions 503_us_79 moreover the commissioner’s determination of value is normally presumed correct and the taxpayer bears the burden of proving that the determination is incorrect see rule a 290_us_111 schwab v commissioner tcmemo_1994_232 generally the amount of a charitable_contribution is the fair_market_value of the contributed_property at the time it is contributed sec_1_170a-1 c income_tax regs fair_market_value is the price at which property would change hands between a willing buyer and a willing seller neither being under any compulsion to buy or sell and both having a reasonable knowledge of relevant facts sec_1_170a-1 income_tax regs in determining the fair_market_value of property we must take into account not only the current use of the property but also its highest_and_best_use see 87_tc_389 sec_1_170a-14 and ii income_tax regs a property’s highest_and_best_use is the highest and most profitable use for which it is adaptable and needed or likely to be needed in the reasonably near future 292_us_246 the highest_and_best_use can be any realistic objective potential use of the property 87_tc_892 the amount of a charitable_contribution of a conservation_easement is generally the fair_market_value of the easement at the time it is contributed sec_1_170a-14 income_tax regs ideally the fair_market_value of a conservation_easement would be based on the sales prices of comparable easements sec_1_170a-14 income_tax regs however because conservation easements are typically granted by deed or gift rather than sold comparable sales are rarely available symington v commissioner supra pincite as an alternative the so-called before-and-after approach is often used instead stanley works v commissioner supra pincite under the before-and-after approach the fair_market_value of a conservation_easement equals the difference between the fair_market_value of the easement- encumbered property before it is encumbered by the easement and after sec_1_170a-14 and ii income_tax regs the general_rule for determining the amount of a charitable_contribution is modified in some situations where appreciated_property is contributed under sec_170 the amount of a charitable_contribution of property is reduced by the amount of gain which would not have been long-term_capital_gain had the taxpayer sold the property at its fair_market_value at the time of contribution 87_tc_261 n sec_1_170a-4 income_tax regs long-term_capital_gain is generally gain from the sale_or_exchange of a capital_asset held for more than year sec_1222 in effect sec_170 limits the contribution amount of appreciated_property which is not long-term-capital gain property to the property’s basis at the time it was contributed see 787_f2d_1538 11th cir 129_tc_146 affd 560_f3d_1196 10th cir it follows that when a taxpayer grants a conservation_easement over appreciated real_property held for less than year the amount of the contribution must be determined with regard to sec_170 see sec_1_170a-4 income_tax regs see also strasburg v commissioner tcmemo_2000_ griffin v commissioner tcmemo_1989_130 affd 911_f2d_1124 5th cir accordingly the amount of the contribution is limited to the conservation easement’s basis at the time it is contributed see strasburg v commissioner supra griffin v commissioner supra the adjusted_basis of a conservation_easement is equal to that portion of the adjusted_basis of the entire property which bears the same ratio to the adjusted_basis of the entire property as the fair_market_value of the contributed_property bears to the fair_market_value of the entire property sec_1 170a- c ii income_tax regs see strasburg v commissioner supra put another way the basis of a conservation_easement is equal to the adjusted_basis of the entire property reduced by the percentage decrease in the entire property’s fair_market_value as a result of the conservation_easement ii expert witnesses each party has offered the report and testimony of an expert witness to establish the amount of petitioner’s charitable_contribution an expert’s opinions are admissible if they assist the trier of fact to understand the evidence or to determine a fact in issue fed r evid we evaluate expert opinions in light of each expert’s demonstrated qualifications and all other evidence in the record see 86_tc_547 where experts offer competing estimates of fair_market_value we determine how to weigh those estimates by inter alia examining the factors they considered in reaching their conclusions see 38_tc_357 we are not bound by an expert’s opinions and may accept or reject an expert opinion in full or in part in the exercise of sound judgment see 304_us_282 parker v commissioner supra pincite we may also reach a determination of value based on our own examination of the evidence in the record 538_f2d_927 2d cir affg tcmemo_1974_285 a petitioner’s expert petitioner’s expert mark s weston has a bachelor of arts degree in english literature and a master of arts degree in library and information science he is a certified general appraiser in the state of colorado and has been a member of the colorado board_of real_estate appraisers since since the mid-1990s he has written several publications and given a number of presentations on valuing conservation easements mr weston wrote two appraisal reports with respect to the conservation_easement over the bull mountain and sylvester parcels an original report dated date and a supplemental report dated date in his reports mr weston used the before-and-after approach and concluded that the fair_market_value of the conservation_easement was dollar_figure he determined that the fair market values of the bull mountain and sylvester parcels before petitioner granted the easement were dollar_figure and dollar_figure both dollar_figure per acre9 respectively referring to sec_170 and the fact that petitioner purchased the sylvester parcel less than year before he granted the easement mr weston used the sylvester parcel’s adjusted_basis dollar_figure in his calculations instead of its fair_market_value in addition he rounded the bull mountain parcel’s fair_market_value to dollar_figure resulting in a total before figure for both parcels of dollar_figure he then determined that this figure was reduced by percent when petitioner granted the easement 9in his original report--in the narrative section on p mr weston twice stated that the value of the bull mountain and sylvester parcels was at the average rate of dollar_figure per acre however he used dollar_figure per acre in his subsequent numerical calculations and also referred to the dollar_figure-per-acre figure in his supplemental report because his report does not explicitly explain how he calculated the average value per acre of the two parcels we cannot be certain which figure mr weston intended while this discrepancy on such an important fact is not comforting we will assume that his references to dollar_figure per acre were typographical errors b respondent’s expert respondent’s expert kerry l packard has bachelor of science and a master of engineering degrees he has been an engineer revenue_agent with the internal_revenue_service since in that role he has conducted field investigations and has made value estimations with respect to real and personal_property and has prepared valuation technical and engineering reports he has experience valuing conservation easements and ranch land and has completed several american institute of real_estate appraisal courses in his report dated date he also used the before-and-after approach and concluded that the fair_market_value of the conservation_easement was between dollar_figure and dollar_figure he further determined that the fair market values of the bull mountain and sylvester parcels before contribution of the easement were dollar_figure dollar_figure per acre and dollar_figure rounded to dollar_figure per acre respectively mr packard referenced sec_170 but because he found that the sylvester parcel did not appreciate after petitioner purchased it he concluded that it did not apply he rounded the fair_market_value of the bull mountain parcel to dollar_figure resulting in a total before figure for both parcels of dollar_figure he then determined that this 10respondent has not asserted an increased deficiency in light of mr packard’s conclusions figure was reduced by to percent when petitioner contributed the easement c expert witness issues the parties have raised two issues with respect to the expert witnesses first the probative value of both experts’ reports and testimony has been called into question petitioner asserts that mr packard is biased lacks appropriate qualifications made numerous mistakes and did not prepare his report in accordance with the uniform standards of professional appraisal practice uspap petitioner also argues that we should give mr packard’s report less weight because respondent did not assert an increased deficiency in light of mr packard’s conclusions respondent counters that mr weston is biased12 and made numerous mistakes we have considered the parties arguments and as appropriate have evaluated the experts’ reports and testimony accordinglydollar_figure we do not find that mr packard’ sec_11in his brief petitioner states that mr packard’s report is unable to claim even a pretense at objectivity or independence and is merely the expression of the decidedly biased opinion of a career irs valuation engineer lacking in requisite credentials and professional accreditation 12respondent points to preliminary valuation notes in mr weston’s work file which contain the handwritten notation nick wants it bigger next to a valuation of the bull mountain parcel at dollar_figure million to dollar_figure million 13see 35_f3d_717 3d cir a judge frequently should find an expert’s methodology helpful even when continued report should be given less weight on the basis that respondent did not assert an increased deficiency petitioner did not provide any support for this argument and we have found none second at trial respondent moved to strike from the record ms sant’s date appraisal report and a date engineer’s report by irs engineer lloyd philip kinneydollar_figure we had admitted those reports into evidence in part so that petitioner could use them to cross-examine mr packard respondent asserts however that petitioner never mentioned the reports during cross-examination we reserved judgment on the issue in order to obtain a transcript of the cross-examination but will now deny respondent’s motion we note that petitioner asked mr packard several questions about the exhibits during cross-examination including continued the judge thinks that the expert’s technique has flaws sufficient to render the conclusions inaccurate whitehouse hotel ltd partnership v commissioner t c __ __ slip op pincite this and other courts have found that an expert’s valuation opinion that does not fully comport with uspap is still admissible although it may or may not be helpful 92_tc_101 in the context of valuation cases we have observed that experts may lose their usefulness and credibility when they merely become advocates for the position argued by a party 86_tc_547 stating that the court will consider an expert’s qualifications when evaluating his or her expert opinion 14ms sant’s report exhibit 28-p provided the basis for petitioner’s form_8283 and mr kinney’s report exhibit p apparently provided a part of the basis for respondent’s date notice_of_deficiency whether the two reports were in the file that mr packard was provided when he began working on the case whether mr packard reviewed ms sant’s report whether he reviewed mr kinney’s report in a supervisory capacity and whether and to what extent he relied on ms sant’s and mr kinney’s reports mr packard responded that the reports were in the file he received he reviewed ms sant’s report he did not review mr kinney’s report in a supervisory capacity and he did not rely on either report to any extent noting that had i agreed with the facts and the analyses that were developed in those reports they would have precluded the need for me to have done one iii analysis respondent allowed dollar_figure of the dollar_figure charitable_contribution_deduction that petitioner claimed for granting the conservation_easement over the bull mountain and sylvester parcels we must determine whether petitioner is entitled to a larger deduction and if so how much larger to do so we must determine the amount of petitioner’s charitable_contribution which is generally the fair_market_value of the conservation_easement see sec_1_170a-14 h i and ii income_tax regs mr weston attempted to determine the fair_market_value of the easement based on the sales prices of comparable conservation easements however he did not weigh this data heavily in his analysis due to dissimilarity of the encumbered parcels compared with the subject property see sec_1_170a-14 income_tax regs we agree with mr weston and find that this data is insufficient to make a conclusion as to fair_market_value accordingly we must rely on the before-and-after approach as both mr weston and mr packard have see id see also stanley works v commissioner t c pincite to apply the before-and-after approach we must determine the fair market values of the bull mountain and sylvester parcels before petitioner granted the conservation_easement and after sec_1_170a-14 income_tax regs a fair_market_value of the bull mountain parcel before petitioner granted the conservation_easement mr weston’s opinion mr weston concluded that the bull mountain parcel’s highest_and_best_use before petitioner granted the conservation_easement was residential development in lots ranging in size from to acres he believed--apparently based on anecdotal real_estate agents’ comments--that there was significant demand for residential property of that size in the area and noted several selling points including proximity to a national forest scenic views relative seclusion and abundant wildlife moreover he believed that gunnison county would have approved the change in the property’s use from agricultural to residential he relied primarily on the sales comparison approach to determine the fair_market_value of the bull mountain parceldollar_figure under that approach the property being valued is compared with similar properties sold in the same timeframe and geographic area schwab v commissioner tcmemo_1994_232 the subject property’s fair_market_value is determined by reference to the sales prices of the comparable properties adjusted upward to the extent that the subject property is superior to the comparable_property in some fashion and downward to the extent it is inferior in some fashion see whitehouse hotel ltd partnership v commissioner t c __ __ slip op pincite see also schwab v commissioner supra this approach is based on the principle that the prudent purchaser would pay no more for a property than the cost of acquiring an existing property with the same utility 15mr weston also used the development technique to test the reasonableness of the direct sales comparison technique but stated that he had a greater degree of confidence in the direct comparison technique the development technique is appropriate where the subject property being valued is ‘ripe’ for development estate of mccormick v commissioner tcmemo_1995_371 under the development technique the subject property is treated as if it were subdivided developed and sold expected proceeds from sales of the subdivided lots are reduced by development costs and discounted over the period during which the lots are expected to sell see branch v commissioner tcmemo_1987_321 using the development technique mr weston determined that the fair_market_value of the bull mountain parcel was dollar_figure for purposes of the sales comparison approach mr weston’s subject property was a big_number 40-acre piece of land that included both the bull mountain and sylvester parcels he valued the parcels as one believing that they had been assembled together when petitioner purchased them and that they can be considered contiguous by virtue of the easements that joined these two parcels mr weston considered sales of comparable properties in his analysis relying heavily on sales including the date sale of the bull mountain parcel to petitioner for dollar_figure or dollar_figure per acre he made adjustments to the sales prices of the comparable properties to--in his view--account for market conditions location size and access with respect to the date sale of the bull mountain parcel to petitioner mr weston made two significant positive adjustments reflecting that the bull mountain parcel had appreciated by a prodigious and at first blush implausible percent in the short months between the date petitioner purchased the remote rural parcel and the date he granted the conservation_easement mr weston’s first and most important adjustment was based on his belief that the value of the bull mountain parcel was increased significantly by the assemblage with the sylvester parcel due to improved access his second adjustment was due to inflation and improved market conditions during the intervening months in his supplemental report mr weston suggested a third reason why the fair_market_value of the bull mountain parcel was higher than the date sales_price namely because that sales_price may have been below fair_market_value in that regard he made the following observation reportedly million had been compelled to take title to this portion of the property after a prior transaction fell through and was as a result highly motivated to sell the property even at a discount due to financial distress ultimately mr weston determined that the fair_market_value of the combined subject property was dollar_figure per acre applying that price per acre to the big_number acres of the bull mountain parcel he concluded that its fair_market_value before petitioner contributed the conservation_easement was dollar_figure mr packard’s opinion mr packard found that the highest_and_best_use of the bull mountain parcel before petitioner granted the conservation_easement was continued agricultural and recreational use 16mr weston suggested this third adjustment in his date supplemental report while discussing generally conditions of sale motivation of the parties in his original date appraisal report he explicitly chose not to make any adjustment for financial distress for any of the comparable sales included in his original report although he believed that residential development in lots of acres or more was legally permissible physically possible and financially feasible he did not think it was the maximally productive use of the property because of the limited demand for residential lots in the area as reflected by limited demand for developable lands in the area mr packard relied on the sales comparison approach to determine the fair_market_value of the bull mountain parcel he used the bull mountain parcel itself as the subject property and compared it with nine comparable properties making adjustments for access size water rights tree cover and market conditions he placed great reliance on the date sale of the bull mountain parcel to petitioner and one other sale his only adjustment to the date sales_price of the bull mountain parcel was a positive adjustment because properties were generally increasing in value during the months between the sale and petitioner’s grant of the easement mr packard ultimately determined that the fair_market_value of the bull mountain parcel before petitioner granted the conservation_easement was dollar_figure per acre or dollar_figure after rounding this value reflects that the bull mountain parcel appreciated in value by percent discussion to determine the fair_market_value of the bull mountain parcel both experts used the sales comparison approach relying heavily on the date sale of the parcel to petitioner we think that this was the appropriate approach to take after all the best evidence of fair_market_value is a recent sale of the property at issue see wortmann v commissioner tcmemo_2005_227 we find that the most persuasive evidence of the subject property’s value as of the contribution date is the actual sale of the subject property months before the contribution for the purposes of our analysis we will focus on the date saledollar_figure there are three major issues that divide the experts first they do not agree whether there was demand for residential property in the area second they do not agree that the bull mountain parcel’s access was improved after petitioner purchased the sylvester parcel third they do not agree that petitioner purchased the bull mountain parcel at a discount due to the seller’s financial distress each of these issues has a significant effect on the fair_market_value of the bull mountain parcel and we will address each separately 17because we will not consider other comparable properties in our analysis we need not address the parties’ disputes over other adjustments such as adjustments due to location size and water rights i demand for residential property the demand for residential property in the bull mountain parcel’s neighborhood is an important consideration because it affects the parcel’s highest_and_best_use and because high demand for residential property would suggest a higher fair_market_value although mr weston acknowledged in his date report that to date there has not been a significant amount of development in this part of gunnison county he indicated that the northwestern portion of gunnison county is beginning to see an increase in demand for vacant land suitable for development and that property values are appreciating rapidly at the present time despite his statement that this growth is not explosive however he projected that demand was so high that if the bull mountain parcel were subdivided into parcels of acres or more the subdivided parcels could have been sold within years citing local realtors he concluded that there was strong demand for residential sites of this size and character in the current market and that the lack of sales activity involving smaller parcels in this area is due entirely to a lack of supply 18in her report ms sant also concluded that demand for residential property in the area was high prices are increasing and demand is moderate to strong the difficulty in this area is the lack of available smaller acreage parcels the subject due to its location and physical characteristics is well suited and desirable for residential use continued mr packard found to the contrary noting simply that if demand for residential parcels was strong it is reasonable to expect that a developer would have shown interest in the bull mountain parcel he stated that there is little or no residential development activity in the market area of the subject property and while there are isolated small-acreage land purchases that have occurred for the purpose of building a home there has been no planned development of large parcels based on the evidence before us we find that there was little to no demand for residential property of the type suggested by mr weston at the time petitioner granted the conservation_easement in addition we do not see a trend of increasing demand at that time either mr weston’s assertions otherwise lack evidentiary support the experts did acknowledge that the property to the bull mountain parcel’s east--property owned by eck and adjacent to state highway 133--was divided into twelve 35-acre residential parcels and sold from through that evidence and the prolonged 4-year absorption rate does not persuade us that there was significant demand for that type of property even with continued and is a convenient drive time from carbondale we note however that reaching carbondale requires one to traverse mcclure pass the summit of which is big_number feet this is not high by colorado standards but would be a problem or cause a delay on snowy days relatively good access in first the eck sales occurred after the valuation_date in this case and we are therefore limited in our consideration of themdollar_figure second even if we could consider those sales they reflect much lower demand than mr weston has suggested specifically although mr weston indicated that thirty-nine 35-acre-or-more residential parcels could be sold within years it apparently took eck years to sell just twelve 35-acre parcels with better access and a comparable nearby location mr weston has also noted the existence of smaller lots including some of less than acre to the north of the bull mountain parcel although those lots may exist there is no evidence that they had been sold or even offered for sale at the time petitioner granted the conservation_easement accordingly they do not support mr weston’s claims regarding demand because we conclude that there was limited demand for residential property in the bull mountain parcel’s neighborhood around the time petitioner granted the easement we also conclude that the highest_and_best_use of the bull mountain parcel before 19see 88_tc_1197 it is well settled that in examining all the relevant facts and circumstances events occurring subsequent to the valuation_date are not considered in determining fair_market_value except to the extent that such events were reasonably foreseeable on the valuation_date petitioner granted the easement was continued agricultural and recreational usedollar_figure ii access to the bull mountain parcel both experts agree that the bull mountain parcel did not have ideal access to public roads when petitioner purchased it on date the road to highway was long and rough and the bull mountain parcel’s easement over mcintyre’s property to access county road which was a gravel road not always plowed in the winter was limited to agricultural purposes mr weston asserts however that when petitioner purchased the sylvester parcel the agricultural restriction over mcintyre’s property was lifted in his words there was created a much better and unrestricted access route that led from county road all the way down into the larger bull mountain ranch tract based predominantly on this belief and the synergy created by the assemblage of the two parcels he determined that the bull 20because the highest_and_best_use of the parcel was not residential development the development technique for valuing it is not appropriate as a result we will disregard mr weston’s development technique analysis as well as the experts’ and parties’ disputes over how that technique was applied but had we considered it and factored in realistic development costs and access problems together with a realistic absorption rate it would not have materially affected our valuation of the conservation_easement 21gunnison county public works department gunnison county colorado county plowed roads numerical list last viewed mountain parcel more than doubled in value after petitioner purchased the sylvester parcel mr weston who is not an attorney never fully explained how the agricultural restriction was lifted and when asked during cross-examination he acknowledged that he was probably not qualified to have that opinion apparently he believed that petitioner could cross mcintyre’s property using the sylvester parcel’s unrestricted easement even if petitioner was traveling to and from the bull mountain parcel there is no discernable legal support for mr weston’s position under colorado law an easement holder may not use an easement to benefit property other than the dominant estate lazy dog ranch v telluray ranch corp p 2d colo citing restatement property 3d servitude sec_4 wrwc llc v city of arvada p 3d colo ct app in lazy dog ranch the colorado supreme court cited the restatement which states that unless otherwise provided an appurtenant easement cannot be used to serve property other than the dominant estate the rationale is that use to serve other_property is not within the intended purpose of the servitude restatement property 3d servitude sec_4 cmt b here the unrestricted easement over mcintyre’s property is appurtenant to the sylvester parcel in that regard the benefit of the easement passed from the parcel’s previous owners to petitioner when he bought the parcel in addition the sylvester parcel is the dominant estate with respect to the easement because it is the property that is benefited by it accordingly colorado law would prohibit petitioner from using the sylvester parcel’s unrestricted easement to benefit property other than the sylvester parcel lazy dog ranch v telluray ranch corp supra pincite restatement supra sec_4 this is true even though petitioner owned both the bull mountain and sylvester parcels restatement supra sec_4 dollar_figure 22the colorado supreme court defined some of the key terms as follows an easement is said to be appurtenant to property when the benefit or burden of the easement runs with an interest in property owners of the property are entitled to the benefit or subject_to the burden of the easement due to their relation to the property thus when their property interest terminates so does their connection to the easement the property burdened by the easement is customarily known as the servient estate while the property benefited by the easement is called the dominant estate lazy dog ranch v telluray ranch corp 965_f2d_1229 colo 23as an example if a hotel owner purchases a lot in an continued what this means is that the bull mountain parcel’s access over mcintyre’s land was still limited to agricultural purposes even after petitioner purchased the sylvester parcel consequently for this and other reasons mr weston’s large positive adjustment to the bull mountain parcel’s fair_market_value due to improved access is unwarranteddollar_figure a second consequence of our access analysis is that mr weston was wrong to have valued the bull mountain and sylvester parcels as a single property presumably mr weston believed that once petitioner owned both parcels he could string the parcels’ easements together to provide access between them thus assembling the parcels or rendering them contiguousdollar_figure a sec_23 continued adjacent subdivision and that lot holds an easement appurtenant allowing it rights to use a community beach and recreational facilities the hotel owner is not entitled to use the beach or the facilities for the benefit of its hotel operation restatement property 3d servitude sec_4 ill in an even more extreme example if an individual purchases two adjoining parcels of land one of which includes the benefit of an appurtenant easement over another parcel and builds a house which straddles the borders of those two parcels the individual is not entitled to use the easement for access to the part of the house built on the other parcel of land id ill 24in any event even if access to the bull mountain parcel was no longer limited to agricultural use given our determination that the parcel’s highest_and_best_use was agricultural and recreational any positive adjustment to its fair_market_value would have been much smaller than mr weston’s adjustment 25mr weston also cited the concept of unity of use to explain why the bull mountain and sylvester parcels could be continued explained above this was not permissible see lazy dog ranch v telluray ranch corp supra pincite the bull mountain and sylvester parcels are two separate properties separated from each other by a quarter mile in fact the parties stipulated that the parcels are not contiguous and even the conservation_easement documents that petitioner signed refer to the parcels as two legally distinct and separately deeded properties for the reasons above the bull mountain and sylvester parcels should have been valued separatelydollar_figure continued considered a single property despite the fact that they are not contiguous we note that in condemnation cases three factors are particularly helpful in ascertaining whether property taken is part of a single larger tract physical contiguity unity of ownership and unity of use 680_f2d_388 5th cir we are not persuaded that unity of use is a relevant concept in the case before us moreover other than some possible savings in marketing costs we do not perceive that development costs would be markedly reduced given the need for separate roads and utilities for the disparate parcels we therefore reject mr weston’s analysis on this point 26there is yet another reason why the bull mountain and sylvester parcels should have been valued separately by valuing the two parcels together and allocating the combined price per acre to the bull mountain parcel mr weston factored the attributes of the sylvester parcel into his determination of the bull mountain parcel’s fair_market_value this may have distorted his ultimate determination of the fair_market_value of the bull mountain parcel this is particularly problematic here because the sylvester parcel was treated separately under sec_170 leaving only the question of the bull mountain parcel’s value continued iii evidence of a discounted sales_price in mr weston suggested in his supplemental report that the bull mountain parcel’s dollar_figure sales_price may have been a discounted price due to the financial distress of its seller million there is insufficient evidence to support that suggestion at trial mr weston admitted that he did not speak with million’s managing partner aaron million about any financial distress that million may have been experiencing mr weston appears to have based his suggestion on the fact that the bull mountain parcel had been listed for sale at a higher asking price for years and that the price was lowered in the year before petitioner purchased it in his testimony before the court mr million acknowledged that the bull mountain parcel had been on the market for years and that its sales_price had been lowered he noted that the continued a simple albeit extreme example can illustrate this point assume that goldacre is a 10-acre property with vast gold deposits and a fair_market_value of dollar_figure dollar_figure per acre and that blackacre is a 10-acre property with no redeeming qualities and a fair_market_value of dollar_figure dollar_figure per acre valued together goldacre and blackacre are still very valuable with a fair_market_value of around dollar_figure dollar_figure per acre because of goldacre’s gold deposits if the fair_market_value of blackacre alone is determined by allocating the joint value of dollar_figure per acre to blackacre then the fair_market_value of blackacre would be dollar_figure that result factors goldacre’s gold deposits into blackacre’s fair_market_value resulting in a large distortion from its actual fair_market_value of dollar_figure parcel had been on the market on a for-sale-by-owner basis for some time before he listed it with a real_estate agent it was listed for to months and at least three offers for parts of the parcel were received before petitioner purchased it mr million also testified that he had moved to fort collins colorado years before the sale of the bull mountain parcel to petitioner he testified however that he was not under duress or financial compulsion when petitioner purchased the parcel mr lario the real_estate agent who worked with mr million to sell the parcel testified that million’s motivation to sell the property may have increased after mr million moved out of the area however he also stated that he had no reason to think that the sales_price of the parcel to petitioner did not reflect its fair_market_value on this evidence we cannot conclude that million sold the bull mountain parcel to petitioner at a discount or that any positive adjustment is warranted with respect to the sales comparison approach the fact that the bull mountain parcel was on the market for several years and that its asking price was lowered is just as likely an indication that demand for the parcel was limited as it is some reflection of financial distress conclusion as to the fair_market_value of the bull mountain parcel before petitioner granted the conservation_easement we have determined that the date sales_price should serve as the basis for determining the fair_market_value of the bull mountain parcel before petitioner granted the conservation_easement we have further determined that that sales_price should not be adjusted upward as mr weston asserted because of improved access or because the parcel was sold to petitioner at a discount we agree with both experts however that a positive adjustment should be made because properties in the bull mountain parcel’s neighborhood were generally increasing in value between the time petitioner purchased the parcel and when he granted the conservation_easement mr weston assumed a very conservative appreciation rate of per year while mr packard’s ultimate conclusion reflects 11-percent appreciation based on the evidence of record we find that an 11-percent positive adjustment is generous but reasonable we therefore find that the fair_market_value of the bull mountain parcel before petitioner granted the conservation_easement was dollar_figure b the fair_market_value of the sylvester parcel before petitioner contributed the conservation_easement the experts disagree on the fair_market_value of the sylvester parcel before petitioner granted the conservation_easement mr weston determined that it had appreciated in value to dollar_figure from its dollar_figure sales_price months earlier nevertheless because of the restrictions imposed by sec_170 he used dollar_figure in his easement valuation mr packard determined that the parcel had not appreciated in value and was still worth dollar_figure we agree with mr packard that dollar_figure reflects the parcel’s fair_market_value before petitioner granted the easement as explained below however even if this parcel had marginally appreciated or percent based on an 11-percent-per-year appreciation rate our ultimate conclusion as to the amount of petitioner’s charitable_contribution with respect to the sylvester parcel would be unchanged because of sec_170 because the sylvester parcel did not appreciate in value between the date petitioner purchased the parcel and the date he granted the conservation_easement sec_170 does not apply the amount of petitioner’s contribution with respect to the sylvester parcel is therefore the fair_market_value of the conservation_easement which is in turn equal to the difference between the fair_market_value of the parcel before petitioner granted the easement dollar_figure and its fair_market_value afterwards see sec_1_170a-14 income_tax regs put another way the amount of the contribution is the fair_market_value before petitioner granted the easement reduced by the percentage diminution in the parcel’s fair_market_value caused by the easement see eg griffin v commissioner tcmemo_1989_ our evaluation of the totality of the evidence supports a value for the easement of percent of the dollar_figure ‘before’ value of the property or dollar_figure accordingly the amount of petitioner’s charitable_contribution with respect to the sylvester parcel is exactly the same regardless of whether the parcel appreciated in value or notdollar_figure either way the operative number is dollar_figure which we will reduce by the percentage diminution in the sylvester parcel’s fair_market_value c the fair market values of the bull mountain and sylvester parcels after petitioner granted the conservation_easement mr weston’s opinion mr weston determined that the fair_market_value of the bull mountain and sylvester parcels was diminished by percent because of the conservation_easement in reaching this conclusion he considered the diminution in value caused by conservation easements over six similar properties he determined that the diminution in value of those properties ranged from to percent in comparing the bull mountain and sylvester parcels with those other properties a critical 27if the sylvester parcel had depreciated we would have used the depreciated value in our calculation see sec_1 170a- income_tax regs however there is no evidence and neither expert suggests that the parcel depreciated factor was the extent to which the easement restricted the use of the property he believed that the highest_and_best_use of the bull mountain and sylvester parcels before petitioner granted the easement was residential development and that the parcels were limited to agricultural and recreational use after the easement he therefore concluded that due to the restrictive nature of the subject conservation_easement we are more confident at the higher end of the range of diminution he provided the following explanation in his date supplemental report if the bull mountain and sylvester parcels had been divided into 35-acre parcels separately conveyable homesites could have been created and if it had been divided into 50-acre parcels consistent with our highest_and_best_use conclusion separately conveyable homesites could have been created in any event density has been reduced by to the easement based on our analysis caused a significant diminution in the fair_market_value of the bull mountain ranch mr weston supported his conclusion using the sales comparison approach and comparing the parcels after petitioner contributed the easement directly with other properties encumbered by conservation easements the comparison resulted in a range in value for the entire big_number 40-acre subject property of between dollar_figure-dollar_figure bracketing our conclusion of value developed by the percentage diminution technique mr packard’s opinion mr packard determined that the conservation_easement diminished the fair market values of the bull mountain and sylvester parcels by to percent like mr weston he considered the diminution in value caused by conservation easements over comparable properties also like mr weston he paid particular attention to the restrictiveness of the easements and whether they changed the highest_and_best_use of the properties in his words the goal in analyzing an easement encumbered property sale is to estimate the loss in value attributable to the change in highest_and_best_use resulting from the conservation_easement and reflected by the easement encumbered sale price he indicated that when using that method the need to adjust for location differences is eliminated because the diminution in value is expressed as a percentage in his report mr packard included a chart that he referred to as the matrix the matrix incorporated information from easement-encumbered properties and illustrated generally that the amount of diminution caused by an easement is related to the degree to which the easement changes a property’s highest_and_best_use according to mr packard the matrix showed that the diminution in value for those properties that did not experience a change in highest_and_best_use is quite small and was often found to be in addition mr packard selected seven specific properties from the matrix to compare with the bull mountain and sylvester parcels because mr packard believed that the highest_and_best_use of the parcels before and after petitioner contributed the easement was agricultural and recreational use he chose comparable properties that did not show any change in highest_and_best_use after analyzing the comparables he determined that the fair market values of the parcels were diminished by to percent because of the easement finally mr packard noted that there were no comparable arm’s-length sales of easement-encumbered properties in gunnison county but that a similar sale involving subdivision covenants resulted in no diminution in value analysis there are fundamental problems with both experts’ opinionsdollar_figure mr weston’s conclusion of 70-percent diminution is premised on his belief that the highest_and_best_use of the bull mountain and sylvester parcels before petitioner granted the easement was residential development we found above that the highest_and_best_use of the bull mountain parcel was actually continued agricultural and recreational use and for the same 28in light of the fundamental problems and because of the conclusions discussed below we need not dwell further on the more specific problems raised by the experts with respect to the methods and comparable properties used in their respective analyses reason we find that the highest_and_best_use of the sylvester parcel is also continued agricultural and recreational use therefore the development restrictions imposed by the easement had much less effect on the parcels’ use than mr weston has suggested and would not warrant a 70-percent diminution in valuedollar_figure moreover given our conclusions as to the fair market values of the bull mountain and sylvester parcels dollar_figure and dollar_figure respectively even with 70-percent diminution in value the amount of petitioner’s charitable_contribution would not exceed the dollar_figure deduction that respondent has already allowed with respect to mr packard we disagree with his conclusion that the conservation_easement may have had no or only a nominal impact on the fair market values of the bull mountain and sylvester parcelsdollar_figure see schwab v commissioner tcmemo_1994_232 we find it hard to imagine a prospective purchaser of a big_number acre parcel of land who would not have considered the 29we note as well that mr weston’s report lacks critical information about the comparable properties he considered namely the highest_and_best_use of the properties before they were encumbered by conservation easements without this information it is impossible to tell how much effect the easements had on the properties’ fair market values 30we also disagree with mr packard’s use of the matrix because it included general information that did not have a specific connection to the bull mountain and sylvester parcels we afforded it little weight in our analysis restrictions of the open-space easement in determining the price further he failed to consider two important factors first for tax years beginning on or after date the state of colorado allows a state_income_tax credit for taxpayers who grant a qualified_conservation_easement on real_property located in colorado colo rev stat sec at the time petitioner granted the conservation_easement the maximum credit allowed was dollar_figure per donation id sec a any unused portion of the credit could generally be carried forward for a maximum of years id sec a in addition subject_to certain limitations the taxpayer could transfer all or a portion of the credit to another taxpayer id sec generally the credit a taxpayer could use was limited to the net tax_liability reported during the tax_year however if state revenue exceeded certain thresholds a taxpayer could elect to have the amount of the credit not used as an offset against income taxes in said income_tax year refunded to the taxpayer id sec b i mr packard disregarded the value of the colorado state_income_tax credits by granting the conservation_easement over the bull mountain and sylvester parcels petitioner precluded any future purchasers from granting a conservation_easement and thus from receiving the benefit of the tax_credits this should have been at least considered in determining the parcels’ diminution in fair_market_value at trial mr packard tried to explain his lack of attention to the state credits by noting that the market was generally not yet sophisticated enough to recognize the potential value of the credits or factor them into fair_market_value we reject his explanation which was based on the state of the market at that time for purposes of determining fair_market_value we must consider a hypothetical sale between a willing buyer and a willing seller both having a reasonable knowledge of relevant facts see arbor towers associates ltd v commissioner tcmemo_1999_213 sec_1_170a-1 income_tax regs second mr packard has seemingly neglected the possibility that circumstances may change in the future for example although there was little demand for residential property at the time petitioner granted the easement residential development may be a realistic possibility in the future in that event the conservation_easement would nevertheless prevent petitioner or his successors in interest from taking advantage of potentially lucrative development opportunities mr packard should have at least considered this possibility in his report and if appropriate reflected it in the diminution in value of the bull mountain and sylvester parcels’ fair market valuesdollar_figure in sum mr weston’s determination of 70-percent diminution is too high and mr packard’s determination of to 10-percent diminution is too low the correct percentage lies somewhere in between however because of our conclusions with respect to the fair market values of the bull mountain and sylvester parcels no diminution in that range will lead to a larger deduction than respondent has already allowed iv conclusion based on a thorough review of the evidence in this case we concluded that the fair market values of the bull mountain and sylvester parcels before petitioner granted the conservation_easement were dollar_figure and dollar_figure respectively when petitioner granted the conservation_easement the fair market values of the parcels diminished entitling him to a deduction they did not diminish so much however that petitioner i sec_31mr packard tried to explain that these two factors are of minimal importance in the real world but we are not persuaded to the extent future demand for residential development could have been anticipated any increase in fair_market_value due to such demand would have had to have been discounted under time_value_of_money principles there is no evidence that there will be significant demand for residential development in the area surrounding the bull mountain and sylvester parcels in the near to intermediate future accordingly in light of the necessary discount for the time_value_of_money the possibility of future residential development does not affect our conclusion as to the value of the conservation_easement entitled to a deduction larger than that which respondent has already allowed accordingly we sustain the deficiency determined by respondent the court has considered all of petitioner’s contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing decision will be entered for respondent


id office uilc cca-101610-12 -------------- number release date from ------------------ sent tuesday date am to -------------------------------------------- cc ---------------------------- subject re revised w-2 - itra voucher --------- ------------------------------------- - i think the form w-2c corrected wage and tax statement is correct and thanks for your patience should not be changed box should not be changed from the original w-2 only boxe sec_3 and of the original w-2 should have been changed by the amount of the repayment and boxe sec_4 social_security_tax and medicare_tax of the original form_w-2 should have been changed as appropriate and this is what the form w-2c did the income and wages for income_tax_withholding purposes including the amount of the income_tax_withholding which was paid under a gross-up procedure was received and includible in gross_income in ------- the repayment of dollar_figure---------- in ------- does not affect gross_income in -- ------- it is deductible in ------- to the extent allowable see revrul_79_311 1979_2_cb_25 the following is an excerpt from irs publication on wage repayments repayment of prior year wages if you receive repayments for wages paid during a prior year report an adjustment on form 941-x or form 944-x to recover the social_security and medicare taxes you may not make an adjustment for income_tax_withholding because the wages were wages and income to the employee for the prior year you also must file forms w-2c and w-3c with the ssa to correct social_security and medicare wages and taxes do not correct wages box on form w-2c for the amount_paid in error give a copy of form w-2c to the employee employee reporting of repayment the wages paid in error in the prior year remain taxable to the employee for that year this is because the employee received and had use of those funds during that year the employee is not entitled to file an amended_return form 1040x to recover the income_tax on these wages instead the employee is entitled to a deduction or credit in some cases for the repaid wages on his or her income_tax return for the year of repayment i hope this is helpful --------------------- ---------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------- ---------------------


internal_revenue_service number release date index number ------------------- ---------------------------------------- -------------------------------- ----------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------ telephone number ---------------------- refer reply to cc corp b04 plr-105615-17 date date legend parent sub sub date company official tax professional dear ----------------- --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- ------------------- --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- ------------------------ --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- ------------------------ ---------------------------- --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- -------------------------------- --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- -------------------------------- this letter responds to a letter submitted on behalf of parent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations plr-105615-17 to file an election the extension is being requested for parent sub and sub to elect to file a consolidated federal_income_tax return under sec_1_1502-75 of the income_tax regulations with parent as the common parent hereinafter referred to as the election for the taxable_year ending date the material information submitted for consideration is summarized below for the taxable_year ending date parent was the common parent of an affiliated_group consisting of parent sub and sub parent as the common parent intended to file a consolidated_income_tax_return for the taxable_year ending date the election was due on the last day prescribed by law including extensions of time for filing parent's return but for various reasons parent did not timely file the election additionally parent failed to include sub in the consolidated_return subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for the parent affiliated group's taxable_year for which it wants to make the election parent represents that it does not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time of the request taking into account any qualified_amended_return within the meaning of sec_1_6664-2 sec_1_1502-75 provides that a group which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in the manner provided in sec_1_1502-75 to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed no later than the last day prescribed by law including extensions of time for filing the common parent's return under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-105615-17 in this case the time for filing the election is fixed by the regulations ie sec_1_1502-75 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for the parent affiliated_group to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service and that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election see sec_301_9100-3 and v based on the facts and information submitted including the affidavits submitted and the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided that parent sub and sub qualify substantively to file a consolidated_return for the applicable_taxable_year an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election by filing a consolidated_return with parent as the common parent and attaching a form_1122 for each of sub and sub for the taxable_year ending date parent having already filed a consolidated federal_income_tax return for the taxable_year must correct the return to include sub and must attach a copy of this letter to the corrected return if such return is filed electronically the requirement of attaching a copy of this letter to the return may be satisfied by attaching a statement to the corrected return that provides the date on date and control number of plr-105615-17 this letter_ruling the above extension of time is conditioned on the parent affiliated group's tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money we express no opinion as to the parent affiliated group's tax_liability for the years involved a determination thereof will be made by the applicable director's office upon audit of the income_tax returns involved except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any item discussed or referenced in this letter in particular we express no opinion with respect to whether parent sub and sub qualify substantively to make the election in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions plr-105615-17 of any other section of the internal_revenue_code or regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the return or the election late that are not specifically set forth in this letter for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made under penalty of perjury by parent company official and tax professional the director however should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable continue to apply this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely ____________________________________ ken cohen chief branch office of associate chief_counsel corporate cc


t c memo united_states tax_court jacqueline sable a k a jacqueline sabal petitioner v commissioner of internal revenue respondent docket no filed date jacqueline sable pro_se alison w lehr for respondent memorandum opinion ruwe judge this matter is before the court on respondent's motion to dismiss for lack of jurisdiction the sole issue for decision is whether the petition in this case was filed within the 90-day period prescribed by sec_6213 a as augmented by sec_7502 and the regulations thereunder the notice_of_deficiency in this case was mailed on date the 90-day period under sec_6213 for timely filing a petition expired on thursday date petitioner's petition was properly addressed and mailed2 to the tax_court in a large envelope bearing a privately metered postmark dated date the postmark also indicates the origin of mailing as fort lauderdale florida the petition was received and filed by the court on date days beyond the period for filing prescribed by sec_6213 generally the court does not have jurisdiction over a case unless the petition is filed within the days allowed by sec_6213 under sec_7502 however some relief is provided in those cases where the petition is mailed within the 90-day period but received for filing after the expiration of that period sec_7502 provides that the date of the u s 1unless otherwise indicated all section references are to the internal_revenue_code as amended 2the petition was mailed to the court by certified mail however this does not afford petitioner any relief since the regulation dealing with certified mail sec_301_7502-1 proced admin regs applies only if the taxpayer has an employee of the u s postal service postmark the sender's receipt there is no evidence that this was done here 3the petition lists petitioner's residence as pompano beach florida postmark stamped on the envelope in which such petition is mailed shall be deemed to be the date of delivery if certain requirements are met with respect to privately metered mail sec_7502 states that the provisions of sec_7502 will apply only if and to the extent provided by regulations prescribed by the secretary regulations have been promulgated pursuant to sec_7502 to govern cases involving privately metered mail sec_301_7502-1 proced admin regs provides in part b if the postmark on the envelope or wrapper is made other than by the united_states post office the postmark so made must bear a date on or before the last date or the last day of the period prescribed for filing the document and the document must be received by the agency officer or office with which it is required to be filed not later than the time when a document contained in an envelope or other appropriate wrapper which is properly addressed and mailed and sent by the same class of mail would ordinarily be received if it were postmarked at the same point of origin by the united_states post office on the last date or the last day of the period prescribed for filing the document thus sec_7502 applies to privately metered mail if the postmark bears a timely date and delivery occurs within the time that it ordinarily takes for delivery of an envelope bearing a postmark of the u s postal service properly mailed on the last day prescribed for filing the petition in issue was mailed in an envelope bearing a privately metered postmark with the timely date of date therefore petitioner satisfies the first element of sec_301_7502-1 proced admin regs however respondent argues that petitioner does not satisfy the second element of this section because a properly addressed envelope mailed by regular mail from the boca raton area and bearing a united_states postmark with a date of date would have ordinarily been received on date at the tax_court since the petition was not filed until date respondent concludes that it was not timely respondent misinterprets the requirement of sec_301_7502-1 proced admin regs the regulation clearly states that the ordinary period of time it takes for delivery starts on the last day prescribed for filing not as respondent contends the date indicated on the privately metered postmark the last day for filing the petition was date for purposes of deciding this motion we accept respondent's allegation that the ordinary delivery period for properly addressed regular mail from the boca raton area to the tax_court is approximately days therefore had the petition been 4whether the petition was received by the tax_court within the time that a document mailed on the 90th day would have ordinarily been received is purely a factual question 69_tc_896 although we apply respondent's allegation of ordinary delivery time for purposes of this case we make no independent finding of fact regarding this continued mailed on thursday date days later would have been sunday date since there is no mail delivery to the tax_court on weekends weekend mail deliveries are held until the following monday morning thus the petition would not have reached the tax_court until monday date the petition in issue was received by the court on date therefore we find that the petition was timely filed under sec_7502 and the regulations thereunder since it reached the court at the same time an envelope properly addressed mailed and postmarked by the u s postal service on date ordinarily would have reached the court mccurry v commissioner tcmemo_1981_68 an appropriate order will be issued continued matter