Court Opinion

ID: 4550455
Source: CourtListenerOpinion
Date Created: 2020-07-23 04:02:19.077545+00
Date Added: 2024-06-11T13:06:09.102750
License: Public Domain

T.C. Memo. 2020-112

                         UNITED STATES TAX COURT

           BELAIR WOODS, LLC, EFFINGHAM MANAGERS, LLC,
                  TAX MATTERS PARTNER, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

      Docket No. 19493-17.                        Filed July 22, 2020.

      David M. Wooldridge, Ronald Levitt, Gregory P. Rhodes, and Michelle A.

Levin, for petitioner.

      Christopher D. Bradley, Jason P. Oppenheim, John W. Sheffield III, and

John T. Arthur, for respondent.

                          MEMORANDUM OPINION

      LAUBER, Judge: This is one of many cases in this Court involving chari-

table contribution deductions for conservation easements. Currently before the
                                        -2-

[*2] Court is a motion for partial summary judgment filed by the Internal Revenue

Service (IRS or respondent). Respondent contends that the charitable contribution

deduction claimed by Belair Woods, LLC (Belair), was properly disallowed be-

cause the conservation purpose underlying the easement was not “protected in

perpetuity” as section 170(h)(5)(A) requires.1 That is so, respondent urges, be-

cause the easement deed contravenes the requirement that the grantee receive, in

the event the easement is extinguished, a proportionate share of the proceeds upon

any subsequent sale of the property. See sec. 1.170A-14(g)(6), Income Tax Regs.2

      The questions presented by respondent’s motion are substantially similar to

those decided adversely to the taxpayers in PBBM-Rose Hill, Ltd. v. Commission-

      1
       Unless otherwise indicated, all statutory references are to the Internal
Revenue Code (Code) in effect for the year at issue, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all paragraph references are to the
paragraphs of the deed of conservation easement at issue. We round monetary
amounts to the nearest dollar.
      2
        This is the third opinion we have issued in this case. In Belair Woods, LLC
v. Commissioner, T.C. Memo. 2018-159, we held that Belair failed to satisfy the
requirement that it attach a fully-completed “appraisal summary” to the return on
which its deduction was claimed. See sec. 1.170A-13(c)(2)(i)(B), Income Tax
Regs. However, we reserved for trial the question whether Belair could excuse
this failure by showing that it “[wa]s due to reasonable cause and not to willful ne-
glect.” See sec. 170(f)(11)(A)(ii)(II). In Belair Woods, LLC v. Commissioner,
154 T.C. ___ (Jan. 6, 2020), we addressed, and resolved mostly in respondent’s
favor, the parties’ dispute as to whether the IRS had obtained timely supervisory
approval, as required by section 6751(b)(1), for the accuracy-related penalties it
determined in this case.
                                         -3-

[*3] er, 900 F.3d 193 (5th Cir. 2018); Oakbrook Land Holdings, LLC v.

Commissioner, 154 T.C. __ (May 12, 2020); Coal Prop. Holdings, LLC v.

Commissioner, 153 T.C. 126 (2019); and Carroll v. Commissioner, 146 T.C. 196

(2016). But petitioner also proffers in support of its position several arguments

that we have not previously addressed. Adhering to the analyses in our prior

opinions, and rejecting the additional arguments petitioner advances, we will grant

respondent’s motion.

                                     Background

      There is no dispute as to the following facts, which are drawn from the peti-

tion, the parties’ motion papers, and the attached declarations and exhibits. Belair

is a Georgia limited liability company (LLC) that has operated at all times as a

partnership for Federal income tax purposes. Belair had its principal place of

business in Georgia when it filed its petition.

      In December 2008 Belair acquired, by contribution from HRH Investments,

LLC (HRH), a 145-acre tract of land in Effingham County, Georgia. On Decem-

ber 30, 2009, Belair donated a conservation easement over 141 acres of that tract

to the Georgia Land Trust (GLT or grantee), a “qualified organization” for pur-
                                         -4-

[*4] poses of section 170(h)(3). We will refer to this 141-acre tract as the

conserved area or the Property. The deed of easement was recorded the same day.3

      The easement deed recites several conservation purposes, including promo-

tion of governmental policies set forth in Georgia’s Uniform Conservation Ease-

ment Act and related laws. See Ga. Code Ann. secs. 44-10 et seq., 48-7-29.12

(2019). The deed generally prohibits commercial or residential development. But

it reserves certain rights to Belair as grantor, including the rights to conduct

commercial agricultural and timber-harvesting activities within the conserved

area. Belair also reserved the right to construct within the conserved area “a

limited number of new improvements.” These improvements could include the

development of “woods roads” for permitted agricultural and forestry activities,

construction of an irrigation system capable of irrigating up to 20 acres,

maintenance of existing roads, construction of two ponds for recreational pur-

      3
       HRH or its affiliates contributed other tracts of land in Effingham County
to other LLCs, and Effingham Managers, LLC, petitioner in this case, served as
tax matters partner for most of these LLCs. Each LLC granted a conservation
easement to GLT. The IRS has challenged the charitable contribution deductions
claimed by the LLCs for those other donations. See Englewood Place, LLC v.
Commissioner, T.C. Memo. 2020-105; Maple Landing, LLC v. Commissioner,
T.C. Memo. 2020-104; Riverside Place, LLC v. Commissioner, T.C. Memo.
2020-103; Village at Effingham, LLC v. Commissioner, T.C. Memo. 2020-102;
Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24; Cottonwood Place,
LLC v. Commissioner, T.C. Dkt. No. 14076-17; Red Oak Estates, LLC v. Com-
missioner, T.C. Dkt. No. 13659-17.
                                         -5-

[*5] poses, and the construction of residential driveways and utilities (including

water, septic, and power lines) to serve a pair of adjacent two-acre residential

parcels owned by Belair.

      The deed recognizes the possibility that the easement might be extinguished

at some future date. In the event the property were sold following judicial extin-

guishment of the easement, paragraph 17 provided that “[t]he amount of the pro-

ceeds to which Grantee shall be entitled, after the satisfaction of any and all prior

claims, shall be determined, unless otherwise provided by Georgia law at the time,

in accordance with the Proceeds paragraph.” Paragraph 19, captioned “Proceeds,”

specified that the deed granted the Conservancy “a real property interest, immedi-

ately vested in Grantee,” and that this vested property interest entitled the

Conservancy to receive, in the event of an extinguishment, a share of any future

proceeds determined

      by multiplying the fair market value of the Property unencumbered by
      this Conservation Easement (minus any increase in value after the
      date of this Conservation Easement attributable to improvements) by
      the ratio of the value of the Conservation Easement at the time of this
      conveyance to the value of the Property at the time of this conveyance
      without deduction for the value of the Conservation Easement.

      Belair timely filed Form 1065, U.S. Return of Partnership Income, for its

taxable year beginning November 11 and ending December 31, 2009. On that
                                        -6-

[*6] return it claimed a charitable contribution deduction of $4,778,000 for its

donation of the easement. Belair relied on an appraisal by David R. Roberts, who

used the “before and after method” to determine the easement’s fair market value

(FMV).4

      The IRS selected Belair’s 2009 return for examination. On June 19, 2017,

the IRS issued Belair a timely notice of final partnership administrative adjustment

(FPAA) disallowing the charitable contribution deduction in full because Belair

had not shown that the requirements of section 170 were met. The FPAA alterna-

tively determined that, if any deduction were allowable, Belair had not established

that the FMV of the easement exceeded zero. The FPAA determined a 40% “gross

valuation misstatement” penalty under section 6662(h) and (in the alternative) a

20% accuracy-related penalty under other provisions of section 6662(a).

      Petitioner timely petitioned this Court for readjustment of the partnership

items. See sec. 6226(f). On October 11, 2018, respondent filed a motion for par-

      4
       Mr. Roberts’ appraisal states that the 145-acre tract was part of a larger
1,447-acre tract acquired by HRH in August 2007 for $3,818,200, or $2,639 per
acre. Assuming that to be true, Mr. Roberts’ valuation supposed that the Property
had appreciated in value by nearly 1,300% during the Great Recession. Mr.
Roberts was the original appraiser in many other conservation easement cases that
this Court has decided. See, e.g., Plateau Holdings, LLC v. Commissioner, T.C.
Memo. 2020-93; Woodland Prop. Holdings, LLC v. Commissioner, T.C. Memo.
2020-55; Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24.
                                        -7-

[*7] tial summary judgment addressed to the “judicial extinguishment” issue.

Petitioner timely responded to that motion.

                                     Discussion

A.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

unnecessary, and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commis-

sioner, 116 T.C. 73, 74 (2001). We may grant partial summary judgment regard-

ing an issue as to which there is no genuine dispute of material fact and a decision

may be rendered as a matter of law. Rule 121(b); Elec. Arts, Inc. v. Commission-

er, 118 T.C. 226, 238 (2002). Petitioner has alleged no genuine dispute of materi-

al fact affecting the question that respondent has proposed for summary adjudica-

tion. We conclude that this question may appropriately be adjudicated summarily.

B.    Judicial Extinguishment

      The Code generally restricts a taxpayer’s charitable contribution deduction

for the donation of “an interest in property which consists of less than the taxpay-

er’s entire interest in such property.” Sec. 170(f)(3)(A). But there is an exception

for a “qualified conservation contribution.” Sec. 170(f)(3)(B)(iii), (h)(1). For the

donation of an easement to be a “qualified conservation contribution,” the conser-

vation purpose must be “protected in perpetuity.” Sec. 170(h)(5)(A).
                                        -8-

[*8] The regulations set forth detailed rules for determining whether this “protec-

ted in perpetuity” requirement is met. Of importance here are the rules governing

the mandatory division of proceeds in the event the property is sold following a

judicial extinguishment of the easement. See sec. 1.170A-14(g)(6), Income Tax

Regs. The regulations recognize that “a subsequent unexpected change in the con-

ditions surrounding the property that is the subject of a donation * * * can make

impossible or impractical the continued use of the property for conservation pur-

poses.” Id. subdiv. (i). Despite that possibility, “the conservation purpose can

nonetheless be treated as protected in perpetuity if the restrictions are extinguished

by judicial proceeding” and the easement deed ensures that the charitable donee,

following sale of the property, will receive a proportionate share of the proceeds

and use those proceeds consistently with the conservation purposes underlying the

original gift. Ibid. In effect, the “perpetuity” requirement is deemed satisfied be-

cause the sale proceeds replace the easement as an asset deployed by the donee

“exclusively for conservation purposes.” Sec. 170(h)(5)(A).

      The judicial extinguishment provisions of the deed in this case are substan-

tially similar to those that we considered in Coal Prop. Holdings, 153 T.C. 130-

131. Following our reasoning in that case, we conclude that Belair’s deed fails to

satisfy the “protected in perpetuity” requirement for two reasons.
                                         -9-

[*9] First, the regulatory fraction used in the deed to determine the grantee’s

proportionate share of post-extinguishment proceeds is applied, not to the full sale

proceeds--an amount presumably equivalent to the FMV of the property at the

time of sale--but to the proceeds “minus any increase in value after the date of this

Conservation Easement attributable to improvements.” Thus, the grantee’s share

is improperly reduced on account of (i) appreciation in the value of improvements

existing when the easement was granted plus (ii) the FMV of any improvements

that the donor or its successors subsequently make to the property. By reducing

the grantee’s share in this way, the deed violates the regulatory requirement that

the donee receive, in the event the property is sold following extinguishment of

the easement, a share of proceeds that is “at least equal to the proportionate value

that the perpetual conservation restriction at the time of the gift, bears to the value

of the property as a whole at that time.” See sec. 1.170A-14(g)(6)(ii), Income Tax

Regs.

        As we have noted previously, the requirements of this regulation “are strict-

ly construed.” Carroll, 146 T.C. 212. Because the grantee in this case “is not

absolutely entitled to a proportionate share of * * * [the] proceeds” upon a post-

extinguishment sale of the Property, the conservation purpose underlying the con-

tribution is not “protected in perpetuity.” Coal Prop. Holdings, LLC, 153 T.C.
                                        - 10 -

[*10] at 127, 139; accord, Plateau Holdings, LLC v. Commissioner, T.C. Memo.

2020-93, at *23; Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo.

2020-54. The U.S. Court of Appeals for the Fifth Circuit has likewise sustained

the disallowance of a charitable contribution deduction where the judicial

extinguishment provision of an easement deed included a carve-out for donor

improvements similar to that here. See PBBM-Rose Hill, 900 F.3d at 208.

      The easement deed here has a second problem, which was also present in

Coal Prop. Holdings. The grantee’s tentative share of the proceeds, as determined

under paragraph 19 of the deed, is adjusted further by paragraph 17. It provides

that the grantee’s share will be determined under the Proceeds paragraph, but only

“after the satisfaction of any and all prior claims.” Prior claims against the sale

proceeds might be held by various creditors of Belair or its successors.

      It is not necessarily unreasonable for a deed to provide that prior claims may

be paid from sale proceeds. What is unreasonable is the requirement that all prior

claims be paid out of the grantee’s share of the proceeds, even if those claims

represent liabilities of Belair or its successors. See Coal Prop. Holdings, LLC, 153
T.C. 145 n.5. Because the grantee’s share of the proceeds is improperly reduced

by carve-outs both for donor improvements and for claims against the donor, the
                                           - 11 -

[*11] deed’s judicial extinguishment provisions do not satisfy the regulatory

requirements.

         If the regulation is interpreted, as we have interpreted it, to make Belair

ineligible for a charitable contribution deduction, Belair contends that the regula-

tion is invalid. It urges that section 1.170A-14(g)(6), Income Tax Regs., is an

“arbitrary and capricious” rule promulgated in violation of the Administrative

Procedure Act. And it contends that the regulation is substantively invalid under

the test set forth in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S.
837 (1984). We comprehensively addressed and rejected both of these arguments

in a recent Court-reviewed Opinion. See Oakbrook Land Holdings, LLC v. Com-

missioner, 154 T.C. at __ (slip op. at 15-33). We need not repeat that analysis

here.5

         5
        Petitioner draws our attention to Priv. Ltr. Rul. 200836014 (Sept. 5, 2008)
(PLR), in which the IRS found unobjectionable an easement deed with a judicial
extinguishment clause resembling that here. Petitioner contends that respondent’s
interpretation of the regulation as set forth in that PLR is binding on respondent
under Auer v. Robbins, 519 U.S. 452, 461 (1997). Petitioner’s argument ignores
the fact that determinations embodied in a PLR “may not be used or cited as prece-
dent.” Sec. 6110(k)(3). The taxpayer in PBBM-Rose Hill brought the same PLR
to the Court of Appeals’ attention, but that court paid no heed to it, finding the
regulation unambiguous on its face. See PBBM-Rose Hill, Ltd. v. Commissioner,
900 F.3d 193, 207-208 (5th Cir. 2018). We have done the same. See Coal Prop.
Holdings, 153 T.C. 144; Hewitt v. Commissioner, T.C. Memo. 2020-89, at *20-
*21 (concluding that the PLR “is neither persuasive nor relevant”).
                                          - 12 -

[*12] C.     Petitioner’s Additional Arguments

      1.     Estoppel

      Petitioner contends that judicial estoppel should prevent the IRS from disal-

lowing Belair’s deduction because, in an unrelated case, the Government stipulat-

ed that a deed with an analogous extinguishment clause satisfied the regulations.

Petitioner directs our attention to DMB Realco LLC v. United States, Civil

No. 16-1585-NVW (D. Ariz. filed May 23, 2016), where the IRS had disallowed a

$26.44 million charitable contribution deduction for a conservation easement. The

parties filed a “joint stipulation of facts for purposes of summary judgment” in

which they stipulated that the easement deed, originally conveyed in 2006, satis-

fied the “judicial extinguishment” regulation after the deed was amended in 2012.

The Government concurrently filed a motion for summary judgment contending

that the original, unamended deed controlled as to whether the taxpayer was enti-

tled to a deduction. Before the court could hear argument on that motion, the par-

ties reached a settlement that allowed the taxpayer a deduction of $6.61 million.

      Judicial estoppel applies in the Tax Court. See Huddleston v. Commission-

er, 100 T.C. 17, 28 (1993). Generally, three non-exhaustive factors guide our

analysis when asked to invoke this doctrine. We consider whether: (1) “a party’s

later position * * * [is] ‘clearly inconsistent’ with its earlier position,” (2) “the
                                        - 13 -

[*13] party has succeeded in persuading a court to accept that party’s earlier

position,” and (3) “the party seeking to assert an inconsistent position would

derive an unfair advantage.” New Hampshire v. Maine, 532 U.S. 742, 750-751

(2001). Where (as here) a party seeks to invoke judicial estoppel on the basis of a

prior proceeding to which it was not a party, the Court of Appeals for the Eleventh

Circuit--to which an appeal of this case would appear to lie--instructs trial courts

to apply a stricter, two-factor test. That test asks whether: “(1) the party took an

inconsistent position under oath in a separate proceeding, and (2) the inconsistent

positions were ‘calculated to make a mockery of the judicial system.’” Slater v.

U.S. Steel Corp., 871 F.3d 1174, 1181 (11th Cir. 2017) (quoting Burnes v. Pemco

Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002)).

      None of these conditions is met here. The Government’s “earlier position”

was simply a concession, and it evidently made that concession for the purpose of

facilitating summary judgment on another theory that it deemed meritorious. Par-

ties to litigation make concessions for all sorts of reasons unrelated to the underly-

ing merits, and the Government’s action in the Arizona case was not “clearly in-

consistent” with respondent’s current position. Ibid. (quoting New Hampshire,

532 U.S. at 750-751). Nor did the Government “persuad[e] a court to accept * * *

[its] earlier position.” Ibid. Because the Government made a tactical stipulation
                                        - 14 -

[*14] and ultimately settled the case, the District Court had no occasion either to

accept or to reject the Government’s position. See Kaplan v. Commissioner, 795
F.3d 808, 813 (8th Cir. 2015), aff’g T.C. Memo. 2014-43. Finally, petitioner has

not shown how the Government’s concession in the earlier case would allow it to

derive “an unfair advantage,” see New Hampshire, 532 U.S. at 751, much less that

it was “calculated to make a mockery of the judicial system,” see Slater, 871 F.3d

at 1181; Smith Lake, LLC v. Commissioner, T.C. Memo. 2020-107.

      2.     Supposed Irrelevance of Improvements

      The regulation requires that the grantee must be entitled to a proportionate

share of proceeds from a subsequent sale, exchange, or involuntary conversion “of

the subject property.” Sec. 1.170A-14(g)(6)(ii), Income Tax Regs. The “subject

property” means “the property that is the subject of a donation under this para-

graph,” as to which the surrounding conditions have unexpectedly changed. Id.

subdiv. (i). Petitioner urges that the regulation does not require the grantee to

receive any proceeds attributable to improvements because improvements are not

part of “the property that is the subject of a donation under this paragraph.” Ibid.

Rather, petitioner contends that the “property that is the subject of [the] donation”

is simply “the underlying land.”
                                         - 15 -

[*15] We disagree. The donation of a conservation easement gives rise to a de-

duction only if it imposes “a restriction (granted in perpetuity) on the use which

may be made of the real property.” Sec. 170(h)(2)(C). The “donation under this

paragraph” thus consists of the use restrictions that are imposed in perpetuity by

the easement deed. See sec. 1.170A-14(g)(6)(i), Income Tax Regs. The restric-

tions imposed by the easement deed necessarily apply, not only to the land, but

also to any improvements made by the grantor pursuant to its reserved rights.

      Here, the deed reserves to Belair the right to conduct forestry and agricul-

tural activities, but it restricts the scale of those activities and the manner in which

they may be performed. Para. 4(a) and (b). The deed reserves to Belair the right

to “construct a limited number of new improvements,” but restricts that right in

various ways. The deed specifies the permissible location of residential driveways

and utility lines, including water, septic, and power lines. Para. 4(e)(i). Utility

lines must be buried if possible “so as to minimize interference with the scenic

nature” of the conserved area. Ibid. The installation of any irrigation system must

not “interfere with the Conservation Values protected herein.” Para. 4(e)(ii).

“Utility and driveway placement and any construction performed shall be done in

such a manner as to minimize damage to the environment and the Conservation

Values.” Para. 4(e)(iii). “Roads, the driveway and utilities shall not be placed in
                                       - 16 -

[*16] locations which significantly interfere with the Conservation Values.” Ibid.

Any ponds constructed may not exceed four acres in toto, may not “impact the

ecological integrity of any wetlands [or] creek,” and are conditioned on the

Conservancy’s approval as to location. Para. 4(f).

      In short, the deed’s restrictions are imposed on the entirety of the conserved

area--both the land and any improvements Belair makes to it. The “property that is

the subject of * * * [the] donation” thus includes both the land and its improve-

ments. Sec. 1.170A-14(g)(6)(i), Income Tax Regs.; see Hewitt v. Commissioner,

T.C. Memo. 2020-89, at *18 (“The subject property refers to the property that is

sold that generates the proceeds after the easement is extinguished.”). The pro-

ceeds that the Conservancy must receive upon a post-extinguishment sale of the

subject property thus include the Conservancy’s proportionate share of proceeds

attributable to improvements.6

      6
       This conclusion is consistent with a commonsense understanding of the
regulatory language referring to proceeds from sale “of the subject property.” Sec.
1.170A-14(g)(6)(ii), Income Tax Regs. Owners of real estate do not typically sell
roads, driveways, ponds, or buried utility lines separately from the real estate on
which those improvements are situated. If the property is sold, the sale proceeds
are necessarily attributable both to the land and to the attached improvements.
                                        - 17 -

[*17] 3.     Supposed Worthlessness of Improvements

      Petitioner next asserts that any future improvements would not meaningfully

increase the value of the subject property. For that reason, petitioner contends that

the deed’s carve-out for donor improvements would not cause the Conservancy to

receive less than its full proportionate share of post-extinguishment proceeds. In

essence, petitioner urges that this is a case of “no harm, no foul.”

      Again we disagree. To start, petitioner’s contention rests uneasily with the

terms of the deed. Paragraph 4(a) reserves to Belair the right to “construct a limit-

ed number of new improvements” and enumerates the types of improvements that

Belair may make. Paragraph 19 explicitly subtracts from the sale proceeds, and

reserves to Belair, “any increase in value after the date of this Conservation Ease-

ment attributable to improvements.” It is hard to understand why the draftsperson

would have included this language if Belair had believed that its anticipated im-

provements would not enhance the property’s value. And it seems entirely plausi-

ble that they would do so: Roads, driveways, irrigation systems, water pipes, elec-

tric cables, and septic systems have value intrinsically and as furnishing essential

services to Belair’s adjoining residential parcels.

      Deductions are a matter of legislative grace, and a taxpayer must prove its

entitlement to the deductions it claims. INDOPCO, Inc. v. Commissioner, 503
                                       - 18 -

[*18] U.S. 79, 84 (1992). To be entitled to a deduction for the donation of a

conservation easement, the donor must ensure that the donation “gives rise to a

property right, immediately vested in the donee organization,” to receive a

proportionate share of the proceeds of any post-extinguishment sale. Sec. 1.170A-

14(g)(6)(ii), Income Tax Regs. The deed here does not meet this test because it

reserves to Belair the right to make “improvements” of obvious value and to retain

all proceeds attributable to those improvements.7

      4.     Georgia Law

      The regulation entitles the grantee to a proportionate share of post-extin-

guishment proceeds “unless state law provides that the donor is entitled to the full

proceeds from the conversion without regard to the terms of the prior perpetual

conservation restriction.” Ibid. Petitioner contends that Georgia law (the law ap-

plicable here) would preclude the Conservancy from receiving any proceeds in a

condemnation proceeding involving the property. According to petitioner, a con-

      7
        Citing Thornton v. Dep’t of Transp., 620 S.E.2d 621, 624 (Ga. Ct. App.
2005), petitioner urges that “the cost to build a driveway on a property does not
reflect the property’s fair market value.” It is true that money spent to improve
property does not necessarily produce a dollar-for-dollar increase in the FMV of
the property. But it does not follow that a combination of roads, driveways,
irrigation systems, water pipes, electric cables, and septic systems would have no
effect on the FMV of the conserved area. In any event, petitioner can only
speculate about the future value of the specific improvements it has retained the
right to make but has not yet made.
                                         - 19 -

[*19] servation easement is not compensable to the grantee in a Georgia

condemnation proceeding.

      Petitioner directs our attention to Anderson v. Lynch, 3 S.E.2d 85 (Ga.

1939). That case involved contiguous parcels of land, each subject to a covenant

restricting it to residential use. The city condemned one of the lots for use as a

public road, a nonresidential use. The court held that the owners of the neighbor-

ing lots had no compensable interest in the condemnation proceeding, reasoning

that they held no property interest in the lot sought to be condemned. Id. at 89.

“The most that can be said,” the court concluded, “is that the restrictive covenants

* * * are enforceable as between the parties thereto and their successors with

notice. They do not convey an interest in the land.” Ibid.

      Petitioner’s argument is unpersuasive for at least three reasons. First, peti-

tioner cites no Georgia authority that extends the principles of Anderson to conser-

vation easements held by charitable organizations. Well after Anderson was de-

cided, Georgia enacted (with a few minor alterations) the Uniform Conservation

Easement Act. See Ga. Code Ann. secs. 44-10 et seq. Georgia’s public policy

now appears to favor enforcement of conservation easements; indeed, the deed in

this case recites several of these policies. See supra p. 4.
                                       - 20 -

[*20] Second, the court in Anderson reasoned that the plaintiffs owned no prop-

erty interest in the land sought to be condemned. Here, by contrast, the deed of

easement explicitly grants the Conservancy “a real property interest, immediately

vested in Grantee.” Para. 19; see sec. 1.170A-14(g)(6)(ii), Income Tax Regs.

(requiring donor to agree that the easement “gives rise to a property right, immedi-

ately vested in the donee organization”).

      Georgia’s takings clause now makes compensable “every species of proper-

ty, real and personal, corporeal and incorporeal.” Bowers v. Fulton Cty., 146 S.E.
2d 884, 889 (Ga. 1966). Moreover, whereas the plaintiffs’ claims in Anderson

were speculative, the deed here provides an explicit method for determining the

value of the Conservancy’s real property interest. See Palm Beach Cty. v. Cove

Club Inv’rs Ltd., 734 So. 2d 379, 385-387 (Fla. 1999) (distinguishing Anderson

and related cases where a condemnation claimant had a contractual right to com-

pensation that was “far from speculative,” reducing the risk of “an endless number

of claims based on unknown and incalculable depreciation of value to land”).

      Finally, as petitioner recognizes, Anderson addressed the narrow situation

where property was “converted to public use through a condemnation.” The extin-

guishment regulation, by contrast, applies broadly wherever an “unexpected

change in the conditions surrounding the property * * * make[s] impossible or
                                       - 21 -

[*21] impractical * * * [its] continued use * * * for conservation purposes.” Sec.

1.170A-14(g)(6)(i), Income Tax Regs. Even if Anderson were thought to deny the

Conservancy any proceeds in the event of condemnation, petitioner has supplied

no Georgia authority for the proposition that the same result would follow if the

easement were judicially extinguished in other ways or for other reasons, e.g.,

because the property had become blighted or the conservation purpose had other-

wise become impossible to accomplish. See Carroll, 146 T.C. 219 (reasoning

similarly regarding a Maryland condemnation provision). For all these reasons,

we hold that Anderson does not suffice to establish that Georgia law would entitle

Belair, following a judicial extinguishment of the easement, “to the full proceeds

from the conversion without regard to the terms of the * * * perpetual conserva-

tion restriction.” See sec. 1.170A-14(g)(6)(ii), Income Tax Regs.

      To implement the foregoing,

                                                An order will be issued granting

                                      respondent’s motion for partial summary

                                      judgment.