[IMGCAP(1)]Having played golf once in my life during my days at Ft. Bragg, N.C., I’m not exactly an avid golfer. But as two golf courses in North Carolina discovered last month, it’s getting tougher for them to successfully claim a charitable contribution deduction for a conservation easement.
In Atkinson et al. v. Commissioner of Internal Revenue, T.C. Memo 2015-236, the Tax Court found that the two courses in St. James Plantation, N.C., did not qualify for the deduction. A conservation easement is basically the granting of a qualified interest in real property to a qualified organization to be used exclusively for conservation purposes. Its deductibility is governed by Code section 170(h). The petitioners in the case were the members of the Members Club, and the tax matters partner of the Reserve Club.
The taxpayers in this case argued that the contributions satisfied the requirements of section 170(h)(4)(A)(ii) in that the contributions were made “for the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem, and (iii) in that they were made for the preservation of open space (including farmland and forest land) where such preservation is for the scenic enjoyment of the general public, or pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a significant public benefit.”
Although the IRS has lost a number of conservation easement cases regarding golf courses, it didn’t lose here. Both parties presented expert testimony as to whether the easement satisfied the requirements under section 170(h). The court found that neither of the golf clubs’ two claimed easements areas existed for the scenic enjoyment of the general public or yielded a significant public benefit.
“The public may be able to drive into St. James Plantation, but guards at the three gate houses control access to the development,” the court observed. In fact, it said, the record is “devoid of any evidence that the public has even visual access.”
The court concluded that the petitioners had failed to satisfy the requirements of section 170(h) and therefore are not entitled to deductions for qualified conservation contributions. However, it found them not liable for the accuracy-related penalties or gross valuation misstatement penalties.
I recently received a “teaser” email asking me if I could name the presidents of some of the largest corporations and banks in 1923. I couldn’t name any, but the upshot was that every one of them died insane or penniless, or after being released from prison. In the same year, the PGA championship was won by Gene Sarazen, who played golf until he was 92, and died in 1999 at the age of 97. He was financially secure at the time of his death.
The moral, according to the email, is “Forget work – play golf.”
While you may not get a share of a conservation easement contribution deduction, at least the health benefits may make you less reliant on medical care under the ACA.