Simmons US Tax Court Decision Handed Down

On September 15, 2009, the U.S. Tax Court handed down its decision in Simmons v. Commissioner (T.C. Memo. 2009-208). Mrs. Simmons had donated two easements to The L'Enfant Trust, one in 2003 and one in 2004, claiming charitable contribution deductions. The deductions were entirely disallowed by the Internal Revenue Service, which asserted that the donations were valueless and that in any event they failed to comply with statutory requirements for deductible conservation easements because of various provisions in the easement deed.

The Court held unambiguously that the easements on Mrs. Simmons properties are valid conservation easements, and it struck down all of the IRS arguments that various provisions in The L'Enfant Trust's deeds made Mrs. Simmons' gifts non-deductible. The Court also made clear "that the easements granted do affect the fair market value of the subject properties," and rejected as not "credible" the IRS's expert opinion to the contrary. The Court came close to "splitting the difference" between the deduction Mrs. Simmons had claimed and the zero valuation asserted by the IRS appraiser, finding that the easements resulted in a 5-percent reduction in the values of the subject properties. This reduction, the Court explained, "stems from the heightened financial burdens of an eased façade and L'Enfant's affirmative enforcement of its easements."
 
Previously, The L'Enfant Trust advised donors of the IRS's vigorous campaign against conservation easements. It is unclear whether the IRS will abandon its pursuit of these issues given the Simmons case. However, the Court's decision should provide D.C. property owners comfort that donations of conservation easements to The L'Enfant Trust and similar organizations with a proven record of affirmative easement enforcement will allow owners to take federal tax deductions.

Affirmed, June 21, 2011