Charitable Contribution Deduction Denied for Donation of Easement Subject to Unsubordinated Mortgage

The U.S. Court of Appeals affirmed the Tax Court’s decision that denied a charitable contribution deduction for a donation of a conservation easement on real property that was subject to an unsubordinated mortgage.

The Petitioner of the Tax Court’s denial purchased a parcel of land with a mortgage, and then transferred a conservation easement of part of the land to a land conservancy. The Petitioner claimed a charitable donation deduction based on the conservation easement, but the IRS denied the deduction because the conservancy’s interest in the property was subject to an unsubordinated mortgage at the time of donation, and, therefore, the conservation purpose was not protected in perpetuity, as required by the Internal Revenue Code. The decision was affirmed by the Tax Court and the 10th Circuit.

See Mitchell v. Comm’r.

Posted by Jin Keol Park, Associate Editor, Wealth Strategies Journal

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