[MassHistPres] the IRS, facade easements, & tax breaks

[Stefan Nagel]

Yes, thanks for sending this around Dennis.  I had intended to do the same.
Some context:  First, bear in mind that the Trust for Architectural
Easements (formerly National Architectural Trust) focused its outreach and
promotional activities on properties located in National Register historic
districts.  Second, two recent court rulings, one relating to the National
Architectural Trust and one relating to the L'Enfant Trust of Washington,
DC, came to nearly contradictory conclusions concerning the qualification
and economic effect of preservation restrictions on properties located in
local, regulated historic districts.  The first ruling, by Tax Court Judge
Laro, is found at 1982 East LLC v. Commissioner, T.C. Memo 2011-84 (April
12, 2011).  This first ruling has previously been posted and discussed on
the Mass. preservation listserv.  Judge Laro found that, because the subject
property was located within a historic district regulated by the City of New
York (which is also a National Register historic district), the property was
effectively protected by the New York Landmarks Preservation Commission and
not by the terms of the preservation easement.  In Judge Laro's view, this
fact therefore disqualified the easement under the federal rules.  This
conclusion is of course very troublesome on a number of levels, including
the fact that the federal historic preservation easement regulations
require, in part, that - to be qualified for the federal tax benefit - a
property must either be located within a National Register district or be
individually listed on the National Register.

In a second, more recent case, the Circuit Court of Appeals for the DC
Circuit (i.e., a federal court) came to a contradictory conclusion with
respect to the effect of a preservation restriction on a property located in
a regulated and National Register historic district in Washington, DC.  The
Court of Appeals in Simmons v. Commissioner, Ct. Appeals No. 10-1063 (DC
Cir. June 21, 2011) held in effect that preservation easements on properties
located in regulated local historic districts which are also National
Register districts are "qualified" under IRC Section 170(h).  Equally
important, the Court ruled that, despite the existence and effect of local
regulation, there was value attributable to the donated preservation
easement.  

So, with this as some context, and in light of other IRS activity, it will
be interesting to read the details of the settlement agreement between the
Trust for Architectural Easements and the Department of Justice.  It should
be released relatively soon.

Stefan Nagel
_______________________________

Stefan Nagel, Esq., Of Counsel

Law Office of Stephen J. Small, Esq., P.C.

One Gateway Center, Suite 801

Newton, MA  02458-2804

Phone:  617-357-4012

Fax:  617-357-1857

www.lawofficeofstephensmall.com

snagel at stevesmall.com

 

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-----Original Message-----
From: masshistpres-bounces at cs.umb.edu
[mailto:masshistpres-bounces at cs.umb.edu] On Behalf Of Dennis De Witt
Sent: Thursday, June 30, 2011 1:38 PM
To: MHC MHC listserve
Subject: [MassHistPres] the IRS, facade easements, & tax breaks

There is an article of interest just posted on Forbs re the question of how
the IRS views facade easements and tax breaks, especially in LHDs.

See http:
//blogs.forbes.com/janetnovack/2011/06/16/feds-sue-trust-over-historic-easem
ent-tax-breaks/
a brief ad runs first but you can click past it.

Dennis De Witt
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