Gunnison County rancher Nick Hughes sued the IRS over their devaluation of his conservation easement and has won, mostly. He still will have to pay an additional $437,153 since the value of his land was determined to be less than the $3 million originally determined. Here’s a report from Seth Mensing writing for the Crested Butte News. From the article:
The IRS had audited Hughes after he filed his 2000 taxes with a $3.1 million charitable contribution for 2,413 acres he had donated to Black Canyon Land Trust Inc. The land was placed in a conservation easement to protect it from future development.
The IRS countered that the donated land was worth between $0 and $238,135, and not more than $3 million as claimed by Hughes, according to expert testimony from the IRS included in the ruling. But Judge Wherry disagreed and overruled the IRS, placing a value of $2 million on the land. Hughes will now have to pay taxes on the remaining $1.1 million. Hughes’ attorney Joseph Thibodeau told the Denver Post, “It was a given that the contribution was allowable. The only issue was the amount [the land was worth].”[…]
Lucy Goehl, executive director of Gunnison Ranchland Conservation Legacy, said there have been several audits of conservation easements conducted by the IRS in Gunnison County, “but they’re all over the state and Gunnison County is not exempt from that.”
The ruling pointed out that the IRS engineers evaluating conservation easements are not certified appraisers, who are the only professionals able to place a value on property donated as a conservation easement. “I think the fact that the court gave very little weight to the matrix the IRS was using in valuing the land makes this an encouraging decision,” said Goehl. In response to that part of the ruling, the IRS asked the Colorado Division of Real Estate to grant their engineers certified appraiser status.
Ann Johnston, executive director of Crested Butte Land Trust, thinks the ruling will have an indirect affect on the trust’s efforts to preserve open space by giving legitimacy to the idea that land held in a conservation easement still has value. “What I’m hoping will happen here is that when these programs in Colorado go through cases like this, it’s showing that the programs are valuable and it could encourage people to donate land,” she said.