Prose by Tax Pros

Unless somebody has been living under the proverbial rock the past few years, he is aware that the IRS is aggressively attacking “syndicated” partnerships that donate conservation easements to charity and claim the related tax deductions. This is common knowledge. What many people do not realize, though, is that the IRS is pursuing others involved with easement donations, and methodically changing the rules to achieve its goals. For instance, with absolutely no fanfare, the IRS released in late January 2020 what appeared to be a routine, innocuous, procedural memorandum called “Interim Guidance on IRC 6695A Penalty Case Reviews” (“Interim Guidance”). The reality is that this Interim Guidance triggers a critical change, eliminating the multi-level review procedure formerly used by the IRS to protect appraisers against improper penalties and disciplinary referrals. This article explains the main concepts around easement donations, categories of IRS attacks against partnerships, evolution...

People generally despise paying taxes. They take various steps to avoid this hated duty, including hiding funds in a foreign financial account. A decade ago, depending on their methodology, taxpayers had a fighting chance of avoiding detection by the Internal Revenue Service . They did not file Forms TD F 90-22.1 or FinCEN Forms 114 (“FBARs”) to alert the IRS, and they simply watched as their money grew abroad on a tax-free basis, with relatively little concern that their day of reckoning would someday come. Now, though, things have changed.  The IRS has a long list of tools for finding unreported foreign accounts, and the Department of Justice is more than happy to assist by initiating lawsuits to collect unpaid FBAR penalties. While focused on similar issues, each FBAR case is unique, teaching valuable lessons about the evolving definition of “willfulness,” key procedural issues, etc. This article centers on the two most recent cases, Rum and Ott, and what they add to the dialog...

The IRS, consistent with repeated public announcements, continues to implement aggressive actions in its challenges of partnerships making conservation easement donations. Grounded in its unproven theory that many unrelated parties involved with a typical easement donation (e.g., organizers, landowners, accountants, appraisers, land trusts, etc.) somehow collaborated to do something improper, the IRS has become more insistent about seeking copies of pre-donation communications between parties, particularly accountants, whose roles vary considerably. For example, accountants might provide tax and/or information return preparation services, bookkeeping, compliance assistance, tax advice, entity formation, financial and tax calculations, due diligence of various sorts, or something else entirely. Section 7525 establishes a safeguard for accountants and others, called the federally authorized tax practitioner (“FATP”) privilege. It states that, when it comes to tax advice, the confidential...

The IRS continues to attack partnerships that donate conservation easements and pass the corresponding charitable tax deductions to their partners. One of its favorite methods is to raise a number of “technical” arguments, which ordinarily focus on alleged problems with a deed of conservation easement (“Deed”). A victory on a technicality creates a windfall for the IRS in the sense that it eliminates all the tax benefits for the partners without obligating the IRS to address thornier substantive issues, like easement valuation. In light of this reality, the IRS continues to introduce new “technical” arguments, such as a blanket assault on “commercial forestry.” In a recent Tax Court case, TOT Property Holdings, LLC, the IRS took the position that conservation easements and commercial forestry are “inherently inconsistent” and simply “cannot coexist.” The Tax Court did not rule on the matter, as the case was resolved on other grounds. Therefore, this important issue remains open.  L...