Partnerships, “Qualified Offers,” and Conservation Easement Disputes: Analyzing Problems with the IRS’s Positions, Now and Later



Taxpayers embroiled in a tax dispute often feel bullied by the IRS. This is particularly true with partnerships that donated conservation easements to charitable organizations, because the IRS has implemented a long list of aggressive enforcement tactics. The good news is that various mechanisms are available to taxpayers to turn the proverbial tide, one of which is submitting a “qualified offer” to the IRS. In simplified terms, if the IRS ignores or rejects a qualified offer, the case goes to trial, and the court rules that the taxpayer’s liability is less than the amount in the earlier qualified offer, then the IRS must reimburse the taxpayer’s reasonable administrative and/or litigation costs. 

Only two cases have addressed whether partnerships subject to the special proceedings created by the Tax Equity and Fiscal Responsibility Act (“TEFRA”) are able to make a qualified offer. Just one of these cases yielded a decision with precedential value, and it explained that TEFRA partnerships are entitled to file qualified offers. Nevertheless, the IRS seems entrenched in its traditional position, arguing as recently as September 2020, in a pending Tax Court case, that TEFRA partnerships are ineligible to file qualified overs, period.


About Hale E. Sheppard

HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

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