First Circuit Rules Easement On Mortgaged Property Can Qualify As Charitable Deduction

The First Circuit has vacated (Docket Nos. 11-2017 & 11-2033) the Tax Court opinion in Kaufman v. Commissioner (136 T.C. No. 13), denying a charitable deduction for the contribution of a façade easement on a Boston townhouse. 

When the easement was granted, the property was subject to a mortgage. In general, a taxpayer must contribute the taxpayer's entire interest in property to a charitable organization to obtain a charitable deduction under Section 170. One exception to this general rule is for a qualified conservation contribution. Under Section 170(h)(1), a qualified conservation contribution is a contribution of a qualified real property interest that is exclusively for conservation purposes. An interest in property conveyed by a façade easement must be protected in perpetuity for the interest to be treated as a qualified conservation contribution. If a perpetual conservation restriction is extinguished, the regulations require that the charitable organization