Montgomery-Alabama River, LLC v. Commissioner (T.C. Memo. 2021-62)

On May 17, 2021, the Tax Court issued a Memorandum Opinion in the case of Montgomery-Alabama River, LLC v. Commissioner (T.C. Memo. 2021-62). The primary issue presented in Montgomery-Alabama River was whether the Tax Court should certify (to the Alabama Supreme Court) the question of whether, under Alabama law, the petitioner would be entitled to the full proceeds of any sale if the easement were extinguished. Basic Legal Framework The governing regulation requires that the grantee receive, in the event an easement is extinguished, a proportionate share of the proceeds upon any subsequent sale of the property. Treas. Reg. § 1.170A-14(g)(6)(ii). This regulation makes an exception, however, if the applicable State law allows the donor to receive “the full proceeds from the conversion without regard to the terms of the prior perpetual conservation restriction.” Id. Basic Background and Wild Turkeys In September 2014 the petitioner acquired, by capital contribution, 132…

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Fumo v. Commissioner (T.C. Memo. 2021-61)

On May 17, 2021, the Tax Court issued a Memorandum Opinion in the case of Fumo v. Commissioner (T.C. Memo. 2021-61). The primary issue presented in Fumo was whether the petitioner, who was a very bad man who defrauded community charities, was liable for excise taxes under IRC § 4958(a)(1) as a “disqualified person.” Background The petitioner, as noted above, was (and likely still is) a real jerk.  He was elected to the Pennsylvania State Senate in 1978, representing the first district in Philadelphia. Reelected many times, he served as a State senator until 2008. His tenure ended in 2009 when he was convicted on Federal corruption charges and sentenced to 55 months in prison. One victim of his fraud was Citizens Alliance for Better Neighborhoods (Citizens Alliance), an IRC § 501(c)(3) charity. In May 2013, the IRS determined that petitioner was liable for excise taxes under IRC § 4958(a)(1),…

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