Conservation Tax Break Fight Shifts Now to Property Valuations

A stunning US Tax Court reversal invalidating a controversial regulation the IRS has used to quash conservation easement deductions will shift the fight to the arena of property values and could even impact agency rulemaking broadly.

The decision that Treas. Reg. 1.170A-14(g)(6)(ii)—which the IRS used to block a $14.8 million conservation easement deduction based on its deed in Valley Park Ranch LLC v. Commissioner—is invalid under the Administrative Procedure Act will be an unexpected boon for taxpayers that otherwise would have been stymied by the rule.

Instead of relying on the rule to challenge easement deductions, the IRS ...