Hewitt v. Commissioner, No. 20-13700 (11th Cir. 2021)
Annotate this CaseThe Eleventh Circuit reversed the tax court's order disallowing taxpayers' carryover deduction for the donation of a conservation easement. The court concluded that the Commissioner's interpretation of I.R.C. 1.170A14(g)(6)(ii) is arbitrary and capricious and violates the Administrative Procedure Act's (APA) procedural requirements. The court explained that Treasury, in promulgating the extinguishment proceeds regulation, failed to respond to NYLC's significant comment concerning the post-donation improvements issue as to proceeds. Because the court found the Commissioner's interpretation of section 1.170A-14(g)(6)(ii) invalid under the APA, it concluded that the easement deed's subtraction of the value of post-donation improvements from the extinguishment proceeds allocated to the donee does not violate section 170(h)(5)'s protected-in-perpetuity requirement. The court remanded for further proceedings.