Minnick v. Commissioner, No. 13-73234 (9th Cir. 2015)Annotate this Case
Taxpayers took out a $400,000 loan secured by an undeveloped plot of land intending to use the funds to develop the land. Taxpayers donated a conservation easement on parts of the plot that would not be developed. Despite warranties in the easement agreement to the contrary, the land was still subject to the mortgage. The mortgage had not been subordinated to the easement. The Tax Court held that Taxpayers were deficient in taxable years 2007 and 2008, affirming the Commissioner’s disallowance of the charitable deduction for those years because of Taxpayers’ failure to ensure the subordination of the mortgage held by U.S. Bank at the time of the gift. The court held that, in order for the donation of a conservation easement to be protected “in perpetuity,” any prior mortgage on the land must be subordinated at the time of the gift. Accordingly, the court affirmed the judgment.