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Summaries - I

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Indian Creek Lumber Co. v. Commissioner
43 T.C.M. 841 Tax Ct. Mem. Dec. (CCH) 38,877(M), (P-H) ¶82,146
(Timber issue only)

The taxpayer produced lumber from timber purchased from the United States Forest Service (USFS) and numerous other outside sources. In 1973 the business, which included a USFS and a private timber cutting contract (Cheney), was sold. On its 1974 tax return taxpayer reported a long-term capital gain of $1,458,735 from the sale of the cutting contracts, pursuant to Section 631(b). The government contended that the sale of the contracts did not qualify for capital gains treatment under Section 631 (b) because an economic interest was not retained. Furthermore, the government maintained that the contracts did not otherwise qualify as Section 1231 property and were not capital assets since they fell within the exception to Section 1221 defined by Corn Products Refining Co. v. Commissioner, 350 U.S. 46 (1955).
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Irby v. Commissioner
139 T.C. No. 14; Nos. 7559-10, 7561-10, 7562-10

Petitioners are members of an LLC which conveyed conservation easements encumbering two parcels of land (one conveyance in 2003 and the other in 2004) to COL, a qualified organization as defined in I.R.C sec. 170(h)(3), in bargain sale transactions. The purchase portion of the transactions was funded with grants from Federal, State, and county agencies which were established to assist in the conservation of open land. The LLC reported gain with respect to the sale portion and a charitable contribution with respect to the remaining portion (the bargain portion) of the transactions. Petitioners reported their respective shares of the gain and deducted their respective share of the charitable contributions on their respective individual tax returns for years 2003 and 2004. In disallowing the charitable contribution deductions Petitioners claimed for the bargain portion of the transactions, Respondent determined that: (1) the conservation purpose for the easements was not protected in perpetuity because COL was required to reimburse the funding government agencies in the event it received proceeds should the land to which the easements relate be condemned and the easements extinguished; (2) Petitioners' appraisal report was not a "qualified appraisal" because the report did not include statements that the appraisal was prepared for income tax purposes; and (3) Petitioners did not obtain contemporaneous written acknowledgments from COL indicating the amount of goods or services that Petitioners received for the contribution.

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