Opinion
20442-19
03-29-2024
MALIBU VALLEY LAND, LLC, SPECTRUM DEVELOPMENT, INC., TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Travis A. Greaves, Judge.
This case involves a charitable contribution deduction claimed by Malibu Valley Land, LLC (Malibu Valley), for a donation of a conservation easement. Malibu Valley has a principal place of business in California. Malibu Valley acquired 316 acres of land in Calabasas, California, in November 2013. In December 2014, Malibu Valley conveyed an easement on 298 acres of the land to Mountains Recreation and Conservation Authority and claimed a corresponding deduction. The Internal Revenue Service (respondent) issued a Notice of Final Partnership Administrative Adjustment (FPAA) to Spectrum Development, Inc., the tax matters partner for Malibu Valley for the tax year ending December 31, 2014, wherein respondent disallowed the charitable contribution deduction. Petitioner timely petitioned this Court for review. Respondent asserts that the judicial extinguishment clause in the deed does not comply with Treasury Regulation § 1.170A-14(g)(6)(ii) (judicial extinguishment regulation), and therefore, we should deny petitioner's deduction.
All amounts are rounded to the nearest whole number.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times.
On September 3, 2020, petitioner filed a Motion for Partial Summary Judgment, challenging the validity of the judicial extinguishment regulation.
In its attached Brief in Support, petitioner additionally asks for a ruling that the extinguishment clause of the deed satisfies the perpetuity requirement of section 170(h). Because this request was not included in the motion and neither party addressed the perpetuity requirement in absence of the regulation, we will not consider this issue in the resolution of this motion.
Among other arguments, petitioner asserts that the regulation is procedurally invalid under the Administrative Procedure Act because the Department of the Treasury failed to adequately respond to significant comments related to the judicial extinguishment regulation in the final regulation's "basis and purpose." Respondent objected to this motion, relying on our prior precedent that determined the regulation was valid. See Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020). Because of conflicting Courts of Appeals' decisions, on January 19, 2022, we ordered that petitioner's motion be held in abeyance, pending further development on the validity of the judicial extinguishment regulation.
We recently reconsidered our holding in Oakbrook Land Holdings, LLC, regarding the procedural validity of the judicial extinguishment regulation. See Valley Park Ranch, LLC v. Commissioner, No. 12384-20, 162 T.C., slip op. at 12-22 (Mar. 28, 2024). In Valley Park Ranch, LLC, we determined that the judicial extinguishment regulation is invalid for the exact procedural reason petitioner advances in this case. Id. at 12. Therefore, we will grant petitioner's Motion for Partial Summary Judgment.
Upon due consideration, it is ORDERED that petitioner's Motion for Partial Summary Judgment, filed September 3, 2020, is granted.