Glass v. Comm'r of Internal Revenue, 17878–99.

• Decision Date: 25 May 2005
• Docket Number: No. 17878–99.,17878–99.
• Citation: 124 T.C. 258,124 T.C. No. 16
• Parties: Charles F. and Susan G. GLASS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

124 T.C. 258

124 T.C. No. 16

Charles F. and Susan G. GLASS, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 17878–99.

United States Tax Court.

May 25, 2005.

L is a longstanding nonprofit nature conservancy, the tax-exempt purposes of which include the preservation of wildlife, plants, and natural land on or near the shoreline of Lake Michigan. Ps own approximately 10 acres of land (property) that includes a high undeveloped bluff on 460 feet of that shoreline. Bald eagles commonly frequent the bluff. In addition, dense vegetation grows naturally on the bluff. That vegetation includes a species of plant, Lake Huron tansy, that is considered to be threatened. The natural values of the bluff also allow it to create or promote a possible habitat for pitcher's thistle, another species of plant that is considered to be threatened and that is found on the Lake Michigan shoreline. Ps made contributions to L of two conservation easements (conservation easements) in perpetuity that generally preclude them or any subsequent owner of the property from ever developing or disturbing the natural state of much of the bluff. Ps contributed the first easement in 1992 and the second in 1993. Ps claimed on their 1992 and 1993 Federal income tax returns that the contributions were qualified conservation contributions under sec. 170(h)(1), I.R.C. R concedes that the contributions meet two of the three requirements for such a characterization; i.e., the portions of the bluff covered by the conservation easements are each a “qualified real property interest” and L is a “qualified organization”. R asserts that the contributions fail the third requirement, that they be “exclusively for conservation purposes”.

Held: Each of the contributions is a qualified conservation contribution under sec. 170(h)(1), I.R.C., in that (1) the conservation easements protect a relatively natural habitat of plants or wildlife as required by sec. 170(h)(4)(A)(ii), I.R.C., and (2) L (or any subsequent holder of the conservation easements) holds (or will hold) the conservation easements exclusively for conservation purposes as required by sec. 170(h)(5), I.R.C.

Charles F. Glass and Susan G. Glass, pro sese.¹

Alexandra E. Nicholaides, for respondent.

LARO, J.

Petitioners petitioned the Court to redetermine deficiencies of $26,539, $40,175, $26,193, and $22,771 in their Federal income taxes for 1992, 1993, 1994, and 1995, respectively. We decide whether petitioners' respective contributions in 1992 and 1993 of two conservation easements (collectively, conservation easements; separately, conservation easement 1 and conservation easement 2) were qualified conservation contributions under section 170(h)(1).² We hold they were. Petitioners claimed on their 1992 and 1993 Federal income tax returns (1992 return and 1993 return, respectively) that their contributions of the conservation easements were qualified conservation contributions. As further support for his disallowance of those claims, respondent in his posttrial brief argues for the first time that petitioners have not proven that they met the “contemporaneous written acknowledgment” requirement of section 170(f)(8). We consider this position to have been advanced untimely and do not decide it. See Leahy v. Commissioner, 87 T.C. 56, 64–65, 1986 WL 22154 (1986).

FINDINGS OF FACT

I. Background

Some facts were stipulated. We incorporate herein by this reference the parties' stipulation of facts and the exhibits submitted therewith. We find the stipulated facts accordingly. Petitioners are husband and wife, and they filed a joint Federal income tax return for each relevant year. They resided in Emmet County, Michigan (Emmet County), when their petition was filed. Emmet County is on the northern lower peninsula of Michigan and has 50 or more miles of shoreline on Lake Michigan.

II. PetitionersA. Charles F. Glass (Mr. Glass)

Mr. Glass is a lawyer who has practiced law in Michigan since 1969. His legal specialties are real estate, medical malpractice defense, and employment and family and domestic matters.

B. Susan G. Glass (Ms. Glass)

Ms. Glass has a bachelor of arts degree in English and a master's degree in art. She also has a real estate license. She has worked as a copywriter and as an artist.

III. The PropertyA. Petitioners' Purchase of the Property

On August 17, 1988, petitioners purchased property (property) at 3445 North Lakeshore Drive, Harbor Springs, Michigan (Harbor Springs), for $283,000. The property is sited along the shoreline of Lake Michigan in northern Emmet County and includes three buildings and approximately 10 acres of land. Although the property's address is listed as in Harbor Springs, the property is actually outside Harbor Springs in the Township of Readmond, Michigan (Readmond), approximately 2–1/2 miles north of Good Hart, Michigan, and 3–1/2 miles south of the Township of Cross Village, Michigan (Cross Village). B. Petitioners' Use of the Property

Petitioners used the property as a vacation home until 1994, when they began using the property as their primary residence. During 1992 and 1993, they resided in Grosse Point Farms, Michigan. During part of 1994 and all of 1995, they used their residence in Grosse Point Farms as a secondary residence to the property. From 1995 through 1999, they lived part time at the property and part time in Detroit, Michigan; they continued during those years to use the property as their primary residence. In 1999 or 2000, they began living entirely at the property.

C. Buildings on the Property

The property has had the same three buildings on it since 1988. The first building is a single-story small handcrafted cabin that is made of hand-hewn logs and elm bark shaving. This cabin is approximately 1,278 square feet and is used by petitioners as their home. The second building is a single-story guest cottage that is approximately 512 square feet. The third building is a single-story garage that is approximately 525 square feet.

D. Description of the Property

The property's dimensions are generally 460 feet in width from north to south and 1,055 feet in depth from east to west. Its eastern edge is a straight line bordering Highway M–119 (M–119).³ Its western edge is a crooked line abutting Lake Michigan. Lake Michigan cannot be seen through the property from M–119 because many large trees and dense foliage grow throughout much of the property. Included among the trees on the property is a plantation of large (approximately 100–foot) old growth original white pine trees.

A portion of the property that generally includes the property's total width and extends approximately 900 feet from M–119 is relatively flat and is generally open, grassy, and well lawned around petitioners' home and wooded and bushy in other places, especially along M–119. The rest of the property (approximately 155 feet in depth and 460 feet in width) slopes down a steep bluff at an angle of about 100 degrees to the shoreline of Lake Michigan or, more specifically, to Lake Michigan's ordinary high water mark.⁴ The bluff is approximately 100 feet high, and a stairway goes down it to the shoreline. The shoreline is level and consists of rocks, sand, grass, and weeds. The side of the bluff contains many trees (e .g., white pine, cedar, spruce, oak, maple, balsam fir) and dense vegetation (e.g., juniper bushes and other shrubs).

Petitioners' home on the property is sited on relatively flat land on the top of the bluff approximately 45 to 50 feet from the edge at the top of the bluff. On a clear day, a beautiful panoramic view of Lake Michigan may be seen from the home and from a further distance of at least 50 more feet towards M–119. Petitioners have chairs at the top of the bluff to enjoy that view and to socialize.

Species of plants that grow on the Lake Michigan shoreline in northern Emmet County include Lake Huron tansy and pitcher's thistle. These plants are considered to be threatened and require undisturbed habitats to survive. Birds on that shoreline include bald eagles, piping plovers, and kingfishers. Other wildlife in the area includes deer, bears, and raccoons.

In the early 1990s, bald eagles were returning to the Lake Michigan shoreline on and near the property, and the presence of bald eagles along that shoreline is more common today than in earlier years, when it was unusual to see an eagle on that shoreline. An exceptionally old and high tree on the top of the bluff of the property covered by conservation easement 1 (the highest tree on the bluff for some miles) is an occasional roosting site for at least one bald eagle. The property also has attracted kingfishers and has Lake Huron tansy growing on it, especially on the bluff. The property is not an ideal habitat for Lake Huron tansy or pitcher's thistle, another threatened species of plant, but the property, in its natural state, allows for the creation or promotion of the habitat of those species as well as the habitat of bald eagles and piping plovers. E. Surroundings of the Property

The Lake Michigan shoreline from north of Harbor Springs to Cross Village is generally developed only for residential and related purposes. Most of that shoreline is privately owned with single family vacation homes. Approximately one home is sited on that shoreline every 250 feet in the half mile north of the property and in the half mile south of the property; i.e., approximately 21 homes are in the immediate 1–mile vicinity of the property.

The typical use of the land in the immediate vicinity of the property is for single-family dwellings. Petitioners' neighbors to the north, for example, built a large home on two parcels of land that cover approximately 400 feet of lakefront. A number of high density developments with either lakefront or back lots are also found on the land in the immediate vicinity of the property. For example, the Sequoia Yacht Club, which is approximately 1 to 2 miles south of the...