UpTrajectory Review

Ken Berry's piece in CPA Practice Advisor addresses a Tax Court decision on historic structure easements, a niche but consequential corner of the tax code. An owner of a certified historic building who gives up development rights through a conservation easement can claim a charitable deduction for the value surrendered. Berry notes the IRS has challenged many of these deductions aggressively, and the Tax Court has now weighed in. The available excerpt is a single sentence, so the full article almost certainly walks through the Court's reasoning and the specific grounds on which a taxpayer prevails or loses. We review what the excerpt confirms and what owners should anticipate.

For a small-business owner holding an older commercial building, especially one in a historic district, this ruling matters because the deduction can be substantial while the compliance burden is unforgiving. A poorly documented appraisal or a vague easement deed invites an audit. Berry's framing suggests the Court identified specific reasons a write-off survives scrutiny. Any owner contemplating a facade easement or a restriction on alterations should treat this decision as a map: it shows which arguments the Tax Court accepts and which it rejects.

What is genuinely new is the Court's apparent willingness to enumerate qualifying reasons rather than issue a blanket denial. The IRS has long argued that many historic easements lack a charitable benefit because the restrictions mirror local preservation ordinances. If the Court instead recognized distinct grounds for deduction, that shifts the leverage in negotiations and in audit defense. We remain skeptical of any reading that treats the ruling as a green light. Tax Court decisions turn on facts, and the IRS will continue to test weak appraisals and boilerplate deeds.

The downstream effects reach beyond the taxpayer. Appraisers who specialize in conservation easements will see demand shift toward those who can defend a valuation under cross-examination. Nonprofit land trusts that accept easements may tighten their standards, which raises transaction costs. Owners who already claimed deductions face a different question: whether to amend returns or prepare for examination. The ruling also affects local preservation boards, because a clear federal deduction strengthens the economic case for maintaining historic character rather than redeveloping.

Watch for IRS guidance responding to the decision and for appeals that could narrow or broaden its reach. Owners should commission an independent appraisal from a specialist with Tax Court experience, review the deed for precise restrictions, and coordinate with the receiving organization before filing. If you claimed a similar deduction in an open year, ask your advisor whether this ruling changes your exposure. The deduction remains available, but only for owners who treat documentation as seriously as the development rights they surrender.

“a taxpayer may be able to write off the value of the conservation easement” — CPA Practice Advisor

Takeaway: Claim a historic easement deduction only with a defensible appraisal and a precisely drafted deed; the Tax Court rewards documentation, not intentions.