Fairfax Case Draws Line on Easements
Sunday, June 4, 2006
With no fanfare, an Alexandria real estate company in 1999 gave Fairfax County what the company would later describe as a tax-deductible $3.1 million donation: a promise not to overdevelop scenic land once owned by George Washington. The wooded tract, down the road from the first president's home at Mount Vernon, was the largest undeveloped plot in the southern part of the county.
But developers then clear-cut acres of trees on the property and erected 29 sprawling homes that preservationists today deride as "McMansions." The towering houses, though not in violation of the terms of the easement, border Washington Grist Mill state park and are visible from the Woodlawn Plantation historic site.
The U.S. Tax Court ruled last month that the company's donation had no value as a tax deduction because it "did not protect open space or a historically important land area." Chief Judge Joel Gerber rejected $342,000 in initial deductions claimed by company manager and local lawyer James D. Turner and his wife. The judge also assessed the couple $56,000 in penalties.
Tax specialists said it appeared to be the first time a court had thrown out such a write-off, known as a conservation easement deduction. The action has broad national implications for both the conservation movement and for wealthy investors, who are increasingly pursuing such deductions.
Boston lawyer Stephen J. Small, author of a leading book on easement law, described the May 16 ruling as "the first big win" for the IRS in its recently declared war against abuses of the easements.
"It's an important case," Small said. "I think the IRS and the courts saw an opportunity to make a statement."
In court filings, the IRS charged that the development, known as the Grist Mill Woods subdivision, created a "massive visual intrusion" on area historic sites and "permanently destroyed" the view.
National and local preservationists applauded the ruling.
"The easement did not protect anything that was not already protected," said Rand Wentworth, president of the national Land Trust Alliance. "It's a joke all around."
Turner, an Old Town real estate lawyer, declined to comment. His attorney, J. Carlton Howard Jr., said that he was disappointed with the ruling and that Turner's company gave up valuable development rights.
"This is not someone playing fraudulent games and trying to make something out of nothing," Howard said. "We agreed to limit ourselves, and we believed that might have been a benefit to Mount Vernon."
Conservation easements are credited with making preservation the fastest-growing arm of the environmental movement. When used as envisioned by Congress, the easements are permanent deed restrictions that limit intrusive development to preserve open space or historical ambience.