Interesting article in today’s Washington Post: Fairfax Case Draws Line on Easements; IRS Gets "First Big Win" in Push to Stem Abuse of Conservation Tool, by Joe Stephens:

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.

The case is Turner v. Commissioner, 126 T.C. No. 16 (5/16/06), blogged here.