Contents

SPECIAL GIFT SITUATIONS• A remainder interest 137• A restriction (granted in perpetuity) on the use that may be made of thereal property 138A qualified mineral interest is the donor’s interest in subsurface oil, gas, or otherminerals, and the right to access to these minerals. 139A real property interest is not treated as an entire interest in the property(other than a qualified mineral interest) if the property in which the donor’sinterest exists was divided prior to the contribution to enable the donor to retaincontrol of more than a qualified mineral interest or to reduce the real propertyinterest donated. 140 However, minor interests, that will not interfere with the conservationpurposes of the gift, such as rights-of-way, may be transferred prior tothe conservation contribution without adversely affecting the treatment of aproperty interest as a qualified real property interest. 141 An entire interest in realproperty may consist of an undivided interest in the property. 142A perpetual conservation restriction is a qualified real property interest. Aperpetual conservation restriction is a “restriction granted in perpetuity on the usewhich may be made of real property—including an easement or other interest inreal property that under state law has attributes similar to an easement (e.g., arestrictive covenant or equitable servitude).” 143 This definition does not precludethe deductibility of a gift of affirmative rights to use a land or water area. 144 Anyrights reserved by a donor in the contribution of a perpetual conservation restrictionmust conform to the law on this subject.(b) Qualified OrganizationsA qualified organization is one of the following entities:• A unit of government 145• A publicly supported charitable organization that is the donative type 146137 IRC § 170(h)(2)(B).138 IRC § 170(h)(2)(C).139 IRC § 170(h)(6); Reg. § 1.170A-14(b)(1)(i). These matters can turn on the definition of a word—in one case,the word subsurface. A corporation claimed a charitable contribution deduction, of about $19 million, for agift of two conservation easements in favor of a state. The government, however, convinced a court that thecharitable deduction was not available for these transfers because the donor retained the right to extract subsurfaceminerals from the easement lands using surface mining techniques. Great N. Nekoosa Corp. v. UnitedStates, 97-2 U.S.T.C. 50, 591 (Fed. Cl. 1997). In the absence of a definition of the term subsurface in thestatute or regulations, the court wrote that it “would be incongruous with the purposes of the statute to adopt adefinition of ‘subsurface’ which would allow disruption of the landscape by surface, or strip mining, to accessgravel and sand.” 97-2 U.S.T.C. at 89,371). The court added that the minerals at issue “should be defined assubsurface minerals since they are not exposed to the atmosphere, and have soil or some other type of covering.”Id. at 89,372).140 Reg. § 1.170A-14(b)(1)(ii). See also Reg. § 1.170A-7(a)(2)(i).141 Reg. § 1.170A-14(b)(1), last sentence.142 Reg. § 1.170A-14(b)(ii). As discussed below, however, the conservation purpose that is the subject of the contributionmust be protected in perpetuity.143 Reg. § l.170A-14(b)(2). For these purposes, the terms easement, conservation restriction, and perpetual conservationrestriction have the same meaning. Id.144 Id. See text accompanied by notes 163 and 164.145 IRC § 170(h)(3)(A). A governmental unit is described in IRC § 170(b)(1)(A)(v). See § 3.4, text accompaniedby notes 376–377.146 IRC § 170(h)(3)(A). This type of publicly supported organization is described in IRC §§ 170(b)(1)(A)(vi) and509(a)(1). See § 3.4, text accompanied by notes 378-394. 286