                              T.C. Memo. 2013-204



                        UNITED STATES TAX COURT



                RAMONA L. MITCHELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



      Docket No. 10891-10.                      Filed August 29, 2013.



      Larry D. Harvey, for petitioner.

      Miles B. Fuller, for respondent.




     *
      This opinion supplements our prior Opinion, Mitchell v. Commissioner,
138 T.C. 324 (2012).
                                         -2-

[*2]             SUPPLEMENTAL MEMORANDUM OPINION


       HAINES, Judge: This case is before the Court on petitioner’s motions to

vacate decision pursuant to Rule 1621 and to reconsider our Opinion in Mitchell v.

Commissioner, 138 T.C. 324 (2012) (Mitchell I), pursuant to Rule 161. We will

grant petitioner’s motion to vacate the decision in order to consider and rule on

petitioner’s motion to reconsider our Opinion. For the reasons that follow, we will

deny petitioner’s motion to reconsider (petitioner’s motion).

       In petitioner’s motion petitioner alleges that this Court erred in relying on

Kaufman v. Commissioner, 136 T.C. 294 (2011) (Kaufman II), which was

affirmed in part, vacated in part, and remanded in part by the Court of Appeals for

the First Circuit in Kaufman v. Shulman, 687 F.3d 21 (1st Cir. 2012) (Kaufman

III).2 Petitioner makes various other claims which we will address below.


       1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code, as amended and in effect at all relevant times, and all Rule
references are to the Tax Court Rules of Practice and Procedure. Amounts are
rounded to the nearest dollar.
       2
        The IRS originally filed a motion for summary judgment with this Court on
January 15, 2010. In ruling on the motion for summary judgment in Kaufman v.
Commissioner, 134 T.C. 182 (2010) (Kaufman I), we disallowed any deductions
for the easement contribution but found genuine issues of material fact remaining
with regard to the cash contribution deduction and the IRS’ imposition of
penalties. In a second Opinion after a trial on the reserved issues, this Court on
                                                                         (continued...)
                                         -3-

[*3]                                 Background

       In Mitchell I we made findings of fact, which we incorporate herein by

reference. For convenience and clarity, we repeat below the facts relevant to our

disposition of petitioner’s motion, and we supplement those facts as appropriate to

provide a complete background statement.

       In 1998 Charles and Ramona Mitchell bought a 105-acre parcel of land

from Clyde Sheek in Mancos, Colorado, for $180,000.3 The parcel was

unimproved; i.e., it had no buildings, only partial fencing, no utilities, and no

domestic water. Access was from a two-lane gravel road maintained by the

county. The Mitchells installed a two-inch water line from the northern boundary

of the 105-acre parcel in 2000 with electrical lines added in 2001-02. The

Mitchells’ son, Blake, and his wife, Melody, built a home on the 105-acre parcel




       2
        (...continued)
April 4, 2011, in Kaufman v. Commissioner, 136 T.C. 294 (2011) (Kaufman II),
aff’d in part, vacated in part and remanded in part, 687 F.3d 21 (1st Cir. 2012),
reaffirmed its ruling on the easement but held that the taxpayers were entitled to
deduct their $16,840 cash contribution on their 2004 return (as opposed to their
2003 return) and were liable for only a small penalty for negligence in claiming
the deduction for the earlier year.
       3
       Montezuma County assessor’s records describe the parcel as 95 acres. The
land records describe it as 105 acres. We will use 105 acres for purposes of this
opinion.
                                        -4-

[*4] in 2000. Subsequently a 50- by 100-foot shop and a 900-square-foot

guesthouse were built on the parcel.

        In 2001 Charles purchased an additional 351 acres bordering the south

boundary of the 105-acre parcel from Sheek for $683,000. Sheek did not want all

cash. He wanted retirement income. Consequently, after a downpayment of

$83,000, the balance of $600,000 was to be paid in installments of $60,000 per

year plus interest. A promissory note was signed and secured by a deed of trust

recorded in the records of Montezuma County, Colorado, in January 2001.

        As a result of the two purchases, the Mitchells owned 456 acres of

ranchland in the southern portion of the Mancos Valley (Lone Canyon Ranch).

Charles and petitioner built their own home at Lone Canyon Ranch in 2001 and

2002.

        Charles began having health problems. In December 2002 the Mitchells

formed C. L. Mitchell Properties, L.L.L.P., a family limited partnership

(partnership).4 Lone Canyon Ranch was transferred to the partnership, subject to

the deed of trust, as were other investments, including a rental property and cash

and securities. Although Charles was named the general partner, it soon became


        4
      The name of the limited partnership was later changed to Lone Canyon
Ranch Limited Liability Limited Partnership.
                                        -5-

[*5] evident that he could not carry out his management duties. Consequently,

Blake took over the management duties. Charles eventually died of his illness in

2006.

        On December 31, 2003, the partnership granted a conservation easement on

the south 180 acres of unimproved land to Montezuma Land Conservancy

(Conservancy). The parties executed a deed of conservation easement in gross.

At the time the easement was granted, the deed of trust securing the debt to Sheek

was not subordinated to the conservation easement held by Conservancy. From

2003 to 2005 the partnership had the money to pay off the promissory note, which

the deed of trust secured, at any time. There were no lawsuits, potential or

otherwise; all bills were paid; payments on the promissory note to Sheek were

current, and casualty insurance was in place. Two years after the conservation

easement was granted, Sheek agreed to subordinate his deed of trust to the

conservation easement but received no consideration for the subordination. On

December 22, 2005, Sheek signed the Subordination to Deed of Conservation

Easement in Gross (subordination agreement).

        In 2004 the Mitchells hired William B. Love Appraisals, Inc. (Love), to

appraise the conservation easement granted to Conservancy as of December 31,

2003. Love determined that the conservation easement had a market value of
                                        -6-

[*6] $504,000. Love issued an appraisal report for the partnership on February 17,

2004 (Love appraisal). The partnership claimed a $504,000 charitable

contribution deduction, which flowed through to its two partners, Charles and

petitioner, equally. Charles and petitioner claimed a $504,0005 charitable

contribution deduction on their 2003 joint Federal income tax return dated April

13, 2004 (2003 return). Charles and Petitioner attached Form 8283, Noncash

Charitable Contributions, to their 2003 return along with a copy of the Love

appraisal.

      On February 23, 2010, respondent mailed a notice of deficiency to

petitioner disallowing her 2003 charitable contribution deduction. Respondent

determined that petitioner had not met the requirements of section 170.

Alternatively, respondent determined that if petitioner had met the requirements of

section 170, the amount of the charitable contribution deduction was $100,100.6

Petitioner timely filed a petition with this Court on May 12, 2010.




      5
       Because of limitations on itemized deductions claimed on Schedule A,
Itemized Deductions, only $447,236 of the charitable contribution deduction could
be claimed on the 2003 return.
      6
       Respondent in his pretrial memorandum conceded that if a charitable
contribution deduction was allowed, the amount of the deduction would be
$122,000.
                                        -7-

[*7] In Mitchell I, respondent argued that petitioner’s conservation easement was

not protected in perpetuity and thus was not a qualified conservation contribution.

Specifically, respondent argued that petitioner failed to satisfy the requirements of

section 1.170A-14(g)(2), Income Tax Regs. (subordination regulation), and

section 1.170A-14(g)(6)(ii), Income Tax Regs. (proceeds regulation). We held

that the requirements of the subordination regulation are strict requirements that

may not be avoided and that petitioner had failed to satisfy the requirements of the

subordination regulation. As a result, we held petitioner had failed to meet the

requirements of section 170 and denied her charitable contribution deduction.

                                     Discussion

I.    Motions To Reconsider and To Vacate

      Motions to reconsider and to vacate are governed by Rules 161 and 162,

respectively. Those Rules establish filing deadlines but provide no guidance on

when the Court should grant or deny such motions. In the absence of more

specific guidance, we look to caselaw and the Federal Rules of Civil Procedure.

See Rule 1(b).

      The decision to grant a motion to reconsider or to vacate lies within the

discretion of the Court. Estate of Quick v. Commissioner, 110 T.C. 440, 441

(1998) (motion to reconsider); Kun v. Commissioner, T.C. Memo. 2004-273
                                         -8-

[*8] (motion to vacate), aff’d, 157 Fed. Appx. 971 (9th Cir. 2005). Motions to

reconsider are generally “intended to correct substantial errors of fact or law and

allow the introduction of newly discovered evidence that the moving party could

not have introduced by the exercise of due diligence in the prior proceeding.”

Knudsen v. Commissioner, 131 T.C. 185, 185 (2008). “Reconsideration is not the

appropriate forum for rehashing previously rejected legal arguments or tendering

new legal theories to reach the end result desired by the moving party.” Estate of

Quick v. Commissioner, 110 T.C. at 441-442. Motions to vacate are generally not

granted absent a showing of unusual circumstances or substantial error, e.g.,

mistake, inadvertence, surprise, excusable neglect, newly discovered evidence,

fraud, or other reason justifying relief. See, e.g., Fed. R. Civ. P. 60(b); Brannon’s

of Shawnee, Inc. v. Commissioner, 69 T.C. 999 (1978).

      Importantly, an intervening change in the law can warrant the granting of

both a motion to reconsider and a motion to vacate. See Alioto v. Commissioner,

T.C. Memo. 2008-185. In Alioto v. Commissioner, T.C. Memo. 2006-199, the

Court had held that it lacked jurisdiction over “stand-alone” section 6015(f) cases.

After Congress expanded the Court’s jurisdiction to include such cases, see Tax

Relief and Health Care Act of 2006, Pub. L. No. 109-432, div. C, sec. 408, 120

Stat. at 3061, the taxpayer filed timely motions to reconsider and to vacate, which
                                         -9-

[*9] the Court granted, see Alioto v. Commissioner, T.C. Memo. 2008-185 (“We

agree that the Court correctly applied the caselaw as it existed at the time the

Court issued Alioto I [Alioto v. Commissioner, T.C. Memo. 2006-1999]; however,

we disagree that the motion for reconsideration should be denied. After the

Court’s decision in Alioto I the law and the Court's jurisdiction changed.” (Fn. ref.

omitted.)).

      Petitioner asks us to grant petitioner’s motion in the light of the partial

vacating of Kaufman II by the Court of Appeals for the First Circuit. See

Kaufman III, 687 F.3d 21.

      In petitioner’s motion petitioner argues that this Court should follow the

approach taken by the Court of Appeals for the First Circuit and reconsider its

Opinion. Specifically, petitioner argues that the conservation easement deed

protected the proceeds to be paid to Conservancy in perpetuity upon termination

of the conservation easement and thus under the approach taken in Kaufman III

the conservation easement deed satisfied the requirements of section 1.170A-

14(g), Income Tax Regs.
                                         - 10 -

[*10] II.    Legal Background

      A.     Qualified Conservation Contribution

      A taxpayer is generally allowed a deduction for any charitable contribution

made during the taxable year. Sec. 170(a)(1). A charitable contribution is a gift of

property to a charitable organization made with charitable intent and without the

receipt or expectation of receipt of adequate consideration. See Hernandez v.

Commissioner, 490 U.S. 680, 690 (1989); United States v. Am. Bar Endowment,

477 U.S. 105, 116-118 (1986); see also sec. 1.170A-1(h)(1) and (2), Income Tax

Regs. While a taxpayer is generally not allowed a charitable contribution

deduction for a gift of property consisting of less than an entire interest in that

property, an exception is made for a “qualified conservation contribution.” See

sec. 170(f)(3)(A), (B)(iii).

      A “qualified conservation contribution” is a contribution (1) of a “qualified

real property interest” (2) to a “qualified organization” (3) which is made

“exclusively for conservation purposes.” Sec. 170(h)(1); see also sec. 1.170A-

14(a), Income Tax Regs. Respondent concedes that there was a contribution of a

qualified real property interest and that at the time of the contribution

Conservancy was a qualified organization under section 170(h)(3). Therefore, we
                                        - 11 -

[*11] focus on the third requirement; i.e., whether petitioner’s contribution of the

conservation easement to Conservancy was exclusively for conservation purposes.

      A contribution is made exclusively for conservation purposes only if it

meets the requirements of section 170(h)(5). Glass v. Commissioner, 124 T.C.

258, 277 (2005), aff’d, 471 F.3d 698 (6th Cir. 2006). Section 170(h)(5)(A)

provides that “[a] contribution shall not be treated as exclusively for conservation

purposes unless the conservation purpose is protected in perpetuity.” Section

1.170A-14(g), Income Tax Regs., elaborates on the enforceability-in-perpetuity

requirement. Paragraph (g)(1) provides generally that in order for a conservation

easement to be enforceable in perpetuity, the “interest in the property retained by

the donor * * * must be subject to legally enforceable restrictions * * * that will

prevent uses of the retained interest inconsistent with the conservation purposes of

the donation.” The various subparagraphs of paragraph (g) set forth many of these

legally enforceable restrictions. Mitchell I, 138 T.C. at 330.

      Paragraph (g)(2) addresses mortgages and in pertinent part provides that “no

deduction will be permitted * * * for an interest in property which is subject to a

mortgage unless the mortgagee subordinates its rights in the property to the right

of the * * * [donee] organization to enforce the conservation purposes of the gift

in perpetuity.”
                                          - 12 -

[*12] Paragraph (g)(3) is entitled “Remote future event” and addresses events that

may defeat the property interest that has passed to the donee organization. It

provides that a deduction will not be disallowed merely because on the date of the

gift there is the possibility that the interest will be defeated so long as on that date

the possibility of defeat is so remote as to be negligible.

      Paragraph (g)(6) is entitled “Extinguishment” and recognizes that after the

donee organization’s receipt of an interest in property, an unexpected change in

the conditions surrounding the property can make impossible or impractical the

continued use of the property for conservation purposes. Subdivision (i) of

paragraph (g)(6) provides that those purposes will nonetheless be treated as

protected in perpetuity if the restrictions limiting use of the property for

conservation purposes “are extinguished by judicial proceeding and all of the

donee’s proceeds * * * from a subsequent sale or exchange of the property are

used by the donee organization in a manner consistent with the conservation

purposes of the original contribution.”

      Subdivision (ii) of paragraph (g)(6) is entitled “Proceeds” and, in pertinent

part, provides:

      [F]or a deduction to be allowed under this section, at the time of the
      gift the donor must agree that the donation of the perpetual
      conservation restriction gives rise to a property right, immediately
                                        - 13 -

      [*13] vested in the donee organization, with a fair market value that is
      at least equal to the proportionate value that the perpetual
      conservation restriction at the time of the gift bears to the value of the
      property as a whole at that time. * * * For purposes of this paragraph
      (g)(6)(ii), that proportionate value of the donee’s property rights shall
      remain constant. Accordingly, when a change in conditions gives rise
      to the extinguishment of a perpetual conservation restriction under
      paragraph (g)(6)(i) of this section, the donee organization, on a
      subsequent sale, exchange, or involuntary conversion of the subject
      property, must be entitled to a portion of the proceeds at least equal to
      that proportionate value of the perpetual conservation restriction
      * * *.

      B.     Mitchell I

      In Mitchell I, petitioner first argued that she met the requirements of the

subordination regulation because Sheek subordinated his deed of trust to the deed

of conservation easement in 2005, two years after the grant of the conservation

easement. Petitioner argued that the subordination regulation had no requirement

as to when the mortgagee must subordinate its claim to that of the donee

organization. We held that though the subordination regulation is silent as to

when a taxpayer must subordinate a preexisting mortgage on donated property, in

order for a conservation easement to be protected in perpetuity at the time of the

gift (i.e., the time the deduction is taken) the taxpayer must have satisfied the

requirements of section 170(h) and specifically the subordination regulations.
                                        - 14 -

[*14] Thus we held that the regulation requires that a subordination agreement be

in place at the time of the gift.

       Next petitioner argued that we must read the subordination regulation in

tandem with the so-remote-as-to-be-negligible standard in section 1.170A-

14(g)(3), Income Tax Regs. She argued that the probability of her defaulting on

the Sheek promissory note on December 31, 2003, was so remote as to be

negligible. Thus, petitioner argued, that possibility should be disregarded under

the so-remote-as-to-be-negligible standard in determining whether the

conservation easement is enforceable in perpetuity. Relying on our prior

discussions of the so-remote-as-to-be-negligible standard in Kaufman II and

Carpenter v. Commissioner, T.C. Memo. 2012-1 (Carpenter I), we found that the

so-remote-as-to-be-negligible standard could not be used to avoid a specific

requirement of the regulations (i.e., the subordination regulation), the judicial

proceeding requirement of section 1.170A-14(g)(6)(i), Income Tax Regs., and the

proceeds regulation.

       Finally, petitioner argued that she entered into an oral agreement with Sheek

with respect to the use of Lone Canyon Ranch and that the oral agreement

provided the necessary protection required by section 170(h)(1)(C). We disagreed

and held that the oral agreement had no effect on Sheek’s ability to foreclose on
                                       - 15 -

[*15] the property and extinguish the conservation easement agreement had

petitioner defaulted on her promissory note. Thus, the oral agreement failed to

comply with the requirements of the subordination regulation.

      Petitioner also argued that she had satisfied the requirements of the proceeds

regulation. However, having found that petitioner failed to meet the requirements

of the subordination regulation, we did not need to make a determination on this

issue to make our decision.

      C.     Kaufman III

      In 1999 Lorna and Gordon Kaufman, the taxpayers, bought a single-family

rowhouse in the South End of Boston subject to local restrictions. In 2003 the

taxpayers contributed to a donee organization a facade easement on their single-

family rowhouse. At the time of contribution, the property was subject to a

mortgage. The mortgagee agreed to subordinate the mortgage to the conservation

easement deed in favor of the donee organization; however, the mortgagee

retained a “prior claim” to all proceeds of condemnation and to all insurance

proceeds resulting from any casualty of the property. The taxpayers claimed a

charitable contribution deduction equal to the value they assigned to the facade

easement. The Commissioner disallowed the deduction because the taxpayers had

failed to meet the requirement of the proceeds regulation that the charity receive a
                                        - 16 -

[*16] proportionate share of proceeds following judicial extinguishment of the

facade easement and a subsequent sale of the property.

      In Kaufman II the taxpayers argued that though the mortgagee may have

had a prior claim to condemnation proceeds over the donee, that did not absolve

Lorna Kaufman of her obligation to make good on the donee’s entitlement to a pro

rata share of the proceeds realized from the sale or involuntary conversion of the

property. As a result, the taxpayers claimed the various agreements satisfied the

requirements of the proceeds regulation. This Court found the donee’s contractual

right against the taxpayer to a share of the proceeds to be insufficient to satisfy the

requirements of section 1.170A-14(g)(6), Income Tax Regs., stating: “[W]e think

it the intent of the drafters of section 1.170A-14(g)(6), Income Tax Regs., that the

donee have a right to a share of the proceeds and not merely a contractual claim

against the owner of the previously servient estate.” Kaufman II, 136 T.C. at 309.

      The taxpayers also argued that section 1.170A-14(g)(6), Income Tax Regs.,

should be read in tandem with section 1.170A-14(g)(3), Income Tax Regs. The

taxpayers hypothesized a very low probability of occurrence of a set of events that

would deprive the charity of its proportional share of proceeds following judicial

extinguishment of the facade easement and subsequent sale of the property. They

concluded that the possibility of such deprivation was “so remote as to be
                                        - 17 -

[*17] negligible” and, thus, had to be disregarded under the so-remote-as-to-be-

negligible standard in determining whether the facade easement was enforceable

in perpetuity.

      This Court in Kaufman II found that the so-remote-as-to-be-negligible

standard does not modify the proceeds regulation. Specifically, we held that

      [i]t is not a question as to the degree of improbability of the changed
      conditions that would justify judicial extinguishment of the
      restrictions. Nor is it a question of the probability that, in the case of
      judicial extinguishment following an unexpected change in
      conditions, the proceeds of a condemnation or other sale would be
      adequate to pay both the bank and * * * [the charity]. As we said in
      Kaufman v. Commissioner, 134 T.C. at 186, the requirement in
      section 1.170A-14(g)(6)(ii), Income Tax Regs., that * * * [the
      charity] be entitled to its proportionate share of the proceeds is not
      conditional: “Petitioners cannot avoid the strict requirement in
      section 1.170A-14(g)(6)(ii), Income Tax Regs., simply by showing
      that they would most likely be able to satisfy both their mortgage and
      their obligation to * * * [the charity].”

Kaufman II, 136 T.C. at 313. The Court of Appeals for the First Circuit agreed.

Kaufman III, 687 F.3d at 27.

      On appeal, the Court of Appeals for the First Circuit in Kaufman III held for

the taxpayers, finding the Commissioner’s reading of section 1.170A-14(g)(6),

Income Tax Regs., unreasonable. The Court of Appeals noted the superpriority of

tax liens to most prior claims and determined that the Commissioner’s reading of
                                        - 18 -

[*18] section 1.170A-14(g)(6), Income Tax Regs., would defeat the purpose of the

statute. Specifically, the Court of Appeals stated:

             The IRS reads the word “entitled” in the extinguishment
      regulation to mean “gets the first bite” as against the rest of the world,
      a view the Tax Court accepted in reading “entitled” to mean “ha[s] an
      absolute right.” Kaufman II, 136 T.C. at 313. But a grant that is
      absolute against the owner-donor is also an entitlement, Black’s Law
      Dictionary (7th ed. 1999) (“entitle” defined as “[t]o grant a legal right
      to”); Collins English Dictionary (10th ed. 2009) (“to give (a person)
      the right to do or have something”), and almost the same as an
      absolute one where third-party claims (here, the bank’s or the city’s)
      are contingent and unlikely.

Kaufman III, 687 F.3d at 27.

      The Commissioner also argued that the taxpayers failed to meet the

requirements of section 1.170A-14(g)(1), Income Tax Regs. A provision in the

agreement between the taxpayers and the donee stated that nothing in the

conservation easement deed of trust shall be construed to limit the donee’s right to

give its consent to changes in the conservation easement deed or to abandon some

or all of its rights thereunder. The Commissioner argued that this provision was a

blank check to the donee to consent to any type of change, irrespective of its

compatibility with the donation’s conservation purpose; thus, the easement failed

to include the necessary restrictions that would prevent uses inconsistent with the

conservation purpose as required by section 1.170A-14(g)(1), Income Tax Regs.
                                         - 19 -

[*19] The Court of Appeals rejected the Commissioner’s argument, citing a

similar argument made in Commissioner v. Simmons, 646 F.3d 6, 10 (D.C. Cir.

2011), aff’g T.C. Memo. 2009-208. The Court of Appeals held that “[t]he

language of paragraph (g)(1) nowhere suggests the stringent outcome that the IRS

seeks to ascribe to it and the consequences of the reading would be to deprive the

donee organization of flexibility to deal with remote contingencies.” Kaufman III,

687 F.3d at 28.

III.   Whether Kaufman III Requires This Court To Reconsider Its Opinion in
       Mitchell I

       Petitioner argues that the Court of Appeals for the First Circuit’s opinion in

Kaufman III is an intervening change in law and requires this Court to reconsider

its Opinion in Mitchell I. Specifically, petitioner argues that in the light of the

Court of Appeals for the First Circuit’s emphasis on the destination of proceeds

upon extinguishment of a conservation easement in Kaufman III, this Court should

take an overall approach in analyzing the in-perpetuity requirement of section

170(h)(5)(A) and section 1.170A-14(g), Income Tax Regs., and focus on any

proceeds resulting from an extinguishment of the conservation easements.

Petitioner argues that if there were an extinguishment in this case, Conservancy

would receive its proportionate share of any proceeds from the extinguishment
                                        - 20 -

[*20] because the partnership had an obligation and sufficient funds to pay

Conservancy its proportionate share of proceeds from an extinguishment of the

conservation easement, that Conservancy is bound by law to discharge its exempt

purpose upon receipt of such proceeds, and thus any such proceeds are protected

in perpetuity, which is the goal of the law. Petitioner also argues that since the

partnership had sufficient funds to discharge the debt related to the Sheek

mortgage at any time before the subordination, this was a functional equivalent of

a subordination. Respondent argues that Kaufman III does not apply to this case.

Specifically, respondent argues that Kaufman III does not represent an intervening

change in law for purposes of this case, that petitioner has misread Kaufman III,

that Kaufman III did not address the subordination regulation upon which this

Court based its Opinion in Mitchell I, and that Kaufman III is not binding in the

present case.7 We agree with respondent.




      7
        Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d
985 (10th Cir. 1971), the Court will follow the clearly established position of a
Court of Appeals to which a case is appealable. However, we will give effect to
our own views in cases appealable to courts that have not yet decided the issue.
Id. This case is appealable to the Court of Appeals for the Tenth Circuit absent
stipulation otherwise. See sec. 7482(b)(1)(A). The Court of Appeals for the Tenth
Circuit has not yet ruled on the issue of whether a taxpayer who failed to
subordinate a conservation easement deed at the time of the gift of the
conservation easement has met the requirements of the subordination regulation.
                                       - 21 -

[*21] Kaufman III addressed legal issues different from the one present in this

case. Kaufman III addressed the proper interpretation of the proceeds regulation

and, in particular, the breadth of the donee organization’s entitlement to proceeds

from the sale, exchange, or involuntary conversion of property following the

judicial extinguishment of a perpetual conservation restriction burdening the

property. The Court of Appeals held that it was sufficient that the donee

organization have a right to postextinguishment proceeds that was absolute against

the owner-donee of the burdened property. Kaufman III, 687 F.3d at 27.

Conservancy’s right to postextinguishment proceeds was not determinative in

Mitchell I as we ruled that petitioner had failed to meet the subordination

regulation, and therefore we need not discuss the postextinghishement proceeds.

      Petitioner would draw a general rule with respect to the in-perpetuity

requirement from the analysis of the Court of Appeals for the First Circuit in

Kaufman III. Petitioner states: “The regulation emphasizes perpetuating an

easement’s purpose as opposed to the conservation easement itself. The proceeds

are protected which is the goal of the law.”

      We disagree with petitioner’s interpretation of Kaufman III. Nowhere in

Kaufman III did the Court of Appeals for the First Circuit state a general rule that

protecting the proceeds from an extinguishment of a conservation easement would
                                       - 22 -

[*22] satisfy the in-perpetuity requirements of section 1.170A-14(g), Income Tax

Regs., generally.

      Petitioner further argues that there was a functional subordination of the

conservation easement to the Sheek mortgage at the time of the gift to

Conservancy because the partnership had sufficient funds to discharge the debt

related to the Sheek mortgage at all times before the actual subordination two

years later. We reject this argument. There is no functional subordination

contemplated in section 1.170A-14(g)(2), Income Tax Regs., nor do we intend to

create such a rule.

      Petitioner also argues that we held in Carpenter I that “the regulation in

paragraph (g)(6) merely creates a safe harbor,” and that given the opinions in

Kaufman III and Simmons, “the entire regulation could and should be read as a

safe harbor.” We rejected a similar argument in Carpenter v. Commissioner, T.C.

Memo. 2013-172, at *21, in which we found that the specific provisions of

section 1.170A-14(g), Income Tax Regs., such as paragraph (g)(6), are mandatory

and may not be ignored. We find the same to be true for the subordination

regulation which like paragraph (g)(6) is a specific provision of section 1.170A-

14(g), Income Tax Regs.
                                       - 23 -

[*23] As a result of the foregoing, we find that the holding in Kaufman III does

not apply to this case and thus does not constitute an intervening change in law

which would justify granting petitioner’s motion.

IV.   Colorado Law

      Petitioner also argues that Colorado law creates restrictions that protect the

conservation easement and thus this Court should reconsider its Opinion in

Mitchell I. Petitioner is simply trying to argue a new legal theory with respect to

Colorado law. As we have previously stated: “Reconsideration is not the

appropriate forum for rehashing previously rejected legal arguments or tendering

new legal theories to reach the end result desired by the moving party.” Estate of

Quick v. Commissioner, 110 T.C. at 441-442.

V.    Conclusion

      Petitioner has not presented any newly discovered evidence or cited an

intervening change in the law that would warrant granting petitioner’s motion.

      In reaching our holdings herein, we have considered all arguments made,

and, to the extent not mentioned above, we conclude they are moot, irrelevant, or

without merit.
                                  - 24 -

[*24] To reflect the foregoing,


                                                 An appropriate order and

                                           decision will be entered.
