Rev. Rul. 75-373

Advice has been requested concerning the deductibility under section 170 of the Internal Revenue Code of 1954 of a contribution of an easement to a county under the circumstances described below.

An individual conveyed an easement in a tract of 50 acres of vacant, beachfront property to the county in which the property was located to be used solely as a public bathing beach and recreational area operated and maintained by the county. The land is located in a rapidly expanding urban area. The county is a political subdivision of state X.

The deed from the taxpayer to the county granted the easement in gross in perpetuity but reserved to the taxpayer certain rights, including the right of access to and from the open water by boat from the remainder of the land owned by the grantor or his heirs, the right to have an open and usable channel connecting the open sea with the lands retained by the grantor, and the retention of all mineral rights in the land underlying the easement. Any prospective drilling and/or mining is to be done by slant from adjacent property so that the surface of the land will not be disturbed. The donor is responsible for all taxes, levies, and assessments of any kind to which the conveyed property is or shall be subject, but the assessment will be reduced to reflect the value of the easement conveyed.

Section 170 of the Code provides, subject to certain limitations, a deduction for gifts and contributions to or for the use of organizations described in section 170(c), payment of which is made within the taxable year.

Section 170(c)(1) of the Code provides, in part, that the term "charitable contribution" means a contribution or gift to or for the use of a state, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.

Section 170(f)(3)(A) of the Code provides, in part, that in the case of a contribution (not made by a transfer in trust) of an interest in property which consists of less than the taxpayer's entire interest in such property, a deduction shall be allowed only to the extent that the value of the interest contributed would be allowable as a deduction under section 170 if such interest had been transferred in trust. A contribution by a taxpayer of the right to use property shall be treated as a contribution of less than the taxpayer's entire interest in property.

Section 170(f)(3)(B)(ii) of the Code provides that section 170(f)(3)(A) shall not apply to a contribution of an undivided portion of a donor's entire interest in property.

However, section 1.170A-7(b)(1)(ii) of the Income Tax Regulations provides that a charitable contribution of an open space easement in gross in perpetuity shall be considered a contribution of an undivided portion of the donor's entire interest in property to which section 170(f)(3)(A) of the Code does not apply. For this purpose an easement in gross is a mere personal interest in, or right to use, the land of another; it is not supported by a dominant estate but is attached to, and vested in, the person to whom it is granted. Thus, for example, a deduction is allowed under section 170 for the value of a restrictive easement gratuitously conveyed to the United States in perpetuity whereby the donor agrees to certain restrictions on the use of his property, such as restrictions on the type and height of buildings that may be erected, the removal of trees, the erection of utility lines, the dumping of trash, and the use of signs.

Under the law of state X, an easement in gross in perpetuity is a valuable property right or interest in favor of the party for whose benefit the easement is created and is enforceable by that party.

In the instant case, the easement in gross in perpetuity is an open space easement within the meaning of section 1.170A-7(b)(1)(ii) of the regulations.

Accordingly, in the instant case, the taxpayer is entitled to a charitable contribution deduction in the manner and to the extent provided by section 170 of the Code for the value of the restricted easement granted. For the rules applicable in valuing the contribution, see Rev. Rul. 73-339, 1973-2 C.B. 68.