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Medved v. State

Court of Appeals of Colorado, Fifth Division

October 20, 2016

John Medved and Debra Medved, Plaintiffs-Appellants,
v.
State of Colorado, Colorado Department of Revenue; Executive Director of the Colorado Department of Revenue, Defendants-Appellees.

         Jackson County District Court No. 11CV14 Honorable Steven E. Shinn, Judge

         JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS

          Fox Rothschild LLP, Christopher J. Dawes, Christopher T. Groen, Denver, Colorado, for Plaintiffs-Appellants

          Cynthia H. Coffman, Attorney General, Grant T. Sullivan, Assistant Solicitor General, Denver, Colorado, for Defendant-Appellee

          OPINION

          FREYRE JUDGE.

         ¶ 1 In this conservation easement (CE) tax credit case involving both a donor and a transferee, we are asked to decide whose tax claim triggers the four-year statute of limitations under §§ 39-21-107(2) and 39-22-522(7)(i), C.R.S. 2006[1], a question left unresolved by another division of this court in Markus v. Brohl, 2014 COA 146. Plaintiffs, John and Debra Medved (Medveds), appeal the district court's denial of their motion for summary judgment and its finding that defendant, Colorado Department of Revenue (Department), timely filed its notice of deficiency and disallowance. Relying on Markus's reasoning and holding that § 39-22-522(7)(i), C.R.S. 2006 treats the donor and the transferee as one entity in all matters and that the first tax claim filed triggers the running of the statute of limitations, we reverse and remand for the dismissal of this action.

         I. Background

         ¶ 2 On March 30, 2006, the Medveds purchased a CE tax credit on a forty-acre parcel of property located in Jackson County for $104, 000 from Whites Corporation (Whites Corp.). The appraised value of the tax credit was $130, 000. For tax purposes, Whites Corp. was the CE donor and the Medveds were the CE transferees.

         ¶ 3 On October 23, 2006, the Medveds filed their 2005 Colorado Individual Tax Return Forms 104 and 1305. They claimed a $130, 000 income tax credit based on the CE. Attached to their tax return were numerous documents related to the CE, including the legal description of the property subject to the easement, the identity of the grantor and donor of the easement, the amount of the tax credit claimed, and a copy of the appraisal provided by Whites Corp.

         ¶ 4 On October 30, 2007, Whites Corp. filed a 2005 Form 112, Colorado State C Corporation Income Tax Return. Whites Corp. claimed a $260, 000 income tax credit based on the same CE.

         ¶ 5 On March 4, 2011, the Department issued a notice of disallowance to Whites Corp. and the Medveds, disallowing the CE tax credit in its entirety. The Medveds appealed directly to the district court and argued that the notice of disallowance was barred by the four-year statute of limitations under § 39-21-107(2), C.R.S. 2006.[2] The Department, relying on the statutory language and a Department of Revenue regulation, argued that the Medveds and Whites Corp. were subject to the same statute of limitations that was triggered when the donor filed its tax return under § 39-22-522(7)(i), C.R.S. 2006.

         ¶ 6 Interpreting § 39-22-522(7)(i), C.R.S. 2006, the district court found that the donor (Whites Corp.) and the transferee (Medveds) were a single entity; that they were bound as to all issues concerning the tax credit, including the statute of limitations; and that the donor's tax claim triggered the four-year statute of limitations. Therefore, because Whites Corp. filed its tax return on October 30, 2007, the Department's notice of disallowance issued on March 4, 2011, was within the statute of limitations.

         II. Conservation Easements

         ¶ 7 A CE "is a permanent restriction that runs with the land for the purpose of protecting and preserving the land in a predominantly natural, scenic, or open condition." Kowalchik v. Brohl, 2012 COA 25, ¶ 2 (Kowalchik I); see also ยงยง 38-30.5-101 to -111, C.R.S. 2016 (establishing the purposes and requirements for CEs). CEs are fashioned to protect ...


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