A recent New York Times article reported that Timothy Mellon, a banking heir, transferred 300 acres of real property to charity. Mellon retained access to certain portions of the property and separately arranged for a maintenance representative to reside on and maintain the property for five years. The article did not address whether Mr. Mellon claimed a charitable contribution deduction but raises an interesting question for donors who want to retain rights in the land they donate to charity. Does the partial interest rule under IRC § 170(f)(3) bar the deduction?
Can Strings Attached Cost You the Deduction? The Partial Interest Rule and Exceptions
Generally, under IRC § 170(f)(3)(A), no charitable contribution deduction is available to donors who transfer less than their entire interest to charity. A deduction, however, may be allowed if exceptions apply. One exception is when the rights retained are insubstantial, such as those discussed in Revenue Ruling 75-66. In that ruling, an individual donated his land but retained the right to train his hunting dog, or any subsequent dog he owned, on trails covering the entire property. The IRS determined that this retained right was “not substantial enough to affect the deductibility for the property transferred,” and the contribution of land was deductible to the extent provided by § 170.
The retained interests in a transfer such as the one detailed in the New York Times article are more extensive than those in Revenue Ruling 75-66. Careful factual analysis is necessary to determine whether the reserved rights are “substantial” and therefore subject the transfer to the partial interest rule.
Statutory Exceptions to the Partial Interest Rule
IRC § 170(f)(3)(B) includes exceptions to the partial interest rule for “(i) a contribution of a remainder interest in a personal residence or farm; (ii) a contribution of an undivided portion of the taxpayer’s entire interest in property; and (iii) a qualified conservation contribution.”
What Does This Mean for Donors?
Donors who donate a fee interest in real property and plan to retain rights should evaluate whether those retained rights are truly insubstantial, as in Revenue Ruling 75-66; substantial enough to trigger the partial interest bar; or meet a statutory exception to the partial interest rule. Failing to meet IRS requirements can cost donors significant resources if the donor’s charitable donation is audited by the IRS. Donors seeking federal income tax deductions are advised to consult with experienced counsel before formalizing transfers of land to charity.
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Tax deductions for charitable contributions have many legal requirements that, if not strictly complied with, can cause a lost deduction. If you are donating an asset and would like to consult with experienced tax attorneys who specialize in charitable giving, contact the attorneys at K. Tyson Law.
This alert should not be construed as legal advice, does not create an attorney-client relationship, and reflects the state of the law as of the date on this notice. Subsequent developments in the law can affect the conclusions in this alert.
October 6, 2026. Written by Kim Tyson, J.D., LL.M. Karin Gross, J.D., LL.M., Emma Messore, J.D., and Yolanda Romero.