142 T.C. 140">*140 BUCH, Judge: These cases are before the Court on respondent's motion for partial summary judgment. The issues for decision are:

(1) whether a State law that limits the duration of an easement to not more than 99 years precludes petitioners' conservation easements from qualifying as granted "in perpetuity" under section 170(h)(2)(C) or (5)(A).¹ We hold that it does; and

142 T.C. 140">*141 (2) whether the documents petitioners provided to the IRS satisfy the "contemporaneous written acknowledgment" requirement of section 170(f)(8) and section 1.170A-13(f)(15), Income Tax Regs. We hold that material facts remain in dispute and thus summary judgment is not appropriate for this issue.

The transactions at issue involve members of the Wachter family and entities that they controlled. Michael and Kelly Wachter filed joint income tax returns for all the years in issue: 2004 through 2006. The same is true2014 U.S. Tax Ct. LEXIS 8">*9 for Patrick and Louise Wachter. During the years in issue, Michael, Patrick, and Louise each held varying interests in two entities: WW Ranch, a partnership, and Wind River Properties LLC (Wind River), a limited liability company that is treated as a partnership for tax purposes. Wind River at times operated under the name Windsor Storage. For convenience, we will refer to the petitioners individually by their given names or to Michael, Patrick, and Louise (as owners of WW Ranch and Wind River) collectively as the Wachters.

Section 2503 of the Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, 116 Stat. at 267, authorized the Secretary of Agriculture to purchase conservation easements in order to protect topsoil by limiting nonagricultural uses of certain lands and authorized funding for such purchases. The United States, acting through the Commodity Credit Corporation (CCC), entered into cooperative agreements in order to implement the Farm and Ranch Lands Protection Program and used the Natural Resources Conservation Service (NRCS) of the Department of Agriculture to administer the program. The parties provided to the Court2014 U.S. Tax Ct. LEXIS 8">*10 a copy of a 2003 cooperative agreement between the CCC and the American Foundation for Wildlife (AFW) with an attachment referencing land owned by WW Ranch. The cooperative agreement listed the requirements for such an easement, including that the easement "[r]un with the land in perpetuity or a minimum of thirty years, where State law prohibits a permanent easement." As a part of the 142 T.C. 140">*142 cooperative agreement, the NRCS listed its prerequisites for easement purchases before the Federal Government would release the Federal funds to reimburse AFW for up to 50 % of the easement purchase price. The cooperative agreement included a provision whereby a landowner could donate up to 25% of the appraised fair market value of the easement and that such a donation may be considered as part of AFW's contribution to the purchase price. However, in order for the landowner's donation to be considered part of AFW's contribution, AFW was required to get a current appraisal of the contribution. In the event the landowner made such a donation, NRCS required a copy of the landowner's IRS Form 8283, Noncash Charitable Contributions, before the NRCS would release the federal funds.

On its returns2014 U.S. Tax Ct. LEXIS 8">*11 for the years in issue, Wind River reported the following cash charitable contributions, which it allocated amongst its members:

On behalf of Wind River, Michael and Patrick signed an agreement dated February 26, 2004, with North Dakota Natural Resource Trust (NRT) agreeing to donate $170,000 by March 1, 2004. Michael signed a check dated February 26, 2004, from Windsor Storage payable to NRT for $170,000. NRT provided a letter dated March 23, 2004, to Michael and Patrick "dba WW Ranch" acknowledging the cash gift and stating that NRT provided no goods or services in exchange for the donation.

Michael signed a check dated March 23, 2005, from Windsor Storage payable to NRT for $171,150. The Wachters provided the IRS with a letter from NRT dated March 21, 2005, to Windsor Storage acknowledging the cash gift and stating that NRT provided no goods or services in exchange for the donation. The only copy of this letter in the record is unsigned.

Someone prepared a check dated May 9, 2006, from Windsor Storage payable to NRT for $144,500. The only copy of this check in the record is unsigned, but the parties do not 142 T.C. 140">*143 appear to dispute that the payment was made.2014 U.S. Tax Ct. LEXIS 8">*12 NRT provided a letter dated May 10, 2006, to Windsor Storage acknowledging the cash gift and stating that NRT provided no goods or services in exchange for the donation.

On its partnership returns for the years in issue, WW Ranch reported bargain sales of conservation easements as charitable contributions as follows:

For each year, the parties to the transaction obtained two appraisals of the property that was to be contributed. Each appraisal valued the property according to a different land use, and the Wachters used the difference in appraised values to determine the value of the conservation easement and thus the amounts of their charitable contributions.

NRT obtained an appraisal of WW Ranch's sections 5 and 6 parcel² as of April 30, 2003, determining a value of $31,000 for use as agricultural property. A second appraisal dated May 14, 2003, was prepared for the sections 5 and 6 parcel, determining a value of $1,400,000 for use as "rural residential sites". On March 8, 2004, WW Ranch sold a conservation easement on its sections 5 and 6 parcel to AFW for $1,020,000 (of which $170,000 was supplied by2014 U.S. Tax Ct. LEXIS 8">*13 NRT). The Wachters subtracted the sale price of $1,020,000 from the difference in value of the two appraisals of $1,369,000 to arrive at their charitable contribution deduction of $349,000.

NRT obtained two appraisals of WW Ranch's section 8 parcel as of February 21, 2005, one for use as agricultural property determining a value of $10,000 and one for "full developmental value" determining a value of $915,000. On March 24, 2005, WW Ranch sold a conservation easement on the section 8 parcel to AFW for $657,450 (of which $171,150 was supplied by NRT). The Wachters subtracted the sale 142 T.C. 140">*144 price of $657,450 from the difference in value of the two appraisals of $905,000 to arrive at their charitable contribution deduction of $247,550.

NRT obtained two appraisals of WW Ranch's sections 16 and 18 parcels as of August 25, 2005, one subject to a proposed conservation easement determining a value of $46,0002014 U.S. Tax Ct. LEXIS 8">*14 and one for rural residential development determining a value of $696,000. On May 11, 2006, WW Ranch sold a conservation easement on its section 16 and 18 parcels to AFW for $487,500 (of which $144,500 was supplied by NRT). The Wachters subtracted the sale price of $487,500 from the difference in value of the two appraisals of $650,000 to arrive at their charitable contribution deduction of $162,500.

Patrick and Louise reported charitable contributions on their joint Federal income tax returns as follows:

Michael and Kelly reported charitable contributions on their joint Federal income tax returns as follows:

On April 8, 2011, respondent issued notices of deficiency to both couples disallowing the charitable contribution deductions related to WW Ranch and Wind River and determining accuracy-related penalties under section 6662. Each couple timely filed a petition disputing their notice of deficiency, and the Court consolidated the cases for trial, briefing,2014 U.S. Tax Ct. LEXIS 8">*15 and opinion. Respondent filed a motion for partial summary judgment and a memorandum of facts and law in support of his motion for partial summary judgment, the Wachters filed a response, and respondent filed a reply.

Either party may move for summary judgment regarding all or any part of the legal issues in controversy. SeeRule 121(a). We may grant summary judgment only if there are no genuine disputes of fact. SeeRule 121(b); Naftel v. Commissioner, 85 T.C. 527">85 T.C. 527, 85 T.C. 527">529 (1985). Respondent, as the moving party, bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law. See Sundstrand Corp. v. Commissioner, 98 T.C. 518">98 T.C. 518, 98 T.C. 518">520 (1992), aff'd, 17 F.3d 965">17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, the factual materials and the inferences drawn from them must be considered in the light most favorable to the nonmoving party. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554">115 T.C. 554, 115 T.C. 554">559 (2000); Bond v. Commissioner, 100 T.C. 32">100 T.C. 32, 100 T.C. 32">36 (1993); Naftel v. Commissioner, 85 T.C. 527">85 T.C. 529. When a motion for summary judgment is made and properly supported, the nonmoving party may not rest on mere allegations2014 U.S. Tax Ct. LEXIS 8">*16 or denials but must set forth specific facts showing that there is a genuine dispute for trial. See Celotex Corp. v. Catrett, 477 U.S. 317">477 U.S. 317, 477 U.S. 317">324, 106 S. Ct. 2548">106 S. Ct. 2548, 91 L. Ed. 2d 265">91 L. Ed. 2d 265 (1986); Sundstrand Corp. v. Commissioner, 98 T.C. 518">98 T.C. 520; see alsoRule 121(d). Respondent filed the motion for partial summary judgment; therefore we construe all factual disputes and draw all inferences in favor of the Wachters.

A deduction is allowed for any charitable contribution for which payment is made within the taxable year if the contribution is verified under regulations prescribed by the Secretary. Sec. 170(a)(1). The Wachters claimed charitable contribution deductions for both cash and noncash contributions for each year. We discuss each in turn.

Generally, a charitable contribution deduction is not allowed for a charitable gift of property consisting of less than the donor's entire interest in that property. Sec. 170(f)(3)(A). However, there is an exception for a "qualified conservation contribution." Sec. 170(f)(3)(B)(iii). A contribution of real property is a qualified conservation contribution if (1) the real property is a "qualified real property interest", (2) the contributee is a "qualified organization",2014 U.S. Tax Ct. LEXIS 8">*17 and (3) the 142 T.C. 140">*146 contribution is "exclusively for conservation purposes." Sec. 170(h)(1); see alsosec. 1.170A-14(a), Income Tax Regs. For the purposes of the motion for partial summary judgment, respondent argues that the State law restricting easements to 99 years prevents the conservation easements from being qualified real property interests and prevents the conservation easements from being exclusively for conservation purposes.

We look to State law to determine the nature of property rights, whereas Federal law determines the appropriate tax treatment of those rights. United States v. Nat'l Bank of Commerce, 472 U.S. 713">472 U.S. 713, 472 U.S. 713">722, 105 S. Ct. 2919">105 S. Ct. 2919, 86 L. Ed. 2d 565">86 L. Ed. 2d 565 (1985); see also 61 York Acquisition, LLC v. Commissioner, T.C. Memo. 2013-266, at *8.

Beginning in 1915, the United States signed several treaties agreeing to protect migratory birds and their habitats. See North Dakota v. United States, 460 U.S. 300">460 U.S. 300, 460 U.S. 300">309-310 n.12, 103 S. Ct. 1095">103 S. Ct. 1095, 75 L. Ed. 2d 77">75 L. Ed. 2d 77 (1983), aff'g650 F.2d 911">650 F.2d 911 (8th Cir. 1981). Between 1931 and 1977 the United States acquired easements covering nearly 1 million acres of land in North Dakota for use as migratory bird refuges. 460 U.S. 300">Id. at 304-305. However, cooperation between the Federal Government and the State of North2014 U.S. Tax Ct. LEXIS 8">*18 Dakota broke down such that in 1977 the State enacted a law, which it amended in 1979 and 1981, (1) requiring approval for all wetland acquisitions first by the board of county commissioners and only then by the governor, (2) allowing the landowner to negotiate the terms of the easement and "drain any after expanded wetland or water area in excess of the legal description", and (3) restricting all easements to a maximum of 99 years. 460 U.S. 300">Id. at 306-308 (quoting N.D. Cent. Code sec. 20.1-02-18.2 (1981)).

The United States brought a declaratory judgment action in the U.S. District Court for the District of North Dakota, seeking judgment that, inter alia, the State law was hostile to Federal law in certain respects and could not be applied. 460 U.S. 300">Id. at 309. The District Court granted the United States summary judgment, and the United States Court of Appeals for the Eighth Circuit affirmed. 460 U.S. 300">Id. at 309. The Supreme Court determined that because of the migratory bird treaties and the "'certainty and finality' that we have regarded as 'critical 142 T.C. 140">*147 when * * * federal officials carrying out the mandate of Congress irrevocably commit scarce funds'", the North Dakota statute was hostile to Federal interests2014 U.S. Tax Ct. LEXIS 8">*19 and may not be applied to the easements for which the Federal Government had already received consent. 460 U.S. 300">Id. at 320 (quoting United States v. Little Lake Misere, 412 U.S. 580">412 U.S. 580, 412 U.S. 580">596, 93 S. Ct. 2389">93 S. Ct. 2389, 37 L. Ed. 2d 187">37 L. Ed. 2d 187 (1973)).

The Supreme Court in North Dakota v. United States invalidated the 99-year restriction only insofar as it related to easements on wetlands for which the Federal Government had already received consent. The Supreme Court did not invalidate the 99-year restriction in all situations in which the Federal Government is a party, directly or indirectly, to an easement purchase.

For the years in issue, N. D. Cent. Code sec. 47-05-02.1 (1999 & Supp. 2013) provided in pertinent part:

Real property easements * * * which become binding after July 1, 1977, shall be subject to the requirements of this section. These requirements are deemed a part of any agreement for such interests in real property whether or not printed in a document of agreement.

* * * *

2. The duration of the easement * * * on the use of real property must be specifically set out, and in no case may the duration of any interest in real property regulated by this section exceed ninety-nine years. * * *