How the ultrarich carved up a famed Main Line estate — and qualified for big tax breaks
When residents of the old Ardrossan estate in
They might contemplate how little has changed since 1940, when the property's owners inspired the classic movie The Philadelphia Story.
Then again, they may just think about the huge tax cuts that were on offer for turning much of that grassy expanse into a nature preserve that they alone can use.
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About a century ago, Col.
Historical map provided by Franklin Maps
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Over time, it grew to more than 800 acres with a manor house at its center.
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In 1997, Montgomery's great-grandson
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The tax breaks, ostensibly for protecting open space, may have cost taxpayers around
Led by an heir to the family that had long owned the land, the once-800-plus-acre Main Line estate has been carved into about 50 sprawling homesites for the region's superrich.
The properties were marketed as an opportunity to live on a luxurious pastoral homestead surrounded by land under permanent protection from further development.
Buyers got to enjoy those protections -- along with the prospect of related tax breaks.
But despite that public subsidy, outsiders are barred from entering the more-than-five-mile perimeter of the former estate to cruise its meandering driveways or hike its meadows.
Owners at the former estate include top bosses at big real estate firms, pharmaceutical chiefs, private equity executives, and descendants of company founders from throughout the region.
An Inquirer analysis of government records suggests that property buyers could have collectively qualified under the setup for some
That figure would represent an extraordinary return on investment, considering that the land was purchased for half that amount just a year or two earlier. It would be a financial return similar to those found in schemes that the
More from this report
Ardrossan homeowners qualify for local reductions, too -- courtesy of programs to save farms
Dozens of properties at the former Ardrossan estate are covered under state abatement schemes, including the Act 319 "Clean and Green" program, that give landowners local tax breaks for farmland.
ks were available at Ardrossan in earlier sales, though full information about those was not available. And more such transactions appear to be in the works.
The eligibility for tax cuts comes courtesy of conservation groups that have accepted buyers' donations, most notably one in
It is the same nonprofit that helped former President
NALT records show that the properties donated to it at Ardrossan were booked at appraised values that exceed those permitted by the nation's main organization of land trusts. NALT and other land trusts say it's not their responsibility to vet the accuracy of appraisals, and the appraiser behind the valuations said he stood by his figures.
There is no indication that the
Donations to preserve land are legal and enjoy widespread support. And even some gifts challenged by the
That said, critics -- including some within the conservation field -- have long sounded warnings that some players are exploiting loopholes in the rules for excessive profits, with little public benefit.
The tax breaks at Ardrossan have accumulated amid a growing national discussion of how the rich have gamed the nation's tax system to unequally burden the middle class with keeping government coffers full.
"This is very wealthy people qualifying for a very significant tax break."
"This is very wealthy people qualifying for a very significant tax break that is not going to provide any charitable goal other than providing more trees for wealthy people to look at inside their gated community," said Zerbe, now with the
Edgar Scott III, 66, the family heir overseeing the land sales for two decades, declined to respond to a list of questions about the deals, saying in a statement that they "appear to proceed from a pejorative point of view."
"I am very proud of what we did to preserve hundreds of acres of vistas, rolling hills, stream valleys and open areas of this farm, the last major undeveloped piece of property in
The Trust
Much of that wealth was plowed into Ardrossan, his growing
At the center of the property, Montgomery enlisted architect
Over the years, additional buildings would sprout on the property to house members of successive generations of his family. Among them were his daughter,
Ownership of the land and buildings was held not by Montgomery himself, but by a number of family trusts, giving successive generations use of the property, while shielding them from paying inheritance taxes, since they never technically inherited any of it.
Montgomery had "created a structure, in property and trusts, that could minimize the exposure of his wealth to taxes and hold his family together into the future," journalist
As decades passed, the once-rural lands around Ardrossan were subdivided into leafy lots for the pricey homes that make up
But, other than
Then, at the start of 1997,
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The northern and southern sections of Ardrossan were the first to be sold by Scott.
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His buyers got a big piece of land, packaged with potential tax breaks for the original buyers in exchange for development restrictions on their properties. Here is one such site first sold in 1997 and later resold.
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Under these arrangements, each lot had a dedicated area where they could build a home ...
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...and a much larger section that had to remain undeveloped. The tax breaks were based on the idea that their property lost value after it could no longer be developed.
He planned to buy a section of land from the family trusts, then subdivide it into big home sites. Some had existing houses that buyers could renovate. Others were empty lots with a designated area where buyers could build new ones.
With the help of a consultant named
The logic behind this was that the lands' potential resale value was diminished by these restrictions. The tax breaks compensated landowners for that value loss.
From the time
For them, this was like free money.
Scott said his grandmother
"Everyone who knew my grandmother knew two things," he told
Scott's presentation came just months before the long-deceased
The family's trustees now had the 21 years -- until 2018 -- to divest themselves of the sprawling suburban estate.
Johnson, the consultant, died last month at age 83. In an interview shortly before his death, Johnson, who was friends with
"Large landowners think they'll put their land in the family trust, and then their problems are solved," he said. "But their problems are just starting."
'Limited-development projects'
When
Following a stint at the
Johnson served as president of the
While leading these organizations, Johnson said, he grew frustrated at the pace of preservation by most land trusts, which depend on philanthropic money and government grants to buy nature preserves.
Concluding that this trickle of cash could never match the torrent of capital available to builders who were rapidly purchasing the area's remaining land, he came upon a solution: He would help developers cash in on land-preservation through what he coined "limited-development projects."
The driving engine was tax breaks.
Here's how they work: Big home sites are sold to buyers who want to live at a large distance from their nearest neighbors, across grassy fields or wooded knolls. They are willing to give up the right to have their properties developed in the future, either by themselves or anyone who ever buys the land.
Those restrictions on development are documented in a type of donation contract called a conservation easement, typically signed with a nonprofit land trust that takes on the task of policing adherence to the pacts in exchange for a fee.
At tax time, these donations qualify as charitable donations, worth the difference between a property's appraised value before and after the restrictions.
Consequently, buyers are often willing to pay more for land that comes with an easement plan, since they can count on an eventual tax deduction as an offset.
And this, in turn, means developers can potentially earn just as much -- if not more -- from selling fewer, larger parcels in a subdivision with an easement as they could by building scores of homes without one.
Although the public is participating in the form of a tax subsidy, there is no legal requirement that they be given any access to the land under easement.
Moreover, such deals can spur outright abuse if they rely on exaggerated appraisals to generate outsized financial returns, analysts have warned.
In such cases, "you have to be able to inflate the value of the tax deduction so the total savings is large enough to compensate investors for what they put in," said
After leaving
A land trust that helped Ardrossans buyers quality for tax reductions also assisted former President
Later, Johnson assisted
Prosecutors in
Carving up Ardrossan
At Ardrossan in the 1990s, Johnson assisted
Each lot included a buildable area surrounded by a much larger section under a conservation easement that was donated to the
Buyers included prominent business people like
Because tax records are private, only the
Mullen and Rubenstein did not respond to messages.
Utsch said in an email that the conservation easements were successful in keeping the property from being intensively developed.
"The owners could have made considerably more money by dividing the property into two-acre lots, but the community would have lost all the charm and beauty of residential living," he said.
That's debatable. An appraiser's report cited in Delaware County Orphan's Court documents found that the land sold to Utsch and others was worth more divided into a handful of large lots than parceled into many small ones.
Edgar "Eddie" Scott III, a great-grandson of
As Scott would later describe these deals during a township planning board meeting, people who bought land at these sites didn't purchase any property directly.
Rather, they bought into a partnership that yielded as a sort of dividend -- a land parcel with a plot for a house and a share of the tax break from the donation of the easement.
Or, as Scott put it, the partnership handed out "the lot that each buyer bargained for and their proportionate share of the gift."
Because of that structure, how much those buyers paid Scott is unknown: Property records only show the land being transferred among partnership members. There is no public deed with a sale price.
This setup meant that Scott and his buyers paid no realty transfer taxes -- 2.5% of the price -- to state and local governments.
How much of a federal tax break was available to these buyers is also a mystery. Land trusts don't make that information public on grounds that the easements are of no value to them as assets.
Nationwide, this lack of transparency can enable property owners to game the
"If nobody knows how much the land sold for originally and nobody knows what the easement was appraised at after the fact," Looney said, some people might "take very aggressive tax positions."
Brandywine declined to share appraisals for the Ardrossan easements, saying the documents belonged to the properties' owners.
It said the size of a tax break being claimed, if any, was not among its concerns, which are focused on environmental and compliance issues.
Nor does the nonprofit consider public access as a standard for donations it will accept. The
The Ardrossan land under easement with the
Entrances to the former estate are marked private.Read moreFRANK WIESE / Staff
"This is the perfect case, if you want to show rich people getting a tax benefit," said
The property's open space is "not for the general public," Booker said. "And yet the general public and the taxpayer are paying for it."
When plans for one section were being considered by
"[The property's open space is] not for the general public and yet the general public and the taxpayer are paying for it."
Scott panned this proposal, threatening to build a dense enclave of homes unwanted by officials if the land were seized. He said the trail would mar a 28-acre parcel scheduled for sale to buyers who didn't want a path on their land.
"It seems like a small sliver of a large pie, but how would you like to have a walking path on the backyard of your property?" he said at the time.
A 15,000-square-foot house with eight bathrooms and a pool was later built on the sizable parcel, the Mullen property. It was built a little less than a city block from the proposed trail.
Another buyer in those 1990s sales was
She said the tax deduction she received for the easement over much of that land was appropriate since she expects the restrictions would hurt the property's value if she ever sold it.
The easement "is valuable to me because I have a lovely view, but going forward, it will probably be harder to sell," she said. "In the end, I could probably do twice as well selling my house if someone could put six houses on this property, but they can't."
In subsequent sales of the former estate's properties, the easements don't seem to be hurting values.
Unlike with the sales to the first set of buyers, the prices of these later transactions were recorded on deeds. And the properties have consistently ranked as either the most- or second-most expensive residential properties to change hands in the two zip codes that include
Mackie's property changed hands too, but not to a new owner. It was transferred into a new trust for her family.
'Leap of faith'
Between then and 2000, the year after Scott's first sets of Ardrossan sales, just over 5 million acres were placed under easement nationwide, according to semiofficial tracker NCED. But over the next two decades, the number increased nearly fivefold, to 25 million acres. Even with NCED acknowledging its figures are incomplete, that is a little less than the entire acreage of
With increased use has come greater scrutiny.
In 2002, The Inquirer published articles detailing how the head of the city's main preservation nonprofit was enmeshed in deals in which he sold conservation easements to the nonprofit he led. It purchased them with money donated to the nonprofit by his own family, creating a loop in which money from charitable donations made its way from one family member back to him.
The following year, the
After that, the
Since then, the
So when Scott appeared again before
As had Scott's approach. "We're rearranging this to meet today's regulatory requirements," he told the board in a session archived online. "There are some different rules we need to comply with."
His new plan dwarfed his previous sales in both size and complexity. And the candor with which he spelled out his "creative" -- his word -- use of tax breaks surprised experienced experts in the field.
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In 2013, Scott launched his most ambitious phase of development, focused on the remaining 345 acres at the center of the estate.
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Scott cut the sprawling tract into dozens of parcels, designating some for houses...
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...and many of the rest for "investment lots." Homesite buyers could buy stakes in the investment lots and give them to the nonprofit to qualify for the tax breaks.
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The nonprofit --
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Recently, Scott filed paperwork keeping the tract's roads closed to the public, reflecting a majority vote by Ardrossan's new homeowners.
As with the previously sold parcels to its north and south, Scott's plan for the remaining 345 acres of the estate would offer homesites surrounded by lush greenery that once again could be used to claim tax deductions.
The big difference: None of it would be done with easements. Instead, buyers of homesites would get tax breaks if they bought other land and donated that property outright to a land trust.
Scott cut the sprawling tract into about 90 parcels, designating some as sites for houses and much of the rest for what he called "investment lots."
He would sell the homebuilding sites to individual buyers, who would retain ownership of those properties and construct houses on them.
The investment lots would be treated differently. They would generate the tax breaks.
To accomplish this, the "investment lots" would be sold to partnerships consisting of homesite buyers, though outsiders could join too, Scott and his attorney,
"Hopefully within one to two years ... those pieces will have found their way into conservation-trust ownership," Snyder explained to the board. "But until we actually do that, we can't restrict it."
In other words, Scott and his lawyer were saying they could not pledge to the township that the land would remain open space, even though they intended to donate the property to a charity whose mission was to do just that.
Scott was blunter than his lawyer: Such a pledge, he told the board, "would be like throwing a lot of money out the window."
The problem: Their buyers' ability to qualify for tax breaks would be wiped out if a commitment was made to the township never to develop the properties. That's because the restrictions would diminish the future appraised market value on which owners' tax deductions would be based.
Several tax experts who heard summaries of Scott's remarks were surprised.
"I don't know if I've ever encountered an instance where a developer was quite so frank with local authorities," said
The tax break was designed to rescue open space facing a real threat of development, Lord said.
But here, Scott seemed to be signaling that there was -- in actuality -- no such threat, since his goal was to donate the property to a land trust.
This calls any breaks that donors could receive into question, Lord said.
"Everybody knew what the deal was," he said.
At the
"I understand that you cannot say, 'This will be deed-restricted,' " she said. "Because then it loses its value. I understand that fully."
Bogosian later joined her fellow commissioners in unanimously endorsing the proposal.
She is now vice chair of the planning board for
Stern, now president of the
"It resulted in less development in
Sweetening the sales pitch
Around two years ago, real estate agent
But things fell apart after the conservation donations and tax breaks entered the picture. The customer's accountant urged him to be cautious about those aspects of the sale, but without them, the purchase wouldn't be "feasible," Duffy said.
"There were just too many things going on," Duffy said. "It wasn't as straightforward as a normal real estate transaction usually is."
Others were more receptive to Scott's pitch.
A homesite at Ardrossan.Read moreFRANK WIESE / Staff
Real estate agent
Those would have been the "investment lots" that buyers could donate to a land trust, in return qualifying for tax deductions.
"The goal was to have the conservation space placed in areas that would maximize views and privacy without needing to own that kind of acreage," she said.
The tax breaks that these parcels would afford were "part of the marketing," she said. "That there were some tax advantages that could be offered with the conservancy situation ... was mentioned right upfront."
On a recent weekday, crews worked in clusters along newly laid private roads that cut through the tract's green expanse. They were installing windows in freshly risen stone facades and landscaping grounds around still unoccupied palatial homes.
"That there were some tax advantages that could be offered with the conservancy situation... was mentioned right upfront."
Some buyers, such as executive
Details of their purchases and donations, if any, are private. None responded to messages.
Records do show that buyers paid as much as
That's a high price, given that an appraisal completed for
A 10-acre section was sold to homebuilder
In all, Scott paid his family trust
"This developer should be snapping his suspenders," she said. "He played everything out perfectly."
High appraisals
In one of the remarkable aspects of the Ardrossan deals, the valuations assigned to the donated land could have permitted tax deductions worth twice what was paid for those parcels.
This alchemy was possible because
Yet county records tell a different story. Deeds show that only
Three more "investment lots" originally purchased for a total of
To be sure, anyone claiming a deduction would not see their taxes reduced by the full valuation put on their donation. Rather, their taxable income itself would drop by that amount. Their actual savings would depend on their tax bracket.
Based on top federal tax rates in those years, the tax reduction for those Ardrossan land donors could have come in at around
The parcels were all donated within two years of their purchase.
Whatever deductions were sought, if any, are private.
Scott is recorded as having sold three additional "investment lots" for a total of
While the buyers of the homesite lots are named in deeds, it is in most cases unclear who bought the "investment lots," and might have benefited from the resulting tax breaks.
Listing Scott as their managing member, they were purchased under names such as
Most who have bought or donated "investment lots" in their own names have done so too recently for those deals to be reflected in NALT's tax returns.
But not
The couple made their purchases in 2017.
One of their deals that year was for a three-acre parcel to build a house on. Another was an "investment lot" they bought for
About 18 months later, they gave that lot to NALT.
NALT's tax documents list the lot as being among three properties it received that year that were together valued at
The Brenans' contribution could have earned them a sizable share of that break under the law. Their tax records are not public. And
The Brenans' donated property sprawls north from the homesite where they are having a
A 50-room mansion still stands at the center of the grounds.
Ardrossan was assembled by Colonel
Foxhunts were a regular event at Ardrossan estate.Read moreScott Family Collection
In another still, Hepburn shares a scene with
Edgar Scott III, has led an effort over many years to sell off much of the Ardrossan property. His complex deals have provided buyers with ways to qualify for tax reductions. He is the great-grandson of
This spring, construction was still underway at Ardrossan, but most of the original estate land has now been sold.Read moreFrank Wiese / Staff
As with all sites, there is no distinction showing where their homesite ends and the donated land begins.
The appraiser whose valuations appear on the nonprofits' tax returns was
Asked why those valuations were far higher than the purchase prices, he said the purchase prices weren't necessarily reflective of the land's market value.
"There's a difference between price and value," he said. "I could sell you a property for
Samuels said Scott told him that he sold the investment lots at what had been his cost to buy them from the trustees. Scott sold the investment lots for about
The trustees had set their sale price using an appraisal by
Attorney
NALT is not a member of the
Those guidelines were aimed at keeping trusts from participating in tax shelters that use conservation for "potentially fraudulent or possibly abusive" federal income tax deductions, the alliance said.
The rules reflect criteria outlined in an
Zerbe, the former congressional staffer, said the Ardrossan deals could raise questions under these criteria if donors took deductions based on the appraised values listed by NALT.
"Transactions with very taxpayer-friendly appraisals are exactly over the plate of what's concerning the
Circular gifts
Some of the deals at Ardrossan followed yet another pattern:
This raises the possibility that the donors claimed tax breaks for charitable donations that were used to buy land near their own properties -- purchases that would have personally benefited them.
Full records for these transactions aren't available. Without access to private tax returns, it is impossible to know whether any particular donor claimed a tax deduction in exchange for the gift. Nor do land trust records reveal much about the deals.
County deeds do show that NALT bought 10 properties spanning 13 acres in the 2017 deals. These were parcels that Scott had set aside as homebuilding sites, not "investment lots," records show.
For these lots, NALT paid the highest price paid by any buyer for Ardrossan turf:
NALT's Carter said at least some of the cash used to pay for that land had been donated by Ardrossan homesite owners.
"Did some of it come from the community? I'm sure that it did," he said. "I also seem to recall that it could have come from outside of the community as well, but that's as far as I'm willing to go."
Carter declined to identify who made the donations, and it's not known whether any donors took the tax deductions often available to people who give money to charities.
Lord, the tax attorney, questioned how charitable any such gifts would have been.
"If the residents' contributions were motivated by the desire to keep those parcels undeveloped, thereby increasing the value of their own parcels and enhancing their living experiences, they shouldn't be allowed to deduct the contributions," Lord said.
By last year, Scott had sold nearly all of what had once been his family's estate, outside of a few remaining slivers -- like the land under the big manor house -- that remained in his or trustees' hands.
More recently, he turned his attention to a last remaining detail. This involved a provision under which roads in the most-recently-sold areas would become public unless a two-thirds majority of new homesite owners there objected.
In June, Scott filed the paperwork to close the roads. Nearly all the area's owners had voted to keep them private.
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