Conservation Easements: An Entirely Different Sort of Mess

shutterstock_247248511Qualified conservation easements provide a taxpayer with the opportunity to obtain a charitable deduction without actually giving up her property; if property is encumbered by an easement in favor of a charitable organization for conservation purposes, Section 170(h)(1) of the Code provides for a charitable deduction.

This deceptively simple concept has spawned a great deal of litigation because the requirements to qualify for the deduction are fairly complex. Inadequate appraisals are a common source of problems for taxpayers. Other taxpayers have been tripped up by the failure to obtain a subordination agreement from the mortgage holder in a timely fashion. A recent case raises a different problem: the taxpayer took the deduction in the wrong year.… Read More

Don’t Ignore the Obvious: A Story About A Conservation Easement and A Penalty.

Qualified conservation easements provide a deduction under Section 170(h) of the Internal Revenue Code to a taxpayer who permanently encumbers her property in favor of an appropriate organization for conservation purposes. I.R.C. § 170(h). There are some complex rules at work in this area, and it has generated a fair amount of litigation. A key factor in conservation easements is valuation; the amount of the deduction is driven by the impact on market value that a conservation easement has. Consequently, the Code requires an appraisal to support the deduction. I.R.C. § 170(f)(11).

Last week the First Circuit took up the case of a Boston couple who had an appraisal to support the value of their conservation easement deduction but wound up losing not only the deduction but paying a forty percent penalty for a gross valuation misstatement.… Read More