By Nick Richards and Keith Buckley
IRS aggressively targets conservation easement transactions —
Donating land for conservation to a charitable foundation will allow you to protect the land from future development and preserve the natural environment. It also provides for a highly beneficial charitable contribution deduction, which puts the IRS on notice. The IRS has a history of scrutinizing these deductions and challenging the value of the land. Therefore, the transaction itself must be carefully done.
The IRS has identified conservation easements which have been deemed abusive. Recently, the IRS has taken notice of transactions involving promoters who establish companies for the purpose of purchasing land. This land in turn is donated at a significantly marked up value. The donation of the land leads to large charitable contribution deductions for the investors. If the deduction amount significantly exceeds the amount invested, the transaction will be constituted as a ‘listed transaction’ which should be disclosed.
If you have entered into any of these transactions or substantially similar transactions on or after January 1, 2010, you must now report the transaction on Form 8886. Failure to report can have serious tax consequences. The reporting requirement extends to promoters, real estate appraisers, and tax professionals involved.
The IRS has issued Notice 2017-29 extending filing disclosures under Notice 2017-10 regarding syndicated conservation easement transactions. The due date on disclosures has been moved from June 2, 2017 to October 2, 2017.
If you are being audited for a conservation easement, or if you believe that you entered into one of these transactions, contact us at Dill Dill Stonbraker & Hutchings, PC. Our tax attorneys will be able to provide guidance on reporting the transaction and how to prevent further harm.
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