0 Conservation Easement Cases And The IRS Conservation easement cases have become a primary focus of the IRS. IRS Commissioner Koskinen's letter to the Senate Finance Committee confirmed that the IRS believes that most syndicated easement donation transactions are patently abusive
The cases can result in enormous tax assessments, interest and draconian penalties imposed. In some cases, there can be criminal exposure. Likewise, the attorneys or others who were marketing and setting up these transactions may be targeted by the IRS for severe penalties and other actions.
In Notice 2017-10, the IRS has put taxpayers and practitioners on notice that it considers certain syndicated conservation easement transactions to be tax avoidance transaction, identifying the transactions as "listed transactions," meaning they could be considered abusive.
Section 170(e)(1) of the Tax Code allows a deduction for a qualified conservation contribution, which is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. The contribution should include a restriction, granted in perpetuity on the use that can be made of the real property.
The IRS asserts that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. In those transactions, a promoter offers prospective investors in a partnership or another pass-through entity the possibility of a charitable contribution deduction for donation of a conservation easement.
The IRS will challenge the purported tax benefits from such transactions based on the overvaluation of the conservation easement. The IRS has indicated that it may also challenge the purported tax benefits from the transaction based on the partnership anti-abuse rule, economic substance, or other rules or doctrines
Syndicated Conservation Easement Transactions Identified in Notice 2017-10 Notice 2017-29 On December 23, 2016, the IRS released Notice 2017-10, 2017-4 IRB 544, identifying syndicated conservation easement transactions described in section 2 of that notice and substantially similar transactions as listed transactions for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and §§ 6111 and 6112 of the Internal Revenue Code. Section 3 of Notice 2017-10 provides that in the case of a participant with a disclosure obligation with respect to these transactions under § 1.6011-4(e)(2)(i) (regarding subsequently listed transactions), the disclosure is due to the IRS Office of Tax Shelter Analysis on June 21, 2017. In response to requests for additional time for participants to meet the disclosure obligation with respect to these transactions under § 1.6011-4(e)(2)(i), this notice extends the due date for participants filing disclosures under § 1.6011-4(e)(2)(i) from June 21, 2017, until October 2, 2017. The due date for disclosure by material advisors under § 301.6111-3(e) and participants who have disclosure obligations under § 1.6011-4(e)(1) (regarding returns filed after December 23, 2016) with respect to the transaction described in section 2 of Notice 2017-10 is unchanged by this notice and remains May 1, 2017. This notice also provides that for purposes of Notice 2017-10, a donee described in § 170(c) is not treated as a material advisor under § 6111
conservation easements and IRS audits
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Conservation Easement Cases And The IRS
Conservation easement cases have become a primary focus of the IRS. IRS Commissioner Koskinen's letter to the Senate Finance Committee confirmed that the IRS believes that most syndicated easement donation transactions are patently abusive
The cases can result in enormous tax assessments, interest and draconian penalties imposed. In some cases, there can be criminal exposure. Likewise, the attorneys or others who were marketing and setting up these transactions may be targeted by the IRS for severe penalties and other actions.
In Notice 2017-10, the IRS has put taxpayers and practitioners on notice that it considers certain syndicated conservation easement transactions to be tax avoidance transaction, identifying the transactions as "listed transactions," meaning they could be considered abusive.
Section 170(e)(1) of the Tax Code allows a deduction for a qualified conservation contribution, which is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. The contribution should include a restriction, granted in perpetuity on the use that can be made of the real property.
The IRS asserts that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. In those transactions, a promoter offers prospective investors in a partnership or another pass-through entity the possibility of a charitable contribution deduction for donation of a conservation easement.
The IRS will challenge the purported tax benefits from such transactions based on the overvaluation of the conservation easement. The IRS has indicated that it may also challenge the purported tax benefits from the transaction based on the partnership anti-abuse rule, economic substance, or other rules or doctrines
Syndicated Conservation Easement Transactions Identified in Notice 2017-10
ReplyDeleteNotice 2017-29
On December 23, 2016, the IRS released Notice 2017-10, 2017-4 IRB 544,
identifying syndicated conservation easement transactions described in section 2 of
that notice and substantially similar transactions as listed transactions for purposes of
§ 1.6011-4(b)(2) of the Income Tax Regulations and §§ 6111 and 6112 of the Internal
Revenue Code. Section 3 of Notice 2017-10 provides that in the case of a participant
with a disclosure obligation with respect to these transactions under § 1.6011-4(e)(2)(i)
(regarding subsequently listed transactions), the disclosure is due to the IRS Office of
Tax Shelter Analysis on June 21, 2017. In response to requests for additional time for
participants to meet the disclosure obligation with respect to these transactions under
§ 1.6011-4(e)(2)(i), this notice extends the due date for participants filing disclosures
under § 1.6011-4(e)(2)(i) from June 21, 2017, until October 2, 2017.
The due date for disclosure by material advisors under § 301.6111-3(e) and
participants who have disclosure obligations under § 1.6011-4(e)(1) (regarding returns
filed after December 23, 2016) with respect to the transaction described in section 2 of
Notice 2017-10 is unchanged by this notice and remains May 1, 2017.
This notice also provides that for purposes of Notice 2017-10, a donee described
in § 170(c) is not treated as a material advisor under § 6111