If you contribute a conservation easement to a qualified organization, then you’re not just protecting the natural value of that land for future generations. You may also be able to claim that contribution as a charitable deduction on your tax return.
If you have invested in or plan to invest in a pass-through entity so you can benefit from a deduction for a charitable contribution of a conservation easement, a recent notice from the Internal Revenue Service (“IRS”) could affect you. And, if you are considering whether to donate a conservation easement to charity with respect to property you already own, the notice may provide some guidance about how the IRS views such a donation.
Background It’s well known that the value of charitable contributions you make can be deducted from your personal income tax return, subject to certain limitations. You can also reduce your tax bill based on your share of contributions that are made by a pass-through entity of which you are an owner. Special benefits apply in the case of contributions of qualified conservation easements.
What Is a Conservation Easement? The purpose of a conservation easement is to conserve property and protect its resources and natural value in perpetuity. A conservation easement is a voluntary legal agreement that limits or prevents certain types of uses and/or development from taking place on the land for as long as the land remains in private hands. The easement stays in place, even if the property is sold or passed to heirs. The landowner usually enters into the agreement with a private environmental organization or a public agency, which then enforces the landowner’s promise not to engage in certain types of activities on the land. These agreements can often be tailored to fit a landowner’s current use of the property. The landowner gets to retain private ownership and use of the property while protecting the land permanently.
Internal Revenue Code Section 170(h)(1) defines “a qualified conservation contribution” as “a contribution – (A) of a qualified real property interest, (B) to a qualified organization, (C) exclusively for conservation purposes.” Conservation purposes include outdoor recreation; saving the natural habitat of wildlife, plants or fish; preservation of open spaces; and historical preservation. These kinds of restrictions are commonly referred
easements require an IRS 8886 form to reduce fines.
ReplyDeletePublished on January 4, 2019
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Lance Wallach
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Know what an IRS 8886 form is?
If you contribute a conservation easement to a qualified organization, then you’re not just protecting the natural value of that land for future generations. You may also be able to claim that contribution as a charitable deduction on your tax return.
If you have invested in or plan to invest in a pass-through entity so you can benefit from a deduction for a charitable contribution of a conservation easement, a recent notice from the Internal Revenue Service (“IRS”) could affect you. And, if you are considering whether to donate a conservation easement to charity with respect to property you already own, the notice may provide some guidance about how the IRS views such a donation.
Background
It’s well known that the value of charitable contributions you make can be deducted from your personal income tax return, subject to certain limitations. You can also reduce your tax bill based on your share of contributions that are made by a pass-through entity of which you are an owner. Special benefits apply in the case of contributions of qualified conservation easements.
What Is a Conservation Easement?
The purpose of a conservation easement is to conserve property and protect its resources and natural value in perpetuity. A conservation easement is a voluntary legal agreement that limits or prevents certain types of uses and/or development from taking place on the land for as long as the land remains in private hands. The easement stays in place, even if the property is sold or passed to heirs. The landowner usually enters into the agreement with a private environmental organization or a public agency, which then enforces the landowner’s promise not to engage in certain types of activities on the land. These agreements can often be tailored to fit a landowner’s current use of the property. The landowner gets to retain private ownership and use of the property while protecting the land permanently.
Internal Revenue Code Section 170(h)(1) defines “a qualified conservation contribution” as “a contribution – (A) of a qualified real property interest, (B) to a qualified organization, (C) exclusively for conservation purposes.” Conservation purposes include outdoor recreation; saving the natural habitat of wildlife, plants or fish; preservation of open spaces; and historical preservation. These kinds of restrictions are commonly referred