Tuesday, December 13, 2011

CONSERVATION EASEMENTS–USING THE IRS AUDIT MANUAL TO AVOID ISSUES

An owner of real property that donates a conservation easement to a qualified organization may be able to deduct the value of the easement for income tax purposes. Such a deductible contribution requires the contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. A qualified real property interest is a restriction granted in perpetuity on the use, modification, and development of property such as parks, wetlands, farmland, forest land, scenic areas, historic land or historic structures.

The IRS has revised it Conservation Easement Audit Techniques Guide as of September 30, 2011. This lengthy guide should be reviewed by those structuring such contributions to assure compliance with all statutory and regulatory requirements.

Exhibit 12-1 is especially beneficial since it provides an all-inclusion list of potential issues. It includes general problems that may arise with charitable contributions, deficiencies in the appraisal process, deficiencies as to the perpetuity requirements, deficiencies as to the recipient organization, and deficiencies as to the requisite conservation purpose. The list is a gift for planners and return preparers – it should be used as a checklist for planning and compliance.

For those with an interest, I have reproduced the Exhibit 12-1 issue list below:

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Conservation Easement Audit Techniques Guide

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