Conservation Easements

[cred65]

Has anyone had experience with these.

High roller client with AGI > $2M has consulted with his Financial Advisor about tax shelters and this concept was discussed.  Client was informed that the units would produce a Donation of $445K for an investment of $100K.  Sounds to good to be true (and generally it is).

Any comments?

TIA    

[BHoffman]

I went to www.irs.gov and searched for 'conservation easement' and read the first article.  Your client would need to very carefully document everything and tread wisely.  Seems that IRS is all over this.

[Jack from Ohio]

On 9/9/2016 at 6:20 PM, cred65 said:

Has anyone had experience with these.

High roller client with AGI > $2M has consulted with his Financial Advisor about tax shelters and this concept was discussed.  Client was informed that the units would produce a Donation of $445K for an investment of $100K.  Sounds to good to be true (and generally it is).

Any comments?

TIA    

RUN FORREST RUN!! Best advice for your client.

[BulldogTom]

A "real" conservation easement is a pretty cool deal for the owner of the property.  I did not do the taxes on the one I was involved in, I was working for the company.  A local quasi-government agency paid the farmer I was working for to agree to never allow his land to be developed, it had to stay farmland forever.  This land is on a highly desirable freeway intersection.  This transaction was never intended to be a charitable contribution of the value of the easement, but it comes down to the same principle, "what is the value of the easement?".

OP sounds like someone has put together some kind of real estate holding company that is going to donate conservation easements on the land they hold and pass the charitable contribution through to the owners of the entity.  Could be legit or could be a scam.  The devil is in the details.

Tom
Newark, CA

[DANRVAN]

Sounds like a scam or misunderstanding.  How can you get a $445,000 donation for $100,000?  There are no special rules for conservation easements that allow such a thing.

[Burke]

On ‎9‎/‎13‎/‎2016 at 10:24 AM, DANRVAN said:

Sounds like a scam or misunderstanding.  How can you get a $445,000 donation for $100,000?  There are no special rules for conservation easements that allow such a thing.

I am going to assume he may be referring to the purchase of a tax credit from someone who entered into a conservation easement.  Often these are awarded to land rich/cash poor taxpayers (i.e, farmers) and who because of no real taxable income, the tax credit is pretty much wasted.  So some states allow them to be sold to actually generate an incentive for the TP to put the land into conservation/non-development use.    In this case, the OP uses the term "donation."  If someone pays $100K for something and it has a FMV of $445K, then then there is going to be gain reportable somewhere when it is realized.