Conservation easement charitable deduction?

[Jack from Ohio]

No firsthand experience with this scenario.  Client wants to do a conservation easement and take a charitable deduction for the value reduction of the land.  Here is the information he gave me:
"I'm only getting paid 75% of the value of my property as it relates to a conservation easement.  So, it''s roughly $100,500 at closing."  "I'm required to pay $5,000 towards the grant group. I think that's considered a charitable contribution. And there's roughly $40,000 that they are not paying me that is to be considered a charitable contribution also. That would be the 25% that they don't pay me."

My question is:  How is this reported on the tax return?  Are there capital gains associated with the sale of the easements?  Can this easement be part of the land parcel where his home is located?  Is this simply reported as a charitable gift?  What kind of documentation is needed?

As you can tell, I truly have no experience with this situation, so any help, advice, or direction will be greatly appreciated.

He is planning to do this in 2018.  Income for 2017 was $75K.

[Lynn EA USTCP in Louisiana]

Start your research with Pension Protection Act of 2006 and IRS Notice 2007-50.  There are volumes of Tax Court cases regarding conservation easement contributions which ultimately, per the Tax Court rulings, failed.  Lots of rules to be followed to be successful.

[Abby Normal]

If they're getting paid, they could also have a gain on the sale.

[SaraEA]

Stay away from giving advice on this one.  The client needs an attorney.  The IRS is aware that this is a loophole and contests these transfers all the time (and wins).

[Richcpaman]

Jack:

Yes, be cautious here, if you have not done one of these before.

First, get an appraisal within 90 days of the actual closing.  That determines what is the number for the charitable contribution.  The $ received can be used to reduce the basis in the land.  The $40k charitable contribution is, I believe, 30% of AGI deductible, but don't quote me. 

The organization getting the easement is usually a font of information as well.  They have done them before, and can provide you guidance.

There is "fraud" in these area's, but really most of the Tax Court cases are about not following the rules.  Sort of like the 1031 exchange rules.  Follow them correctly or die on the tax gallows.

Rich 

 

[DANRVAN]

The client needs an attorney who is experienced in this matter.

Reg 1.170A-14 is a good source for the qualifications.

Also if client is a qualified farmer or rancher per sect 2032A(e)(5) he might be able to deduct up to 100% of his contribution base.