Conservation Easement Tax Deduction
A conservation easement tax deduction may significantly lower your tax bill. But, without a tax attorney’s advice you may end up like Mr. and Mrs. Belk. The Belks contributed 184 acres of a golf course to a qualified organization expecting a conservation easement tax deduction. But instead, they got an audit and a large tax bill. Your charitable contributions are important. You can help others while helping yourself. You can file all the right forms. And still, get your deduction denied by the IRS. A tax attorney can help you manage your charitable contribution to get your conservation easement tax deduction.
The Belk’s conservation easement tax deduction story: The conservation easement agreement permitted them to change what real property was subject to the conservation easement. The Belks claimed a $10,524,000 charitable deduction on Form 1065 (U.S. Return of Partnership Income). Their Form 8283 listed the appraised fair market value of the conservation easement at $10,524,000. The Belks claimed the contribution deduction on their Schedule A Itemized Deductions and carried forward the remainder to subsequent years. The Internal Revenue Service disallowed the charitable contribution deduction (and made other adjustments) and determined deficiencies for all involved years.
The United States Tax Court agreed with the Internal Revenue Service (“IRS”) that the Belks are not entitled to a qualified conservation contribution. The Court discussed that: (1) IRS determinations are presumed correct and taxpayers have to prove that they are incorrect, and (2) that the contribution must be (i) a “qualified real property interest,” (ii) to a “qualified organization,” and (iii) “exclusively for conservation purposes.”
Do you want to wonder if you filed the right paperwork? As you can see from the above scenario the Belks seemed to follow the tax laws by filing the correct paperwork. Even so, their contribution deduction was disallowed. Each term the Tax Court discussed has special rules associated with it. I can help you navigate the Internal Revenue Code. Planning is everything. Why wait until you have all the aspects of the transaction finalized? Get me involved now to help you structure your transaction appropriately. You can spend your time reviewing and reading the rules. Or you can call me today to help you get your intended outcome.