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Shoring Up Deductions for Conservation Easements

During the last year, the IRS has stepped up its efforts to eliminate tax abuses for charitable donations. Prime example: It has been taking a tough stand on charitable deductions for conservation easements. However, a new case shows that you can still qualify for a current deduction if you meet all the tax law requirements.

To qualify, the donation of an easement must be made exclusively for conservation purposes. For instance, a contribution may be made to protect a relatively natural habitat in which a fish, wildlife or plant community, or similar ecosystem, normally lives. With this type of conservation easement, public access to the area may be restricted.

Facts of the case: Over a two-year period, the taxpayers donated conservation easements for undeveloped land along the shore of Lake Michigan. The donation was made to a qualified tax-exempt organization, which preserves land and wilderness for the recreation and education of the residents of Michigan.

A couple maintained a log cabin, guest house and garage on the property. The easements did not interfere with their enjoyment of the property—first as a vacation home and subsequently as their principal residence—but did restrict development along the lakefront. Result: Relying heavily on the testimony by all the parties, the Tax Court determined that the easements donated protected a natural habitat for wildlife and plants. Therefore, the deductions were allowed.

It is recommended that you obtain professional assistance before you make contributions of such a nature.

 

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