Conservation easements has become popular in recent years as they potentially provide a tremendous tax advantage. Essentially, a person transfer the rights to future development of the property and agrees not to change its current use (keeping a forest intact instead of building a mall for example). In exchange, the person is able to take a charitable write off on the difference in the current use value and what the value of the property would have been if new development was allowed. However, this write off must be based on an appraisal which can lead to potential problems down the road especially when a person tries to push the limits of their gain. Be careful using conservation easements because the IRS is now on alert and will seek penalties for any out of line claims.
See Peter J Reilly, Conservation Easements – Tax Court Lets Owner Sell Them Or Give Them But Not Both, Forbes, June 1, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
