Know the Facts: Qualified Conservation Easement Contributions

A contribution of land for the public good, or at least an easement over a portion of some of your land to the community would potentially allow you a deduction for a qualified conservation easement.

Qualified Conservation Easements Charitable Contributions are a means for significant tax savings through the deduction one receives when he makes such a large charitable gift to the government. The foregoing discussion highlights the research our professionals conducted for you on this issue and outlines the guidelines for such deductions in these circumstances should you ever buy a plot of land with a view towards building construction.

Qualified conservation contributions gifts will qualify for deduction within IRC § 170 for certain interests in real estate to be used for conservation purposes. Q: What exactly is a “Charitable Gift?” in the eyes of the IRS? A: When a gift of land use is made to a public agency or to a qualifying 501(c) (3) organization such as a government Land Trust.

  • The gift must be a true gift for which no benefit is anticipated in For example, a conservation easement given to a land trust by a developer in exchange for government approval of a subdivision is not a gift.
  • The gift must be complete and irrevocable, without contingencies or strings For example, a condition that ownership of a property will revert to the donor or an easement will be extinguished if the land trust does not meet certain performance standards would make the donation non-deductible.

Next, when you have been shown to have true Charitable Gift intent, IRC § 170(h) then defines a four part test utilized to determine if a transfer constitutes a qualified conservation contribution. The four part test is as follows:

  1. Contributed property must be a qualified real property interest;
  2. Donation must be donated to a qualified organization;
  3. The donation must be for conservation purposes, and
  4. Donation must be exclusively for conservation purposes

To address these requirements the paragraphs below will analyze each requirement of IRC § 170(h) and applicable case law.

  1.  Qualified Property Interest

 Three categories of interests are qualified real property interests for purposes of IRC § 170(h) and Treasury Regulations §D 1.170A-14(b). Theses interests are:

  • The entire interest of a donor other than a qualified mineral interest;
  • A remainder interest; and
  • A perpetual conservation

An entire interest, other than a qualified mineral interest refers to a whole interest other than subsurface oil, gas or other minerals and the right to access such minerals. IRC § 170(h)(6). Care must be given not to divide an interest prior to contribution for the purpose of enabling a donor to retain additional control over the property or to reduce the property contributed. The regulations do allow for prior transfers of minor interests, that do not interfere with a contribution’s conservation purposes. E.g. retaining a right of way over the property. Treas. Reg.§ 1.170A-14(b)(1)(ii).

A remainder interest is an interest that is left after a prior timing period has expired. This can be after a term certain, after 10 years, after a measuring period, such as a life estate, or after a specific event or date. Remainders are structured to receive a current income tax deduction for a charitable contribution, and in addition to exclude the donated property from a donor’s estate.

The exclusion of the property form the constraints of IRC § 2033 reduces the taxable estate and hence reduces the federal estate tax.

A perpetual conservation restriction is a restriction granted in perpetuity relative to the usage on the contributed real estate. Various types of interests that normally qualify as perpetual conservation restrictions include easements and restrictive covenants. Treasury Regulations

  • 1.170A-14(b)(2).

2.  Qualified Organizations

 The second requirement is that the real estate must be donated to a qualified organization. A qualified organization is one that is eligible to receive qualified conservation contributions. Four types of organizations are qualified for purposes of IRC § 170(h):

  • A governmental unit described within IRC 170(b)(1)(A)(v);
  • A publicly supported charity described within IRC 170(b)(1)(A)(vi);
  • A publicly supported charity; and
  • A support organization controlled by a governmental unit or a publicly supported

Treasury regulations add additional restrictions to the Code provisions applicable to this definition. The organization must not only be “qualified”, but must also have a commitment to protect the donation’s conservation purposes and require the organization have sufficient resources to enforce any restrictions on the donated property. Other restrictions relate to the future use and prohibition against subsequent transfer unless the conservation purposes continue to be implemented.

3.  Qualified Conservation Purposes

 A qualified conservation purpose is also defined within the Code and treasury regulations. Treas. Reg. §1.170A-14(d)(1).

For purposes of this section, the term “qualified organization” means:

  • A Governmental Unit Described In Section 170(b)(1)(A)(v);.
  • An Organization Described In Section 170(b)(1)(A)(vi);.
  • A charitable organization described in section 501(c)(3) that meets the public support test of section 509(a)(2);
  • A charitable organization described in section 501(c)(3) that meets the requirements of section 509(a)(3) and is controlled by an organization described in paragraphs (c)(1)(i), (ii), or (iii) of this

The first permitted purpose listed in the regulations relates to access of the general public to use the land for recreation or education. An example of this type of use would be a forest preserve or hiking trails.

The second permitted purpose relates to maintaining or preserving natural habitats of animal or plant communities or similar ecosystems. The Code requires the habitat to be relatively natural. IRC §170(h)(4)(A)(ii).  The types of habitats and ecosystems included within Treasury Regulation Section 1.170A-14(d)(3)(iii) are, habitats for rare, threatened or endangered species; natural areas, such as undeveloped islands, that represent high quality examples of a terrestrial or aquatic community; and natural areas included in or contributing to the ecological viability of a local, state or national park, preserve or similar conservation area. Public access to property contributed for the second conservation purpose may be appropriately limited without jeopardizing the deduction.

The third permitted purpose is the preservation of open space.  Two requirements must be met to qualify:

  • for the scenic enjoyment of the general public; or
  • pursuant to a clearly delineated federal, state or local governmental conservation

In addition to either of the foregoing the preservation must yield a significant public benefit to qualify.

There are rigorous tests and inclusions relative to this test. They range from qualifying as a certified historic structure to determining the public’s benefit.

4.  Exclusively for Permitted Conservation

 The fourth requisite is the contribution must be exclusively for one or more permitted conservation purposes. IRC § 170(h)(1)(C); Treas. Reg. § 1.170A-14(e)(1). Normally the gift must be protected in perpetuity to qualify.  This is to cause the property to use in a manner that is consistent with the conservation purpose when gifted  This does not prohibit a donor form continuing an existing use of the property which does not conflict with the gift’s conservation purpose. This requires any retained interests to be subject to legally enforceable restrictions that prevent the retained interests from being used inconsistently with the conservation purpose.

The requirement that the separation of interests occurred before June 13, 1976 was eliminated by Section 508(d) of the Taxpayer Relief Act of 1997. Thus, the separation of interests can be made at any time before the contribution of the easement. This change is effective for easements granted after December 31, 1997.

In certain cases, documentation is needed to satisfy the preserved in perpetuity requirement. For current contributions if a donor reserves rights which may be exercised to impair the gift’s conservation interests a deduction is not allowed unless the donor furnishes the donee organization with documentation sufficient to establish the property’s condition at the time of the gift. Appropriate documentation includes; U.S. Geological Survey maps; maps drawn to scale showing all the property’s relevant features; aerial photographs; and on-site photographs.

How does one apply the above 4 part test in practical circumstances?

 Maintaining the Basic Integrity of Section 170(h)

Many people, including many tax professionals, think you can get a deduction under section 170(h) for building fewer houses on a piece of property than you could under local zoning. That is not correct. To qualify for a deduction, you must meet one of the “conservation purposes” tests: protecting property for public outdoor recreation and education, protecting significant wildlife habitat, protecting certain qualifying open space, or protecting historic property. Once you have done that, once you have protected some important conservation values, you get an income tax deduction for the value you have given up. Most “landowners” (as opposed to “developers,” who are of course also landowners) who donate conservation easements are motivated in large part by love of their land and the “conservation” qualities that make it desirable. Most developers are motivated by profit, and that is not a bad thing but it means the developer’s mindset about any particular piece of real estate generally starts with building, not conservation. Section 170(h) starts with conservation, not building.

The statute was intended to encourage the protection of open space and property with significant conservation values, and was not intended to be a tax incentive for “conservation development” projects that left a little open space between estate lot building envelopes. While the determination of what works and what doesn’t work is subjective, here is one generalization and one clear example.

In general, the larger the contiguous block of uninterrupted open space (uninterrupted by driveways, cul-de-sacs, house lots, swing sets, etc.), the more likely a conservation easement is  to meet the requirements of section 170(h). A large contiguous uninterrupted block of open space is not a prerequisite but it helps. Also, it is important to understand that the definition of “large” can vary quite a bit from region to region, state to state, and even within states.

Here is an example of what does not work: A “conservation easement” allowing 19 five-acre house lots on 100 acres does not protect the conservation values of that 100 acres. It may protect some of the conservation values, and it will prevent more intense development of the 100 acres, but it does not protect the conservation values of that 100 acres in a way that meets the requirements of section 170(h) of the tax code. There comes a time in the life of every piece of land when there are too many house lots (1? 5? 10?) to protect its conservation values, as the tax code defines them, no matter how strategically situated those house lots might be, and anyone who tries to convince you otherwise (either in a debate or with a glossy flora and fauna report) is ill-informed. There is nothing at all wrong with a 19-lot subdivision but the builder is not entitled to an income tax deduction under section 170(h) for doing it.

A developer also may say: “I am going to do 40 house lots, and in the middle of the subdivision I am going to keep five acres of woods. I’m going to put a conservation easement on the woods  and take a big deduction.” Once again, although there may be a number of other problems with this concept, a conservation easement on those particular five acres, the conservation benefit of which accrues only to the homeowners in the surrounding lots, simply does not rise to the level  of what the statute is looking for (although it is closer). A larger, voluntary “set-aside” of open space may or may not meet the requirements of section 170(h), depending, of course, on the facts and circumstances. If the protected open space is within a gated development, for example, the conservation “benefit” from the easement may accrue only to homeowners within the development. In that connection, see Example (4) of Treas. reg. section 1.170A-14(f) (“Owners of homes in the clusters will not have any rights with respect to the surrounding Greenacre property that are not also available to the general public.”)

Finally, under the “conservation purposes” heading, there is a lot of loose talk these days about conservation easements on private golf courses. This is a generalization, but 98 percent (although not 100 percent) of the proposed “golf course easement” deals I hear about (many of which never come to fruition) simply do not meet the threshold section 170(h) requirement that the easement protect some significant conservation values. Most private golf courses, although they look nice for the members, are intensely disturbed environments for section 170(h) purposes and have no significant “conservation” values under section 170(h). Also, many golf course easements seem to be the subject of proposed “syndicated” deals, in which ownership interests in the course are proposed to be sold at a remarkably low price to “investors” who are to receive some share of large easement deductions through a new LLC golf course owner.

There is another Section 170(h) problem that comes up in a limited number of situations. A developer wants to donate a conservation easement to the local land trust. (I use “land trust” as the generic term for the tax-exempt charitable organization in the business of protecting open space. Some land trusts are local, some are regional or statewide, and some are national.) The land trust tells the developer either that the assumed  conservation values” are not high enough (like the five wooded acres in the middle of the subdivision) or that the conservation easement reserves the right to build too many residences and that that construction will effectively destroy any real conservation values the property may have. The land trust declines to accept the easement. Undaunted, the developer sets up “his own” charitable organization, with a name like “Fox Run Estates Conservation Trust,” and donates the conservation easement to it.

Without knowing more, of course, it is impossible to know for sure, but on those facts it is a good guess that the Fox Run Estates Conservation Trust is classified as a private foundation under section 509(a)(1), and while their creation for charitable purposes is generally not a bad thing, the developer has made a serious mistake here because under section 170(h)(3) a private foundation is not an eligible donee for a deductible conservation easement.

Valuation of the Gift

The type of qualified interest contributed will determine the valuation method.

A remainder interest is calculated utilizing the appropriate IRS tables for a retained interest, taking into account the age of the donor, the time period of the retention, the type of gift times the current value.

Normally, the value of an easement or other perpetual conservation restriction is equal to the difference between the property’s fair market value prior to and subsequent to the grant of the easement. Sales prices of conservation easements are uncommon, as such no sales price comparable are generally available. As such the valuation approach is the method generally used.

Treasury regulations provide special rules for valuing a qualified conservation contribution. The purpose of the rules is to reduce the amount of gift by any economic benefit received by the donor or a related party. If the gifted easement increases the value of any other property owned by the donor or a related person, the amount of contribution is reduced by the amount of the increase in the other property’s value. This occurs even if the other property is not contiguous. Great caution should be had if any economic benefit, direct or indirect, excluding the income tax deduction is received by the donor or a related party. Deduction limitation may result.

Many terms used above are defined in the Internal Revenue Code and Treasury regulations. The terms include

A, “family” defined in Section 267(c)(4) and Treas. Regs. Section 1.170A-14(h)(3)(i).

  1. “related person” has the same meaning as in either Section 267(b) or Section 707(b). Regs. Section 1.170A-14(h)(3)(i).

See also, Treas. Reg. § 1.170A-14(h)(4), Example (10). 481. § 170(f)(3)(B)(iii). See, Treas. Reg. § 1.170A-14. See generally, S. Small, The Federal Tax Law of Conservation Easements (1986); Schuster, Charitable Contributions of Real Property Interests for Conservation Purposes,

1981-6 Tax Mgmt. Estates, Gifts & Tr. J. 25 (Nov.-Dec. 1981). IRC §170(f)(3)(B)(iii), IRC § 170(h) and the rules governing qualified conservation contributions were added to the Code in 1980. P.L. 96-541, Section 6. These provisions are effective for transfers made after December 17, 1980, in taxable years ending after that date. See, Treas. Reg. § 1.170A-14(j). Their enactment changed the law respecting the deductibility of conservation easements. Under prior law, exceptions to the nondeductibility of partial interests were provided for perpetual easements and remainder interests granted exclusively for conservation purposes. Former IRC § 170(f)(3)(B)(iii), (iv). Also, formerly an open space easement in gross in perpetuity was deductible as  an  undivided  portion  of  the  donor’s  entire  interest  in  property.  Treas.  Reg.§ 1.170A-7(b)(1)(ii). E.g., Rev. Rul. 75-373, 1975-2 C.B. 77; Rev. Rul. 74-583, 1974-2 C.B. 80;

PLR 8012026. Under the present rules, an open space easement in gross in perpetuity must meet the requirements of IRC §170(h) in order to be deductible, Treas. Reg. § 1.170A-14(d)(4)(i). To substantiate the deduction of a qualified conservation contribution, a donor must  maintain written records of the fair market value of the underlying property before and after the gift and the conservation purpose furthered by the gift. Treas. Reg.§ 1.170A-14(i). This information is required to be stated in the taxpayer’s tax return as required by the instructions on the return. BNA portfolios conservation easements.

The Conservation Easement regulations, at Treas. Reg. § 1.170A-(h)(3)(i), clearly specify the two appraisal rules

 The first rule is this: When a landowner donates a conservation easement on a portion of the contiguous real estate owned by that landowner and the landowner’s family, the deduction is equal to the value of all the contiguous property owned by the landowner and the landowner’s family before the easement minus the value of all of the contiguous property after the easement. In those situations, the appraisal rule picks up any enhancement or increase in value to land abutting the restricted land and reduces the deduction accordingly. In some situations the “all before minus all after” rule can have a significant impact on the amount of the deduction (but a longer analysis of that issue is beyond the scope of this article). Finally, the rule also tends to make the appraisal more expensive since the project is a bigger one.

The second appraisal rule is similar, and is also designed to pick up any “enhancement” to certain other real estate as a result of a conservation easement donation. This is the second rule: When a landowner donates a conservation easement and as a result there is an increase in the value of any other land, whether or not contiguous, owned by the landowner, the landowner’s family, or a “related party” (broadly defined to include certain partners and partnerships, corporations and shareholders, trusts and beneficiaries, and so on), the value of the deduction is reduced by any such increase in value to such other property.

In many  (though  not  all)  “routine” easement  situations,  involving  donations  by individual landowners or families on family land, those two appraisal rules usually do not come into play. In most situations involving conservation easement donations by real estate developers, who might be likely to donate a conservation easement on a portion but not all of a particular landholding, one of those rules is likely to be triggered.

The easement must meet certain standards and fulfill conservation purposes established by Congress for permanent open space protection and public benefit. Note that an easement does not have to provide for public access to qualify as a charitable gift.

You should have your attorney or tax advisor review the gift’s terms and advise you as to its deductibility.

Substantiating the Value of Your Gift

To take a tax deduction for gifts worth more than $5000, including land or conservation easements, the donor must obtain a “qualified appraisal” by a “qualified appraiser” (cash and publicly traded securities are exceptions). In general, the value of a conservation easement is equal to the difference between the fair market value of the property before and after the easement                      is donated.

Generally, a qualified appraiser is one who holds him/herself out to the public as an appraiser, who is qualified to make appraisals of the specific type in question (such as a conservation easement), and whose relationship to the taxpayer and donee would not cause a reasonable person to question the appraiser’s independence. TLS cannot provide the appraisal itself, but can give you a list of appraisers with experience in appraising gifts of land and conservation easements. The appraisal is necessary only if you are seeking a charitable contribution tax deduction for your easement or land donation.

In late 2006, the IRS issued guidance, “Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions”, defining “qualified appraiser” and clarifying that appraisals with respect to returns filed on or before August 17, 2006 did not need to meet the new Pension Protection        Act        requirements.        Notice        2006-96,        2006-46        I.R.B.        902.

The IRS requires that the appraisal must not be completed earlier than 60 days before the date of the gift and must state the fair market value of the gift as of the date of the contribution. (TLS can work with you and your appraiser to correlate these timing issues.) Alternatively, an appraisal may be done at any time after the gift, retroactive as to the date of the gift. The appraiser’s report must meet IRS standards, and a summary of the appraisal (IRS Form 8283), signed by the land trust and the appraiser, must be attached to the donor’s income tax return.

There is a federal requirement for taxpayers making charitable donations of property (including donations of conservation easements) worth more than $500,000. The language in the law (Public Law No. 108-357) requires that the taxpayer include the full, unabridged appraisal with their tax return. This provision is retroactive, and covers all donations made after June 3, 2004. The Treasury Department may provide regulations further interpreting the law soon. (posted 11/16/04)

Conference Report (H. Rept. 108-755) — (House of Representatives – October 07, 2004) (Now Public Law No: 108-357)



case of contributions of property for which a deduction of more than $5,000 is claimed, the requirements of this subparagraph are met if the individual, partnership, or corporation obtains a qualified appraisal of such property and attaches to the return for the taxable year in which such contribution is made such information regarding such property and such appraisal as the Secretary may require.


of contributions of property for which a deduction of more than $500,000 is claimed, the requirements of this subparagraph are met if the individual, partnership, or corporation attaches to the return for the taxable year a qualified appraisal of such property.

Effective date.–Effective for contributions made after June 3, 2004.

The provision requires increased donor reporting for certain charitable contributions of property other than cash, inventory, or publicly traded securities. The provision extends to all C corporations the present law requirement, applicable to an individual, closely-held corporation, personal service corporation, partnership, or S corporation, that the donor must obtain a qualified appraisal of the property if the amount of the deduction claimed exceeds $5,000. The provision also provides that if the amount of the contribution of property other than cash, inventory, or publicly traded securities exceeds $500,000, then the donor (whether an individual, partnership, or corporation) must attach the qualified appraisal to the donor’s tax return. For purposes of the dollar thresholds under the provision, property and all similar items of property donated to one or more donees are treated as one property. The provision provides that a donor that fails to substantiate a charitable contribution of property, as required by the Secretary, is denied a charitable contribution deduction. If the donor is a partnership or S corporation, the deduction is denied at the partner or shareholder level. The denial of the deduction does not apply if it is shown that such failure is due to reasonable cause and not to willful neglect.

The provision provides that the Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of the provision, including regulations that may provide that  some  or  all  of  the  requirements  of  the  provision  do  not  apply  in  appropriate  cases.

Limitations on Deduction Amounts of Charitable Contribution Easement Gifts

 As noted earlier the donation of a conservation easement is a gift to charity. The value of that gift provides an income tax deduction as will all charitable contributions, there are limitations.

B. Federal Income Tax

30% Limitation. The tax law places limitations on the maximum annual charitable deduction a donor may take. Generally, for a gift of long-term capital-gain property held more than one year

– which includes most gifts of appreciated land or conservation easements – the amount you can deduct in one year is limited to 30% of your adjusted gross income. If the value of your gift exceeds 30%, you can carry forward the excess for up to five additional years, applied each year up to the 30% limit. Beyond that time, any remaining portion of the value of the gift cannot be taken as a tax deduction. Hence, If the donor has owned the property for more than one year, he is subject to the “capital gain” property limitation of 30% of the donor’s “contribution base” (roughly his gross income). The total deduction may be taken over a period of six years (the year of donation plus a five year “carry forward”).

Congress created an enhanced incentive in the 2006 Pension Protection Act, which was extended through 2009 in the 2008 Farm Bill, through 2011 by section 723 of H.R. 4853, and through 2013 by section 206 of H.R.8. The incentive expired December 31, 2013, but contributions by that date will continue to carry forward under the enhanced rules.

For tax years beginning after December 31, 2005, and on or before December 31, 2011, an individual may deduct a qualified conservation easement contribution up to 50% of the individual’s contribution base and carry forward the excess for up to fifteen additional years. IRC § 170(b)(1)(E)(i).

For contributions made in tax years beginning after December 31, 2005, and on or before December 31, 2011, the following rules apply:

An individual with a qualified conservation contribution or a qualified farmer or rancher may carry over deductions for 15 years. IRC § 170(b)(1)(E)(ii).

A corporate qualified farmer or rancher may carry over a deduction for a qualified conservation easement for 15 years. IRC § 170(b)(2)(B)(ii)

The 50% (step down) election. In some cases, a taxpayer might want to take advantage of another option. The taxpayer can elect to claim a deduction only for the property’s tax basis (usually the price originally paid for it or its value when inherited, rather than its current fair market value), and in so doing can deduct an amount up to 50% of his or her adjusted gross income per year. Again, this may be carried forward five additional years. Hence, If the donor had purchased the land within one year of its donation, he would be able to deduct 50% of his “contribution base”. He would be subject to the same six year deduction period.

Example: The owner’s contribution base is $200,000; the appraisal has established the value of the deduction at $300,000.

  1. If the donor is limited to 30% of $200,000, he may deduct $60,000 (30% of $200,000) annually.
  2. The donor is a very recent purchaser, he may deduct $100,000 (50% of $200,000) annually.

Two Simple Suggestions for Avoiding “bad” conservation easement transactions which could be disallowed by the Service:

  1. Avoid Bad Appraisals. If we want to focus on bad appraisals use a qualified appraiser and collect and provide with the more useful information the IRS might think about to

Here is a short list of some questions that might be asked. It is important to understand that for many transactions that are legitimate and correct in every way the answers to one or more of these questions will be yes .If a donor answers yes to, say, four or more of these questions, there are indicia that the transaction might warrant further scrutiny. As always, when a taxpayer claims an income tax deduction the burden is on the taxpayer to substantiate the deduction, and in legitimate transactions done correctly the taxpayer will have no trouble doing that.

  1. Has the taxpayer owned the property for less than 24 months?
  2. If the answer to question 1 is yes, is the claimed deduction greater than two and one- half times the cost basis?
  3. Is the taxpayer a limited liability company or partnership?
  4. If the answer to question 3 is yes, did the taxpayer purchase the property from one of its members or partners or a party related (under section 707(b)) to one of its members or partners?
  5. If the answer to question 3 is yes, does the taxpayer or a party related to one of its members or partners own abutting land, or land in the immediate vicinity of the property, that is being used (or that will be used) for real estate development purposes?
  6. Does the conservation easement reserve the right to build more than six (or five, or eight, ) new residences on the property?
  7. Is the principal place of business of the appraiser in a state that is different from the state in which the property is located?
  8. Is the principal place of business of the donee in a state that is different from the state in which the property is located?
  9. Has the property been part of any submission to authorities for zoning or subdivision approval in the 18-month period before the donation?
  10. Are any of the comparable sales relied on by the appraiser for the conclusion of value more than 50 (30? 20?) miles from the property?

What was the fee for the appraisal?

The second suggestion is that in some states the taxing authorities can assist the taxpayer by looking at their own state income tax credits rules for conservation easement donations.

“Bogus” Charitable Contribution Easement Transactions:

The IRS are cracking down on certain bogus charitable contribution easement transactions. They are aware that some taxpayers are claiming inappropriate charitable contribution deductions for

easement transfers that do not qualify as qualified conservation contributions, or are claiming deductions for amounts that exceed the fair market value of the donated easement.

In addition, the IRS is aware that some taxpayers are claiming inappropriate charitable contribution deductions for cash payments or easement transfers to charitable organizations in connection with the taxpayers’ purchases of real property.

The IRS may impose penalties on promoters, appraisers and other persons involved in these transactions. In appropriate cases, the IRS may challenge the tax-exempt status of the charitable organization, based on the organization’s operation for a substantial nonexempt purpose or impermissible private benefit.

One of the agency’s four service-wide enforcement priorities is to discourage and deter non- compliance within tax-exempt and government entities and misuse of such entities by third parties for tax avoidance and other unintended purposes. (IRNotice 2004-41; 2004-28 IRB 1)

Recommendations – Qualified Conservation Easements Contributions

 You have invested in a conservation easement trust. Unfortunately the deduction provided is approximately four times the amount of your cost. Even though we have not read the tax opinion, as we have already advised you the IRS takes a very harsh view of transactions that provide little or no economic substance, other than the income tax deductions, and further if the deductions exceed the “investment” most of these structures are ultimately determined to be tax shelters and are ultimately disallowed.

We are not and are not in a position where we have reviewed all applicable literature with this transaction, but we wanted you to be aware of this issue, and that this has been an IRS priority since 2004 to locate such structures.

Richard M. Colombik, JD, CPA, is an award-winning attorney and CPA with a doctorate in jurisprudence with distinction and was formerly on the tax staff of one of the world’s wealthiest families.

Mr. Colombik has also been a tax manager at a Big Four accounting firm, the State Bar’s liaison to the Internal Revenue Service (IRS), vice president of the American Association of Attorney-CPAs, and vice chairman of the American Bar Association’s Tax Section of the General Practice Council, as well as the past chair of the Illinois State Bar Association’s Federal Tax Committee. Mr. Colombik has also served on the liaison committee to the Washington, DC, National Office of the IRS. Mr. Colombik is also a member of the Asset Protection Committee, American Bar Association, and a member of its captive insurance subcommittee.

Mr. Colombik has appeared on numerous television shows, hosted a weekly radio show on tax and business planning, and authored more than 100 articles on income taxation, asset protection planning, IRS defense, and estate planning. He has also instructed more than 100 seminars to professional groups, business groups, bar associations, CPA societies, and insurance groups. This is in addition to authoring a published work on business entity structures offered by the Illinois Institute of Continuing Legal Education, as well as writing a chapter for The Estate Planning Short Course and Asset Protection Planning.