Conservation Easement -- IRS audits and litigation

Atlanta, Georgia tax attorney Cal Bomar and the attorneys at Bomar Law Firm, LLC assist clients who are undergoing an audit relating to a conservation easements and conservation strategies.

In Notice 2017-10, the IRS has put taxpayers and practitioners on notice that it considers certain syndicated conservation easement transactions to be tax avoidance transaction, identifying the transactions as "listed transactions." meaning they could be considered abusive.

Section 170(e)(1) of the Tax Code allows a deduction for a qualified conservation contribution, which is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. The contribution should include a restriction, granted in perpetuity on the use that can be made of the real property.

The IRS asserts that that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. In those transactions, a promoter offers prospective investors in a partnership or other pass-through entity the possibility of a charitable contribution deduction for donation of a conservation easement.

The IRS said it intends to challenge the purported tax benefits from such transactions based on the overvaluation of the conservation easement. The IRS has indicated that it may also challenge the purported tax benefits from the transaction based on the partnership anti-abuse rule, economic substance, or other rules or doctrines.

The IRS will be litigating a large number of conservation cases over the next several years. For a detailed analysis of your conservation easement case, call Bomar Law Firm at (404) 841-6561. Cal Bomar is a former IRS Chief Counsel Attorney who represents taxpayers in conservation cases, as well as other tax controversies.