The Internal Revenue Service released a new guide Nov. 22, 2011 that gives taxpayers a blueprint for how IRS examiners will view charitable contributions of property that is permanently restricted as to use and development, according to Bureau of National Affairs’ Daily Tax Report.
The Conservation Easement Audit Techniques Guide covers the statutory requirements for charitable contributions of parks, wetlands and historic land or structures as they pertain to which organizations will qualify for the deductions, according to BNA’s Daily Tax Report.
A charitable contribution is not deductible unless it is properly substantiated, IRS said, and that can include documentation of contribution date, the nature of the contribution, whether it is cash or noncash, the type of property contributed and the dollar amount claimed, according to BNA’s Daily Tax Report.
IRS tax code Section 170 says qualified appraisals are required for all noncash contribution deductions of conservation easements greater than $5,000. The value of a conservation easement is determined by a qualified appraisal .
Citing the IRS guide, BNA’s Daily Tax Report’s articles said that value is the fair market value at the time of the contribution, but if there is a substantial record of sales of easements comparable to the donated easement, the fair market value is based on the sales price of such comparables.
If there is no substantial record of market-place sales, the value is generally the difference between the fair market value of the underlying property before and after the easement is transferred, according to the articles.
Find the IRS’ new conservation easement audit technique guide at http://www.irs.gov/pub/irs-utl/conservation_easement.pdf.