Are Conservation Easements Abusive Transactions? Learn more!

The IRS identifies charitable contributions of conservation easements as potentially abusive transactions. Often encouraged by promoters and armed with questionable appraisals, IRS asserts that contributions of conservation easements can result in inappropriately large deductions, and in some cases, taxpayers claiming deductions when they are not entitled to any at all.

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  Be certain that, if you are gifting a conservation easement, the donation involves a qualified donee organization (i.e., usually an established organization with known ties to conservation efforts) and the gift is made for a qualified conservation purpose.  

• Charitable Contributions Deduction: Treasury Regulations and Other IRS Guidance
  See how the federal income tax deduction of charitable contributions is limited under I.R.C. § 170 when there exists a quid pro quo for a donor who receives or expects to receive benefits from a third party. 

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  • Business Entities. Treasury issued final regulations concerning the statutory disallowance rule enacted by the SECURE 2.0 Act of 2022 to disallow a federal income tax deduction for a qualified conservation contribution made by a partnership or an S corporation after December 29, 2022. 89 Fed. Reg. 54284 (June 28, 2024).
  • Business Entities. IRS advises taxpayers of its position challenging certain partnership related-party transactions under the codified economic substance doctrine in R.C. § 7701(o). Specifically, the IRS addresses the question: "Does the economic substance doctrine apply to disallow tax benefits associated with a series of transactions involving a related-party partnership, through which the parties first generate a disparity between inside basis and outside basis and then trigger a basis adjustment to property under I.R.C. § 732(b), § 734(b), or § 743(b), which generates increased cost recovery deductions with respect to the property or reduced gain (or increased loss) upon a sale of the property?" Rev. Rul. 2024-14.
  • Compensation/Employee Benefits/Payroll. IRS provides guidance on applying exceptions to the 10% additional tax underR.C. § 72(t)(1) for emergency personal expense distributions and domestic abuse victim distributions. Notice 2024-55.
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