Preservation Strategies & Tax Benefits
Wednesday, February 18th, 2004Deed: The most popular land preservation technique is simply a gift or sale of land from a donor to The Warren Land Trust. If you wish, your deed may include land use restrictions that are particularly important to you.
Tax Benefits: If you give the land to the Warren Land Trust, you will receive a tax deduction equal to the fair market value of the land. Your tax deduction is limited to 30 percent of your income each year. If you cannot use up your entire deduction on the year of your donation, you may “roll over” the remainder of your deduction for the next five (5) years.
For example: Assume John and Mary have a joint income of $200,000 each year during 2000 – 2005, and donate land appraised at $360,000 to the Warren Land Trust. In tax year 2000, they could take a tax deduction of $60,000 for this gift. In tax years 2001 through 2005, they could “roll over” the remaining $300,000 and receive a $60,000 tax deduction each year. Please consult your accountant for details on this matter.
If you sell your land to the Warren Land Trust for less than its fair market value, this is a “bargain sale.” Your tax deduction will be the difference between the fair market value and the actual sales price. No tax benefits are available for a land sale at fair market value.
Conservation Restriction: A conservation restriction (also called a conservation easement) is your legal agreement that the property subject to this easement will never be developed. The restrictions in this document can be custom-tailored to your specific concerns. For example, a conservation restriction on a family farm can permit agricultural use only; a conservation restriction on a large forested area can permit hiking trails, recreational structures and routine maintenance and trail-clearing. A popular technique is to use a survey to designate a limited number of “building envelopes” within a large tract of land, then to place a conservation restriction on the remaining land. Click on Sample Conservation Restriction on this website to view a sample document.
Tax Benefits: If you are donating a Conservation Restriction, your appraiser should place two values on the land: (1) its highest value without the restrictions and (2) its value with the restrictions. The difference between these two values is the value of your charitable donation to The Warren Land Trust. Your tax deduction for this charitable gift is limited to 30 percent of your income each year. If you cannot use up your entire deduction in the year of your donation, you may “roll over” the remainder of your deduction for the next (5) years.
For example: John and Mary’s 50 acres are worth $200,000 undeveloped. These same 50 acres are worth $600,000 with no restrictions. The value of their charitable donation therefore is $400,000. If they have a joint income of $200,000 for tax years 2000 through 2005, they will have a tax deduction of $60,000 each of those years (or total tax deductions of $360,000). Please see your accountant for details on this matter.
Testamentary Gift: You may give land to us in your will (or trust), or you may place a conservation easement on your property in your will or trust. Here, your executor or trustee will act in your behalf after your death. If you wish, we can provide appropriate language for use by your attorney in preparing your will or trust.
Tax Benefits: Your estate taxes will be reduced by the value of your gift of land (or value of the conservation easement) as of the date of your death.
Life Estates: If you are making a gift of land (now or in your will or trust), you may always reserve a life estate, which permits the use of the land during your lifetime and during the lifetimes of others you designate (such as your spouse or children).
Tax Benefits: Your tax benefits may be reduced if a life estate is reserved.
Important Estate Planning Opportunity: If you are the executor or administrator on an estate, you may elect to donate land or grant a conservation restriction to the Warren Land Trust after the decedent’s date of death, so long as this decision is made before the estate tax return is filed. This is a valuable post-mortem estate planning tool that can reduce the size of the taxable estate and provide a charitable deduction to the estate. Your attorney or accountant can assist you with this matter.
Other Opportunities: You may wish to consult with your attorney or accountant to explore other ways to support land conservation efforts, such as granting a right of first refusal to a land trust, mutual agreements with neighbors to preserve a scenic view, or creating a charitable annuity or charitable remainder trust, which allows a land owner to transfer land to a conservation organization while realizing income and /or tax benefits during the donor’s lifetime.
