IRS Cracking Down On Easement Donation Syndications
Given the high value of the castles in the air that some appraisers can conjure, you can see that ultimately the owners of property have much more in the way of potential tax benefit than they can use themselves even with the generous 50% adjusted gross income limitation and 15 year carryover. That’s where syndication comes in.
A year or so ago, thanks to all I have written about conservation easements, I received a call from someone who was promoting the syndication of conservation easements. In order for it to work I figured that one of three things had to be going on. There was fast and loose playing with Code Section 704, which concerns how you allocate income and losses among partners, property was being acquired from very dumb people or they were, you know, fibbing about the valuation. I think the proportions may vary, but that the third element, the valuations, tends to predominate. At least that is what the IRS is implying.
Tax Court Sustains IRS Strict Interpretation Of Charitable Acknowledgement Rules
The problem with valuing conservation and facade easements is that they involve subtracting the value of something real and existing now from the value of something hypothetical, which can turn into something of a fantasy. The valuation of the facade easement in this case is more grounded in reality. There was a real development plan ready to roll until Mr. Berman stepped in front of the hypothetical wrecking ball. It would be interesting to dig into it further, but at this point, I really don’t have enough information. My guess is the appraiser kind of underestimated the hurdles and risks including the obvious one that the Landmark Preservation Commission might, as they did, rule in favor of preservation.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.