Income Taxes
Under the Internal
Revenue Code, for most gifts of appreciated land or
conservation easements, a taxpayer can deduct up to 30% of
his adjusted gross income in the year of the donation. If
the value of the gift exceeds that deduction the taxpayer
can carry forward the balance for up to five additional years.
For example, if Ms. Landowner has an adjusted gross income of $50,000 and
makes a gift of a conservation easement worth $80,000, her deduction in the
first year would be $15,000. The balance can then be carried forward for each of
five years until she has deducted the full $80,000 value of her gift.
Estate Taxes
Because development pressures in most parts of the country dramatically
increased property values during the past 20 years, many people are forced to
sell lands that have been in the family for generations in order to pay estate
taxes. Consider the Triple Bar Ranch, a fictional working ranch, but a
true-to-life financial example. The family patriarch bought the ranch in the
1960s, when land was far less expensive. Today, it is worth $1,250,000.
Ms. Landowner is a widow, and the ranch comprises nearly her whole estate. She
and her husband accumulated just $250,000 in other assets. Therefore, her total
estate is worth $1.5 million. In nearly every state, the combined state and
federal estate taxes would be around $200,000 - more than the surviving
Landowner children could afford to pay, even though they want to see the ranch
remain as open space. The solution may be the voluntary donation of a
conservation easement, which legally limits the amount and type of development
that can take place on land.
An easement can be tailored to a landowner's desires. The easement may, for
example, permit construction of just two more large-lot homes but protect the
land from construction of a subdivision. As a result, Ms. Landowner may reduce
the land's market value to $750,000, down from its current $1,250,000 value. Her
estate, including $250,000 in other assets, would then be worth $1 million, and
no estate taxes would be due.
The Growing Use of Conservation Easements
The nation's private, nonprofit land trusts have been tremendously successful
at land protection. Grassroots land trusts had permanently protected more than
6.2 million acres by the end of 2000. Of that, approximately 2.6 million acres
had been protected by conservation easements, according to the Land Trust
Alliance (LTA). The amount of acreage protected by conservation easements
increased more than fivefold since 1990.
The New Roxbury Land Trust, Inc. offers two
informational items for landowners -
"Protecting Your Land with a Conservation Easement" and "Conservation Options
for Private Landowners." You can get a copy by sending a self-addressed,
stamped business envelope with your request to THE NEW ROXBURY LAND TRUST, INC.,
P.O. Box 98, Woodstock, CT 06281.
