Another Conservation Settlement Offer and a Crazy Idea to Beat the System - 08-15-26

The IRS has issued a statement about a new settlement offer that is going out for conservation and historic preservation easement disputes. It is similar to previous offers, but there is one big difference. The partnership will not have to make a payment at the time that it accepts the offer. Other than that, it is a similar to the deal offered in 2020. Taxpayers get to deduct what they are out-of-pocket as an ordinary deduction and are subject to a 10% penalty. In general, the out-of-pocket donation might be around 20% to 25% of the claimed charitable deduction. The Tax Court, on average has been allowing 6%, although results vary. There is usually a 40% penalty in the decided cases.In one of my harsher moments, I referred to syndicated easements as an industry based on nonsense. The trade association, Partnership For Conservation, promoted the notion that an easement on property could be worth more than the current value of the property. This was necessary in order for the deals to work since promoters would acquire an interest in property and mark it up to sell partnership interests to investors who would be promised a deduction typically four to five times their investment (sometimes more) which would allow them to pay their taxes effectively for about fifty cents on the dollar, more or less. The Senate Finance Committee refers to inflated appraisals as being the engines of syndicated conservation-easement transactions. The inflation of the appraisals is being borne out in Tax Court. Overall, you can see why the settlement looks like a good deal... let's take a deeper look.This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax