Fair Market Value
From: Conservation Easements: The Federal Tax Rules and Special Considerations Applicable to Syndicated Transactions
By: Bryan Mick, JD, MBA and Bradford Updike, JD, LLM
Mick Law P.C.
The amount of a contribution in property (including conservation easements) is the donated property’s fair market value.1 For individuals, the amount of the charitable contribution deduction from the donation of a conservation easement to a qualified organization for 2012 and 2013 is limited to 50% of the individual’s contribution base (adjusted gross income, computed without regard to any net operating loss carry-back), over the amount of all other allowable charitable contributions for that year (100% for contributions of agricultural or livestock production property by qualified farmers or ranchers), with a carryover period of 15 years (IRC §170(b)(1)(E)). At the end of 2013, this higher limitation amount is scheduled to sunset, and, barring a further extension of the higher limitation to subsequent years, the limitation of 30% of the contribution base and five-year carry-forward for capital gain property will apply (IRC §170(b)(1)(C)).
An individual who is a qualified farmer or rancher may deduct up to 100% of the individual’s contribution base (after reduction by other contributions) for the donation of a qualified conservation contribution. A qualified farmer or rancher is an individual whose gross income from the trade or business of farming within the meaning of IRC §2032A(e)(5) is greater than 50% of the individual’s gross income for the taxable year. For any contribution after August 17, 2006, of property that is used in agriculture or livestock production, the 100% limitation applies only if the contribution is subject to a restriction that provides the donated land remains available for agriculture or livestock production.2 If the contribution is not subject to such a restriction, the 50% limitation applies.
For corporations, in general, the maximum amount allowable as a charitable contribution deduction for any taxable year is 10% of the corporation’s taxable income for that year, computed with certain adjustments described in IRC §170(b)(2)(C). A corporation that is a qualified farmer or rancher may make a qualified conservation contribution of property used in agriculture or livestock production (or available for such production) and deduct up to 100% of the corporation’s taxable income provided the donated land remains available for such production. 3
Bryan S. Mick is the President of Mick Law P.C. in Omaha, Nebraska, and a provider of independent due diligence legal services for various broker-dealers and registered investment advisors throughout the country.
Brad Updike joined Mick Law in August 15, 2006, and his areas of practice include securities law, oil and gas, private equity, conservation real estate, DPP due diligence, taxation analysis relating to securitized financing, and securities advertising practices. On a local level, Mr. Updike has also served the legal needs of Omaha-based clients on matters relating to estate planning, private placements, trademark law, and 501(c)(3) non-profit taxation matters.
Bryan Mick, Bradford Updike, Mick Law P.C., SANDLAPPER Securities, LLC, Sandlapper Wealth Management, LLC, and TRIPS are unaffiliated.
1 Treas. Reg. §1.170A-1(c).
2 IRC §170(b)(1)(E)(iv)(II).
3 IRC §170(b)(2)(B).
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