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A deduction with a view: Donate a scenic easement to charity

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Did you buy a place in the country in the days before suburban sprawl? If so, you can nail down a tax deduction this year simply by agreeing to preserve the land in its pristine state.

How? Donate a "scenic easement" in the property to a qualified state or local government agency or unit. The easement allows others to enjoy or study the natural beauty of the land. As long as you meet the tax-law requirements, you can grab a charity deduction for value of the benefit.

The real beauty of the deal: You can secure this sweet deduction without giving up one square foot of your property. In a physical sense, you still own the property, but you've given away some legal rights you had before.

4 categories of easements

The IRS has given its stamp of approval to four categories of conservation easements, including the "scenic" variety, which can qualify for a deduction:

1. Recreation/education. This category includes the preservation of land for fishing, boating, hiking trails, etc. The public use of the property must be "substantial and regular."

2. Wildlife habitat. That includes a natural habitat of fish, wildlife or plants or similar ecosystem. The donation can include land that's been altered by human activities if the fish, wildlife or plants exist in a relatively natural state. Access by the public may be limited for environmental reasons.

3. Historical significance. Preservation of historically important land or a certified historic structure could qualify. You must allow some public access if you want to deduct this kind of contribution.

4. Open spaces. Finally, you can earn a deduction for preserving open space (including farmland and forest) that is either (a) for the scenic enjoyment of the general public or (b) pursuant to a federal, state or local government conservation policy that will yield a significant public benefit. In both cases, you don't have to allow public access onto the property; visual access is sufficient.

In other words, you don't have to deal with visitors trampling across your land to secure the scenic-easement tax deduction.

By allowing the public to view the landscape from afar, you can enjoy the tax benefits along with the serenity of the countryside.

One catch: You must make your donation of a scenic easement, or any other conservation easement, "in perpetuity." That means your heirs or any succeeding owners won't be able to alter the land or use it for other purposes, including real estate development.

For more on conservation easements, visit:

• www.lta.org/conserve/ options.htm

• www.nature.org/aboutus/howwework/conservationmethods/privatelands

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