Example 1Conservation easements have often been the subject of contention with the IRS. The substantiation regulations regarding conservation contributions were developed in an attempt to curb abuses of the conservation contribution deduction. In recent years, courts have addressed the perpetuity requirement for conservation easements.
Richard owns 1,200 acres of land that has been in his family for over 100 years. The land is heavily wooded, contains a large pond and is adjacent to both a river and a creek. Richard decides to donate a conservation easement in the land to the local conservation society to protect the wildlife habitat. In addition to making sure that his conservation contribution qualifies, Richard must also substantiate his charitable deduction.
Richard prepares a file of the documents he will need in order to substantiate the conservation contribution. First, he hires an appraiser to document the fair market value of the property prior to the donation. The appraisal values the land as of the gift date, but may be completed as early as 60 days prior to the gift or as late as the date on which the donor's tax return is due, including any extensions. He also created a document that detailed the conservation purpose that the donation furthered, including preservation of a wildlife habitat.
Courtney owns a three-year-old pickup truck with 30,000 miles on it. With a growing family, she decided it was time to upgrade from a pickup truck to a sport utility vehicle. At first, she was preparing to sell the truck, but, while she was talking with the gift planner at her favorite charity, the gift planner mentioned that the charity was in the market for a pickup truck. After doing some research and talking with her tax advisor, Courtney determined that she wanted to donate the truck to the charity. The advisor explained to Courtney the way the process would work and gave her a list of things that she should expect to see in the charity's written acknowledgment.
Soon after Courtney delivered the truck to the charity, she received a note thanking her for her contribution. The note contained Courtney's name and Social Security number, as well as the truck's VIN. However, Courtney did not see any indication of the charity's intended use of the vehicle. She contacted the charity and requested an updated acknowledgment certifying that the charity intends to keep the truck for a number of years and that it will not sell the truck until that time period has passed.