You know what a conservation easement is,
right? It is a nonpossessory interest of a holder
in real property. (A nonpossessory interest in
land is a term of the law of property to describe
any of a category of rights held by one person to
use land that is in the possession of another.) A
conservation easement is granted by a voluntary
deed conveying an interest in real property from
a landowner to a grantee that restricts future
uses of the real estate as negotiated between the
parties. Many people refer to this giving away or
selling your development rights. The land subject
to the easement may be thereafter sold, given or
willed by the landowner – subject, however, to the
restrictions in the easement.
Any landowner can grant a conservation
easement – an individual, a corporation, an LLC,
a partnership, an estate or a trust. The landowner
should seek advice from her lawyer, accountant
and financial planner, and may wish to hire her
own appraiser. The grantee of the easement can
be the County Farmland Protection Board, a
statewide or local land trust or other conservation
organization or a Federal agency.
However, what are the income tax
consequences? A conservation easement can be
donated to the grantee, sold for fair value, or sold
for less than fair value (known as a bargain sale).
The fair value of a conservation easement is the
difference between the market value of property
before the easement and the market value after the
easement is applied. A bargain sale is both a sale
and a donation.
If an easement is sold, the landowner will
recognize taxable gain if her basis in the easement
is less than the sale price. Her basis in the
easement is a proportion of t H