PowerPoint PresentationAn audit of the Company may lead to an audit of its members. • Tax Laws...
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Transcript of PowerPoint PresentationAn audit of the Company may lead to an audit of its members. • Tax Laws...
DEANS CONSULTING TOP TAX STRATEGIES
CPE FOR CPAs PROGRAM
Deans Consulting, LLC is registered with the National
Association of State Boards of Accountancy (NASBA) as
a sponsor of continuing professional education on the
National Registry of CPE Sponsors.
Donald M. Deans CPA / PFS
OVERVIEW OF CONSERVATION
EASEMENTS
For Accredited Investors Only. If you are not a CPA or Tax Adviser and are viewing this presentation, please obtain
the advice of one or both before making an investment in an investment partnership for conservation.
IMPORTANCE
ENABLEMENT
170(h)
CONSERVATION EASEMENT
CONSERVATION PURPOSES
• To be deductible, the conservation easement
must comply with at least one of the following
conservation purposes:
• Preservation of land areas for outdoor
recreation or education of the general
public
• Protection of a relatively natural habitat
of fish, wildlife, plants, or ecosystem
• Preservation of open space
• Protection of historically important land
or certified historical structures
HISTORIC PRESERVATION EASEMENTS• The Tax Reform Act of 1976 established tax benefits to
encourage the preservation of historic structures.
• The fourth conservation purpose provided further
incentives to property owners to preserve historic
structures and lands.
• Preservation easements can be donated in combination
with Historic Tax Credits to help fund rehabilitation.
QUALIFYING ORGANIZATION DONEE
EASEMENT VALUATION
HIGHEST AND BEST USE (HBU)
DONATING WHAT COULD HAVE
BEEN… TO BE CONSERVED,
FOREVER.
TO BE PRESERVED, FOREVER.
DONATING WHAT COULD HAVE
BEEN…
DONATING WHAT COULD HAVE
BEEN… TO BE CONSERVED,
FOREVER.
IRS FOCUS &
NOTICE 2017-10
IRS AUDIT GUIDE
IRS FOCUS
Bosque isn’t
Belk
Esgar – no
market for Rocks
to the Rockies
Dr. Carroll is
NOT an attorney
Kiva Dunes –
Court agreed with
HBU.
IRS FOCUS
MONETIZATION
INVESTMENT PARTNERSHIPS FOR CONSERVATION
INVESTMENT PARTNERSHIPS FOR CONSERVATION Growing support for contributions of investment
partnerships for conservation that help to fund
conservation of land.
INVESTMENT PARTNERSHIPS FOR CONSERVATION
INVESTMENT PROCESS
Experienced sponsors pre-assess 9 out of 10 potential
projects before selecting one that is approved by a qualified
land trust or government agency for accepting a potential
donation.
Sponsor forms LLCs
Acquisition LLC
Investor LLC
Landowner
contributes
land
Sponsor offers
investment in LLC
Members share in
Charitable
Deduction
Sponsor maintains
current operations
Sponsor arranges
for debt and
manages the
development
Sponsor offers
investment in LLC
Currently ranges
from 4:1 to 5:1 ratio
of deduction of
investment
Members elect to pursue
three plans:
• Highest & Best Use
Plan
• Hold Plan
• Donate Easement
Plan
Members vote
on a plan
Hold Plan
USE OF FUNDS
LAND
CONSERVATION
EXAMPLE
LAND CONSERVATION EXAMPLE
LAND CONSERVATION EXAMPLE
Investment $100,000
Deduction $500,000
Effective Tax Rate 40.0%
Tax Savings $200,000
LAND CONSERVATION EXAMPLE
INVESTMENT RISKS
• Investment Loss Risk – if the Mining or Build Option is chosen and the business activities fail to generate a profit.
• Lack of Liquidity/Investment in Real Estate – Investments in real estate are speculative and subject to various risks including, but not
limited to market risk, interest rate risk, and credit risk. The Units are illiquid investment and must be held indefinitely.
• Appraisal/Valuation Risk – Appraisals are subjective by nature and if the Conservation Option is elected by the members, the
valuation may be successfully challenged by the IRS.
• Tax Risk/Audit Risk – If the Conservation Option is elected by the members, the IRS may challenge the entire conservation easement
and/or any part of the Company. An audit of the Company may lead to an audit of its members.
• Tax Laws Subject to Change – Tax laws are subject to change, and there can be no assurance the tax code or existing Treasury
regulations thereunder will not be amended in such a manner that would adversely affect this offering.
• Substantial Fees – The Company will pay substantial compensation to the Manager, none of which have been negotiated at arm’s
length. Some of these payments may be made regardless of the success or profitability of the Company. Additionally, the purchase
price of the Property will not be the product of an arm’s-length transaction.
• Listed Transaction Notice – If the members elect to pursue the Conservation Option, then, pursuant to the IRS Notice 2017-10, the
Manager believes that this investment would constitute a Listed Transaction for purposes of Treasury regulations Section 1.6011-4.
Accordingly, each prospective investor should consult with its own independent tax advisors regarding the consequences of an
investment in a “Listed Transaction” disclosure under “Federal Income Taxation” in the PPM.
