On December 23, 2016, the IRS announced that certain Syndicated Conservation Easement Transactions will be considered listed transactions. Taxpayers who participate in these transactions must file IRS Forms 8886 with the IRS Office of Tax Shelter Analysis before May 1, 2017. The failure to file Forms 8886 with the IRS could lead to significant IRS non-filer penalties.
The Notice provides that investors involved in transactions with the following facts must file Form 8886:
• An investor receives promotional materials that offer investors in a pass-through entity the possibility of a charitable contribution deduction that equals or exceeds an amount that is two and one half times the amount of the investor’s investment (the materials may be oral or written).
• The investor purchases an interest, directly or indirectly in the pass-through entity that holds real property.
• The pass-through entity contributes a conservation easement encumbering the property to a tax-exempt entity and allocates, directly or indirectly a charitable deduction to the investor.
• The investor reports a charitable contribution deduction with respect to the easement on his or her tax return.
Note that the deduction does not have to exceed 2 ½ times the investment – it is sufficient if the promotional materials boast of such a deduction. Also, this Notice applies to any transactions that were entered into on or after January 1, 2010.
Material Advisors to these transactions must also file IRS Form 8918 in order to avoid IRS penalties.
Williams Coulson is available to assist in the preparation and filing of IRS Forms 8886 for Syndicated Conservation Easements. Call Mike Lloyd at (412) 454-0225 or email him at email@example.com for more information.