Some Conservation Easement Transactions Abusive: IRS

Originally published on December 6, 2022, by the IRS.

The Treasury Department and Internal Revenue Service today issued proposed regulations identifying certain syndicated conservation easement (SCE) transactions as "listed transactions" – abusive tax transactions that must be reported to the IRS.

In these transactions, investors typically acquire an interest in a partnership that owns land and then claim an inflated charitable contribution deduction based on a grossly overvalued appraisal when the partnership donates a conservation easement on the land.

The IRS previously identified certain SCE transactions as listed transactions in Notice 2017-10. Recent court decisions in the Sixth Circuit and the U.S. Tax Court ruled that the IRS lacks the authority to identify listed transactions by notices, such as Notice 2017-10, and must instead identify such transactions by following the notice and public comment procedures that apply to regulations.

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