Tax Notes Article Warns About Mixing Mortgages and Conservation Easement Deductions

In the Tax Notes article "Mortgages and Conservation Easements: Not a Good Mix," Wendy Gerzog discusses the Tax Court's denial of a charitable deduction for a conservation easement on a home.  The home-mortgage-holder's claim on any insurance or indemnity payouts for a casualty loss to the home was prior to the claim of the preservation organization that received the easement.  Because of this, the organization did not have the absolute right to proceeds from extinguishment of the easement that is required by Regulations section 1.170A-14(g)(6).  In the same opinion, the court did allow deductions for payments made by the homeowners to the preservation organization because there was no evidence of a quid pro quo inuring to the taxpayer's benefit, and the payments were only used to assist the taxpayer in attaining a charitable deduction.

See Wendy Gerzog, "Mortgages and Conservation Easements: Not a Good Mix," 2011 TNT 145-10, June 27, 2011.

Posted by David Perry, Associate Editor, Wealth Strategies Journal