Conservation Options
The following represents a range of conservation options available to landowners that can be used alone or may be blended to help you achieve your objectives.
Land Donation: An outright donation of land to the Trust or a municipality (herein after referred to as a "qualified organization") may provide the donor with a charitable income tax deduction, and a reduction in the value of one's taxable estate.
Conservation Easement: A donation of a conservation easement (defined as a voluntary agreement between a landowner and a qualified organization that protects land, or a portion thereof, from residential or commercial development in perpetuity) may provide the donor with a charitable income tax deduction, a reduction of property taxes on the protected property, and a special property tax credit (see New York State Conservation Tax Credit). The landowner continues to own the property, less its development rights, but retains the right to sell the restricted land or pass it on to heirs.
Sale of Development Rights/Purchase of Development Rights (PDR): A sale of development rights (generally in the form of a conservation easement) to a qualified organization that protects land, or a portion thereof, from development in perpetuity. The landowner continues to own the property and retains the right to sell the restricted land or pass it on to heirs. The sale provides cash to the landowner and may result in a reduction of property taxes on the protected property. The proceeds of the sale, however, may be subject to capital gains taxes and remain as part of the landowner's taxable estate.
Transfer of Development Rights (TDR): In this transaction, development rights are transferred from one property in a sending district to another property(ies) in a receiving district(s).
Bargain Sale: A sale of land or a conservation easement to a qualified organization at less than fair market value. The difference between the fair market value and the bargain sale price may provide the seller with a charitable income tax deduction. For more information, please see the white paper from the Back Forty Primer Series on Bargain Sales.
Conservation Planning: The subdivision of land on a reduced-density basis that results in the protection of land of conservation value (i.e., agricultural, natural, or historical resources). When the amount of land protected exceeds that required under zoning regulations, the landowner may be able to sell or donate a conservation easement to a qualified organization and benefit from an expedited approval process. Given the reduced density, infrastructure costs of development may be reduced.
Charitable Remainder Trust (CRT): An arrangement in which property or money is donated to a charity, but the donor (called the grantor) continues to use the property and/or receive income from it while living. The beneficiaries receive the income and the charity receives the principal after a specified period of time. The grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned. In addition, the asset is removed from the estate, reducing subsequent estate taxes.
Reserved Life Estate: A gift of a residence with a reserved life estate to a charitable organization allows the donor to continue living in the residence during their lifetime. Upon the donor's passing, the organization may sell the real estate and use the proceeds to carry out its charitable mission.
Family Limited Partnership/Limited Liability Corporation: Forms of ownership that can be used to transfer land and other assets from one generation to another. The value of land may be reduced by virtue of restrictions inherent in these forms of ownership, enabling it to be more easily transferred to beneficiaries over time, ultimately reducing estate taxes.
Like-kind Exchange: A tax-free transaction where property is exchanged for other qualified, like-kind property. An exchange can be accomplished using the proceeds from a sale of land or development rights as long as the exchange property is identified within 45 days of the initial sale and the proceeds thereof are reinvested in qualified business or investment property within 180 days of such sale. The capital gains tax on the initial sale is deferred.
Tax-exempt Installment Sale: In this option, because the proceeds of the sale are spread over a number of years, the seller defers payment of the capital gains tax and, by increasing the basis, reduces inheritance taxes that are paid during the term of the installment sale.
Testamentary Gift: Gifts of land and conservation easements can be made a part of your Last Will and Testament. While testamentary gifts do not result in a charitable contribution for income tax purposes during the donor’s lifetime, such gifts may dramatically reduce the estate tax liability faced by the next generation. Codicils to a will can be an effective interim measure to protect land while planning is underway.
Fair Market Purchase: If funds are available, the Trust may purchase land or conservation easements at fair market value. In other instances, the Trust may negotiate a purchase on behalf of municipalities.
Staff
Julie Wesnofske
Senior Project Manager
jwesnofske@peconiclandtrust.org