The use of conservation easements and land trusts have grown steadily since the 1970's in many cases permanently preserving millions of acres for wildlife conservation, forestry and wetlands from urban sprawl. Land conservation and easement conservation are created when the property owner transfer some or all rights to a qualified conservation non-governmental organization or government entity for a specific time or perpetuity. The utility, government or conservation entity as owner of the easement has the legal right to prohibit development contrary to the easement agreement that establishes the restrictions specific to the piece of land.
The benefit to the property owner is they maintain title to the land, enjoy limited use that does not interfere with the easement and have preserved the property's natural habitat. As with any property right, easements may be donated or sold. Donating land to a charitable organization may be eligible for charitable income tax deductions for the value of the contributed easement. If sold and the gain is substantial, the tax can be deferred by initiating a ยง1031 exchange, given the value of the replacement property is equal to or greater than the easement. The 1031 tax deferral enables the property owner to divest into any real property. A conservation easement exchange follows the same 1031 exchange guidelines required for forward exchange or reverse exchange.
As always, tax deferrals should be reviewed with your tax or legal counsel. Exchanging conservation easements, development, stewardship or mitigation credits are subject to State law and require adequate planning.
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