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1031 and Conservation Easements

One of the experts to whom we refer our 1031 Like-Kind Exchangeclients has written a fabulously interesting post. He makes a great point here in terms of conservation easements and the 1031 possibility!

He writes, " The exchange would enable them to sell the easement, defer their income tax and place the proceeds into income-producing property which would supply them a way of life after farming. After this, they are still able to sell the property in the future...with the easement still in tow."

Take a close look at this post!

I have to admit that I am jumping on the bio-diesel eco-wagon much later than most. My wife and I have taken steps around the house to make sure that we are doing our part in saving what we can. We have changed our light bulbs, filter our own water instead of buying bottled, decreased our water usage and buy from our local farmers market. I don't think we are on the cutting-edge, but everyone needs to start somewhere, right?

So, my biggest question was how do I begin to go eco with the most time consuming aspect of my life...WORK? I stumbled across the answer with one phone call a few months ago. For those who don't know me...basically everyone...I am a Qualified Intermediary that handles 1031 Like-Kind Exchanges. This tax code consumes most every hour of the six days I spend working. I have had the ability to help thousands of taxpayers in deferring tax of the sale of antique cars, cattle, rental properties, high-rise buildings, jets, beach homes, and most recently, conservation easements.

I am from a fairly rural area of NC and grew up raising cattle, tobacco and gardens. Most of the summer was spent priming tobacco for several families in the area as paying help (more than $3 dollars an hour and all the Pepsi's and raisin cakes one would need) was mostly out of the question. Times were tight for many farmers, large and small, and loans were often taken to make sure that ends were met before the crops came in. I believe that this pattern is still in place, though labor costs have certainly skyrocketed as have all other forms of overhead. The short of it being that incomes were not made to save, but to spend to make the next year possible.

As many farmers are experiencing such an increase in land value and have many developers and realtors at the ready to pull the sales-switch, the decision to sell and have a nice bankroll to supply retirement funds becomes quite easy. But, can a family's tradition and community culture be so easily lost? I hope not, thought it seems the case as I drive around many of my surrounding communities. So, let's talk about conservation easements. As you know there is the ability to donate a conservation easement which allows the taxpayer to take a first- year tax deduction based on a percentage of their Adjusted Gross Income along with a carryover period of up to 15 years. That is fantastic, but what if, for various reasons, the farmer does not want to donate the easement but would sell the easement for cash?

Let me split a fine hair and provide an example of how I was able to help my client. Mr. and Mrs. Smith (original, huh?) owned a farm with many acres. They were approached by an entity and asked if they could purchase a conservation easement on the farmland. The Smith's had no issue with this as they wanted the land to stay farmland. The big question was could they afford the taxes they would have to pay on the income from the purchase of the easement. As I was able to talk with them about options, we discussed the 1031 Like-Kind exchange. The exchange would enable them to sell the easement, defer their income tax and place the proceeds into income-producing property which would supply them a way of life after farming. After this, they are still able to sell the property in the future...with the easement still in tow.

What will be the value of this property since it has such a distinct restriction? Probably less monetarily than it might have received without the attached easement, but what value are we ascribing? This land will stay in tact with the proven and needed ecological helps to encroaching urban development.

There are many who could have written this article much better than I.

I am always humbled by the vast amount of knowledge of my peers. As I continue to learn how my career can better help in our eco-friendly desire for our local areas, I will share. Please continue to share with me as well!

 

 

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Comments

The exchange would enable them to sell the easement, defer their income tax and place the proceeds into income-producing property which would supply them a way of life after farming. After this, they are still able to sell the property in the future...with the easement still in tow.

WOW!

I want to know more!!!

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) almost 12 years ago

Hi JaneAnne,

Thank you for sharing this information.  There are many real estate investors as well as their advisors that do not realize what tremendous benenfits of the 1031 exchange exist today.  The more  information posted on 1031 exchanges the more informed decisions can be made by the real estate investor.

Posted by Bill Exeter, 1031 Tax-Deferred Exchange Expert (Exeter 1031 Exchange Services, LLC) almost 12 years ago

Bill and All~

Indeed. I have seen many situations in which a  real estate portfolio has grown via the 1031 Like Kind Exchange while it also was creating positive possibilities now and into the future . ..

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) almost 12 years ago

WOW, What a great thing!  I would love to see more of it happening.

Posted by Rhodes Waite almost 12 years ago

Everyone~ 

This just in.... a note from Matt Linville...THE 1031 Professional...thought I'd share it... 

Hi, janeAnne.  I really hope you are well!  I wanted to give you a bit of great news.  I was offered and accepted the role of President for Banker Exchange this week.  I am so honored and look forward to leading our QI our of these tougher times to the harvests of plenty. 

 I will certainly need your help and look forward to our working together, janeAnne.  I appreciate the referrals, mentions and the relationship we have.  As the president of our company, I can now say that our company is dedicated to helping you! 

Next time I am in, I will give you a call and hope we can meet for at least coffee!

CONGRATULATIONS, MATT! 

 

Matt Linville, CES| President
Banker Exchange, LLC

matt.linville@bankers1031.com | www.bankers1031.com

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) almost 12 years ago

janeAnne -- what a great resource Matt will be!  I had no idea that 1031 exchanges could be used in this fashion.  This is just one more important tool to have when working with clients.  Very interesting indeed.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 12 years ago

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