The IRS is hot on the tail of promoters of tax-deductible easements who are allegedly inflating values to increase those deductions.
The agency is challenging $21 billion in deductions over a three-year period from 2016 to 2018, Bloomberg reported. It is going after promoters who sell deals through brokers, accountants and lawyers, and who market the projects as tax-deduction generators. The issue has become an enforcement priority, according to the publication.
Syndicated conservation easements reward investors with tax breaks for donating easements to land trusts or forgoing development. Those deductions are based on land appraisals, which are allegedly being inflated so donors reap a benefit worth several times what they invested.
Appraisals are based on the highest and best use of land, but the IRS believes that some wealthy landowners are claiming values far above reality — prompted by promoters of the scheme.
In one case, brothers Stein and Corey Agee pleaded guilty in December to conspiring to promote fraudulent tax breaks. They are associated with Jack Fisher, a developer in the crosshairs of a criminal probe. Prosecutors in the Agee case claim 1,500 investors received $1.2 billion in fraudulent tax benefits.
New York authorities looking at two examples of easements donated by the Trump Organization at a property the ex-president’s firm was struggling to develop. Appraisal values for the Seven Springs estate have been all over the map, drawing interest from Attorney General Letitia James.
Meanwhile, a battle is raging in Congress over the easements. Conservation groups want to prevent investors from claiming deductions that are worth more than two and a half times an investment. Promoters have fought any legislation to that effect, though.
[Bloomberg] — Holden Walter-Warner
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