Conservation Corner: April 8, 2002

Don't Let Another Tax Year Pass Without Conserving Your Land
by James L. Cummins

April 15 doesn't have to be painful again next year. Instead, it can be a day you celebrate both your tax savings and the satisfaction of permanently conserving important fish and wildlife habitat.

The Mississippi Land Trust, a non-profit organization that is independent of government and works hand-in-hand with landowners who choose to conserve their lands, offers a variety of ways that you can permanently protect your land and perhaps shave your tax bill. One can donate it to a land trust, 2) donate a conservation easement, which permanently limits the type and scope of development or 3) sell the land to a land trust in a "bargain sale" for below fair market price.

Under the Internal Revenue Code, for most gifts of appreciated land or conservation easements, a taxpayer can deduct up to 30 percent of his or her adjusted gross income in the year of the donation. If the value of the gift exceeds that deduction the taxpayer can carry forward the balance for up to five more years. For example, if a landowner has an adjusted gross income of $50,000 and makes a gift of a conservation easement worth $80,000, the deduction in the first year would be $15,000. The balance can then be carried forward for five years until the landowner deducted the full $80,000 value of the gift. Because development pressures dramatically increased property values during the past 20 years, many people are forced to sell lands that have been in the family for generations to pay estate taxes.

Consider The Stewart Place, a fictional working farm, but a true-to-life financial example. The family bought the farm in the early 1950s, when land was far less expensive. Today, it is worth $1,250,000. The current owner is a widow and the farm comprises nearly her whole estate. She and her husband accumulated just $250,000 in other assets. Therefore, her total estate is worth $1.5 million. The combined state and federal estate taxes are approximately $200,000 - more than the surviving children could afford to pay, even though they want to see the farm remain in the family and not used for development. The solution may be the voluntary donation of a conservation easement, which legally limits the amount and type of development that can take place on land. An easement can be tailored to a landowner's desires. The easement may, for example, permit construction of just two more homes for each of the children but protect the land from construction of a subdivision. As a result, the landowner may reduce the land's market value to $750,000, down from its current $1,250,000 value. Her estate, including $250,000 in other assets, would then be worth $1 million, and no estate taxes would be due.

The Mississippi Land Trust has been very successful at land protection. By the end of 2001, at only 2-years old, it had already permanently protected more than 12,000 acres. For more information about conservation easements and the Mississippi Land Trust, write: Mississippi Land Trust, P.O. Box 23, Stoneville, MS 38776.

James L. Cummins is Executive Director of the Mississippi Fish and Wildlife Foundation in Stoneville, Mississippi. Known as "Wildlife Mississippi," the Foundation is a non-profit, conservation organization founded to conserve, restore and enhance fish, wildlife and plant resources throughout Mississippi.