CONSERVATION EASEMENTS, THE IRS WILL GET YOU

CONSERVATION EASEMENTS, THE IRS WILL GET YOU The IRS knows right where to look to see if the partnership or LLC fighting the battle has enough capital to fight the good fight – the balance sheet. Is this partnership well capitalized or not? If not, then there won’t be sufficient funds to fight the IRS at the IRS Exam, IRS Appeals levels, then in Tax Court, if necessary in Appeals Court, and if necessary back in Tax Court. The IRS is taking an aggressive approach and is auditing every single syndicated Conservation Easement Deduction, and likely will issue notices of deficiency for all. Legal fees can easily exceed what partnerships have in reserves, and if so, partners will have to infuse additional capital into the partnership in order to keep fighting the IRS. Moreover, even if a partnership does keep up the fight, in light of these recent taxpayer victories, does it mean that all conservation easement cases will be decided in favor of taxpayers? Not even close. It is therefore critical that partners consider that a deduction today may very well turn into a tax bill later, plus interest. The IRS is entitled to interest at 3% above Prime on tax, which is due from the date the tax was due. Looking back to Pine Mountain, if the partners in that entity end up owing tax, they will owe interest since 2005. Nerve: Fighting the IRS is no easy task, even with a good lawyer by your side. It is important to consider whether you are the kind of person who can sleep at night knowing that the IRS may literally come knocking on your door. Taxpayers who participate in conservation easements can expect to have the deduction disallowed until they are proven right – and this is not an emotional place that many taxpayers are comfortable in. Conclusion In light of these recent taxpayer wins in Tax Court and at the Eleventh Circuit, those who have a stake in the conservation easement world have good reason to take heart. But as any attorney who has actually tried tax cases will tell you, trials are unpredictable and expensive. Indeed, fighting with the IRS even before getting to trial is expensive and takes a toll on those who are forced to do so. One client of mine put it this way: “when the battle with the IRS first began, whenever I went out to the mailbox, my hands would start trembling.” Taxpayers who are considering whether or not to settle should be encouraged by the recent hard-won taxpayer victories, but take care not to discount the cost of a trial and appeal, both from a financial and emotional perspective. Lance Wallach receives hundreds of calls annually to help people fight the IRS and get their money back from the promoters of these scams. As an expert witness, Lance's side has never lost a lawsuit. Google Lance Wallach and your advisor, who do you trust? 516-236-8440 Wallachinc@gmail.com