Discussion:Introduction - Gscpa
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| 31 January 2008 | |
| I am a CPA as well as an EA with over 20 years tax preparation experience. Back when I started doing returns the only way to do them was by hand. In addition to the CPA and EA that everyone in this forum will recognize, I am also a CF, Certified Forester. My first degree was in forestry and I have quite a few years experience in that field as well. I am the proud owner of two certified (ATFS) Tree Farms and live on one of them. I can cross country ski, canoe or kayak and fish just out my back door which is important to me. As you can probably guess, I specialize in the Internal Revenue Code as it relates to forestry investments. I look forward to helping others on this forum as well as using the rest of you as a sounding board when I have questions. I live in a very remote area so don't have much opportunity otherwise for professional discourse. | |
| 31 January 2008 | |
| Welcome! You might be able to help me with an issue I have. My client who has an LLC which owns 80 acres of forested land, received a payment in 2007 from the WA State Forest Riparian Easement Program, which is basically payment for a 50 year lease. My client cannot cut any timber or do anything to this 15 acre buffer parcel for 50 years. They still own it. I suppose it is similar to other kinds of conservation easements purchased.
From my research the amount over cost basis (which cost basis is only about $5,000 since they received it as a gift from their parents) should be reported on Form 4797. Is there anything else I should be aware of with this Forest Riparian Easement payment? I just want to make sure I don't miss anything. Someone mentioned a charitable deduction for the easement, but I don't see how that would work if they were compensated at fair market value for the easement. I would really appreciate your insight! | |
| 1 February 2008 | |
| Most conservation easements are perpetual - they don't expire over time. For those types of easements the sale would be treated as you describe. You are also correct that it would not be a charitable contribution because they didn't give away anything - they received fair market value for it.
I'm not familiar with the WA State Forest Riparian Easement Program but as you describe it, it is not perpetual. It appears that after 50 years the owner has exactly the same rights he had before he entered into the agreement. In essence then it appears that he is renting rights rather than donating or selling them. I'm guessing, without researching this program, that it may be more appropriate to report as rental income, taxed at ordinary rates, rather than the sale of an asset, taxed at CG rates. Perhaps you could call the Washington Department of Natural Resources or whatever resource agency in the State administers these easements and see what they have to say. Hope that helps | |
| 1 February 2008 | |
| Thank you very much! I will definitely contact WA State to get more info. | |
| 4 February 2008 | |
| I left a message for WA State DNR, but was re-reading the information I got from their website and they state "The landowner still owns the property and retains full access, but has "leased" the trees and their associated riparian function to the State." They also state that one of the requirements is to enter into a "50-year agreement" with the State. So it doesn't appear to be written up as a lease, I don't think. Also, aren't leases with terms of greater than 30 years considered "perpetual"?
Thanks again. | |
| 5 February 2008 | |
| My client just received a Form 1099-S from WA State DNR, so I guess they view it as a purchase & sale transaction. | |
