The Sonn Law Group is currently investigating broker recommendations that customers invest in conservation easement transactions, which the IRS describes as “abusive tax shelters.” Prior to recommending investments, brokers are required to conduct due diligence on those investments. Due diligence involves conducting independent research on material aspects of the investment product to determine whether the investment product is suitable for customers.
What is a Conservation Easement?
Conservation easements aim to preserve certain property by prohibiting development, commercial, industrial, and other intrusive uses on the land permanently. Subject to the requirements in section 170 of the Internal Revenue Code, donors may be eligible for a federal income tax charitable deduction equal to the value of their donation of the land they purchased. The easement donation is valued by calculating the difference between the fair market value of the property before and after the easement takes effect.
As an investment, syndicated conservation easements are private placements that promise investors a tax deduction worth up to 5x a person’s investment. Brokers and investment advisors often target high net-worth individuals that are seeking to exploit the tax benefits of the conservation easement.
IRS Names Syndicated Conservation Easements “Tax Scams”
In 2019, the IRS named syndicated conservation easements on their “dirty dozen” list of tax scams to avoid. The IRS said that promoters were attempting to cheat the system by inflating the value of the land if it were to be developed. In April 2021, IRS Commissioner Charles Rettig told the Senate Finance Committee that approximately 28,000 taxpayers were under examination by the IRS and that the IRS had challenged $21 billion in tax deductions claimed for syndicated conservation easement investments from 2016 through 2018.
Given the IRS’s stance that the deductions claimed under these conservation easements are invalid, investors might be held responsible for the taxes due, including penalties of up to 40% plus interest. If a broker or investment advisor recommended the conservation easement investments that resulted in you taking a charitable contribution deduction, you may be able to recover losses.
Recovering Your Conservation Easement Investment Losses
Many investors who claimed a charitable contribution deduction based on conservation easement investments were not adequately warned about the high-risk nature of these investments and the possibility of facing an IRS audit. As a result, many investors suffered significant damages. If your broker or investment advisor recommended these investments, you might be able to recover your losses.
Contact Us Today
The Sonn Law Group is currently investigating allegations that brokers recommended conservation easements to their customers. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.