Facade Easements On Mortaged Property

For many years taxpayers have taken charitable contribution deductions for the gift of a facade easement.  Basically, if we have older, historic properties we would gift the rights of the outside of the building to a historic preservation society.  No problem.  We gift the rights to a qualified charity and get a deduction for the fair market value of the gift. Well….

… it seems as most taxpayers have over looked the simple fact that in order to make that gift we need to own the property.  That means no mortgage.  In a recent tax court case, the courts once again upheld this position. The courts held that the gift did not result in a charitable contribution deduction because a bank held a mortgage on the underlying property and as a result the facade easement was not protected in perpetuity.  The courts granted a deduction for the cash contributions the taxpayer made to the facilitate the gift.

Once again it emphasis that there are significant tax benefits available to taxpayers, but you must be extremely careful in not running afoul of these complex rules.  If you have any questions or need any additional information regarding facade easements, please do not hesitate to contact us.

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