The taxpayer in Mountanos v. Comm’r, No. 14-71580 (Ninth Cir., June 1, 2016)(Mountanos III), claimed that he had relied on the appraiser’s report when claiming and unrealistically high value for his easement. Because he relied on the appraiser, he argued, he shouldn’t have to pay accuracy-related penalties. The Ninth Circuit affirmed a lower court decision that he could not reasonably rely on such a high valuation. He remained subject to gross valuation misstatement penalties because the value he reported on his income tax returns for the easement ($4.69 million) was more than four times (400%) that value.
Since then, the IRS has made the rules even harsher. When Mountanos was filing, the IRS charged accuracy-related penalties to taxpayers who overstated donation values by more than 400%. Now, accuracy-related penalties kick in when the value claimed is more than 200% of the real value. Assessing the value of conservation easements is difficult so it’s more important than ever that donors take appraisals seriously. Help your donors with this appraisal guide for landowners available on *The Learning Center.
*The Learning Center is a service offered to Alliance member land trusts and partners, and to individual members at the $250 level and above.