Appraisals of land, especially land with subdivision potential, are substantially different from typical residential property appraisals. Appraisals of conservation easements are even more highly specialized.
The IRS has specific requirements for reporting on and determining the value of charitable gifts. These are highly detailed and complex for gifts of property valued at more than $5,000, which includes most donations of land or conservation easements to land trusts.
IRS requirements for a qualified appraisal:
- prepared by a qualified appraiser for gifts of property valued at more than $5,000
- including information on the timing of the appraisal
- that the donor is responsible for any determination of the value of the donation
- that the donor should use a qualified appraiser who follows Uniform Standards of Professional Appraisal Practice
You should also be aware that:
- the land trust will most likely request a copy of the completed appraisal,
- and that the land trust will not knowingly participate in projects where it has significant concerns about the tax deduction.
The effective date of value in the qualified appraisal must be no earlier than 60 days before the date of the contribution, and the appraisal must be in the hands of the taxpayer no later than the due date (including extensions) for filing the tax return in the tax year in which the contribution is claimed.
The Pension Act defines a “qualified appraiser” under Internal Revenue Code §170(f)(11)(ii) and (iii) as an individual who:
- Has earned an appraisal designation from a recognized professional appraisal organization or has otherwise met minimum education and experience requirements;
- Regularly performs appraisals and receives compensation;
- Meets other requirements as may be prescribed by the Secretary;
- Demonstrates verifiable education and experience in valuing the type of property subject to the appraisal; and
- Is not an individual who has been prohibited from practicing before the Internal Revenue Service during the prior three years.