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On their 1990 Federal income tax return (1990 return),
petitioners claimed as a deduction a $94,000 noncash charitable
contribution of the previous easement. Petitioners attached to
their 1990 return a letter from Robert W. Frame (Frame), C.A.E.,
M.A.I., stating that he had appraised the previous easement at
a fair market value of $94,000. Frame stated in the letter that
he had estimated that the fair market value of the encumbered
woodland was $114,000 before the previous easement was imposed,
that the fair market value of the encumbered woodland was $10,000
after the previous easement was imposed, and that the previous
easement enhanced by $10,000 the fair market value of the portion
of the property that was not encumbered by the previous easement.
Frame concluded in the letter that these numbers resulted in the
claimed $94,000 fair market value for the previous easement
($114,000 - ($10,000 + $10,000) = $94,000).
V. Easement on the Property Contributed by Petitioners in 1992
On December 28, 1992, petitioners signed a document (deed 1)
entitled “Conservation Easement”. Deed 1 was recorded at the
Register of Deeds for Emmet County on December 29, 1992. LTC
prepared deed 1 contemporaneously with petitioners’ contribution
to the trust of conservation easement 1 in perpetuity. At the
time of that contribution, petitioners also contributed $2,000 to
the trust.
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