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I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.


Bill and Carol

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Form 990 CPA discusses Schedule D Part II for 2012 | Conservation Easements

Form 990 CPA explains Schedule D and conservation easements

Gary Bode: Form 990 seems straight forward, but there are extensive underlying implications for the Organization. For a free phone consult call (910) 399-2705.

The following are my preliminary notes prepared for a April 25th, 2012 web seminar for Strattford Publications.

What Is Schedule D Part II of Form 990?

It’s just a sub schedule required if the tax exempt organization holds conservation easements.

What is a Conservation Easement?

Conservation easements limit or modify the use of real property. They must be granted to a qualified organization in perpetuity exclusively for conservation, generally limited to the five purposes listed in Line 1 of Form 990, Schedule D, Part II, see below. The donor typically claims a charitable tax deduction.

What Triggers Preparing Schedule D Part II?

Part IV, Line 7 of the core 990 form asks:

Did the organization receive or hold a conservation easement, including easements to preserve open space, the environment, historic land areas or historic structures? If “Yes,” complete Schedule D, Part II.

Recent Changes to Form 990, Schedule D, Part II

  • No longer asks about residential developments and golf courses.
  • Now only relates to conservation easements.
  • Acreage of controlled easements is now defined as easements eligible for a section 170 deduction (26 USC § 170 – CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS).
  • Requires an explanation of, and/or a financial statement footnote , delineating the Organization’s conservation easements policies.
  • Expands the hours of conservation easement monitoring to include both staff and volunteers.

Where to look for Guidance on Conservation Easements and Form 990 Schedule D Part II Reporting

  • Internal Revenue Code and Treasury Regulations. a. 170(h)(4)(B) b. 170(h)(4)(B)ii.
  • IRS Audit Guides. The easement must be perpetual. The ability to amend easements negates perpetuity.
  • Tax Court Rulings. a. 2000. Established that donating a conservation easement had charitable value.b. 2012. The easement must be perpetual and not subject to amendments that can extinguish it by mutual agreement.
  • State laws. a. State laws determine effect of the Deed. b. Federal law deals with the tax treatment.
  • IRS Instructions.

 Schedule D, Part II, Line 1

Purposes of Conservation easements held:

  • Preservation of Land for Public Use e.g. recreation or education.
  • Protection of Natural Habitat.
  • Preservation of Open Space.
  • Preservation of an historically important land use.
  • Preservation of a certified historic structure; National Register of Historic Places.

Form 990 evolves. Part XIV allows for detailed explanation of any variant not specifically listed.

Schedule D, Part II, Line 2

  • Total number of conservation easements (held) on the last day of the tax year.
  • Total acreage under control. Acreage is now limited to conservation easements qualified under Section 170.
  • Number of conservation easements on a certified historic structure. Remember easements on building must be on the national Historic Register, or on some historic register.
  • Number of conservation easements included in (c) acquired after 8/17/06, and not on a historic structure listed in the National Register.

Schedule D, Part II, Line 3

Number of conservation easements modified, transferred, released, extinguished, or terminated by the organization during the tax year.

Provide an explanation in Part XIV.

Here’s what I believe the IRS is looking for. Abuse exists in donating conservation easements. If an easement has been extinguished, it probably wasn’t given in perpetuity, although exceptions could exist. An extinguished easement would negate the charitable tax deduction of the donor. And, place the Organization is jeopardy for accepting an inappropriate conservation easement.

Schedule D, Part II, Line 4

Number of states where property subject to conservation easement is located. Remember the States control the Deed. A higher number of States means more due diligence is required by the Organization.

Schedule D, Part II, Line 5

Does the organization have a written policy regarding the periodic monitoring, inspection, handling of violations, and enforcement of the conservation easements it holds?

My opinion only here. When the Organization accepts a conservation easement it incurs multiple responsibilities. I believe it is prudent to have a written policy and to display it as a public record. I believe the IRS is actively discouraging continued donor rights, which could be part of a conspiracy to falsely claim charitable deductions. It also seems like they expect to pursue Organizations that can’t or won’t take on the responsibilities incumbent with conservation easements.

Schedule D, Part II, Line 6

Staff and volunteer hours devoted to monitoring, inspecting, and enforcing conservation easements during the year.

Note the organization has to incur expense to track time for both staff and volunteers.

Schedule D, Part II, Line 7

Amount of expenses incurred in monitoring, inspecting, and enforcing conservation easements during the year.

Again more required information that infers the Organization’s efforts to ensure the intended governmental goals of conservation easements are followed. I wouldn’t estimate this figure. The organization should implement a formal system to track this expense.

Schedule D, Part II, Line 8

Does each conservation easement reported on line 2(d) above satisfy the requirements of section 170(h)(4)(B)(i) and section 170(h)(4)(B)(ii)?

  • Restrictions that preserve the entire exterior of a building, (including the space above it) and prohibit any changes to the exterior that are inconsistent with the historical character.
  • Both parties agree in writing under penalties of perjury that the donee’s exempt purpose is environmental protection, land conservation, open space preservation, or historic preservation and the donee has the resources and commitment to enforce the restrictions.
  • There is a qualified appraisal, photographs of the entire building exterior, and a description of all development restrictions relating to it, (such as zoning laws, restrictive covenants, etc.)

Schedule D, Part II, Line 9

In Part XIV, describe how the organization reports conservation easements in its revenue and expense statement, and balance sheet, and include, if applicable, the text of the footnote to the organization’s financial statements that describes the organization’s accounting for conservation easements.

The IRS is looking for consistent financial reporting treatment across the entire Form 990. It does not proscribe that treatment per se.

I’m a Form 990 CPA with a virtual office to accommodate long distance clients. For a free phone consult call (910) 399-2705.


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