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Conservation purpose. An easement

conveyance of the easement. A

easements granted by the decedent (or

has a conservation purpose if it is for:

development right is any right to use

someone other than the decedent) prior

•

The preservation of land areas for

the land for any commercial purpose

to the decedent’s death, easements

outdoor recreation by, or for the

that is not subordinate to and directly

granted by the decedent that take effect

education of, the public;

supportive of the use of the land as a

at death, easements granted by the

•

The protection of a relatively natural

farm for farming purposes.

executor after the decedent’s death, or

habitat of fish, wildlife, or plants, or a

some combination of these.

Note. If the value of the retained

similar ecosystem; or

development rights reported on line 7

Use the value of the easement

•

The preservation of open space

was different at the time the easement

as of the date of death, even if

(including farmland and forest land)

was contributed than at the date of

the easement was granted prior

CAUTION

where such preservation is for the

death, see the Caution at the beginning

to the date of death. But, if the value of

scenic enjoyment of the general public,

of the Schedule U Instructions.

the easement was different at the time

or under a clearly delineated federal,

the easement was contributed than at

You do not have to make this

state, or local conservation policy and

the date of death, see the Caution at

reduction if everyone with an interest in

will yield a significant public benefit.

the beginning of the Schedule U

the land (regardless of whether in

Specific Instructions

Instructions.

possession) agrees to permanently

extinguish the retained development

Explain how this value was

Line 1

right. The agreement must be filed with

determined and attach copies of any

this return and must include the

appraisals. Normally, the appropriate

If the land is reported as one or more

following information and terms:

way to value a conservation easement

item numbers on a Form 706 schedule,

is to determine the FMV of the land

1. A statement that the agreement

simply list the schedule and item

both before and after the granting of the

numbers. If the land subject to the

is made under section 2031(c)(5);

easement, with the difference being the

2. A list of all persons in being

easement comprises only part of an

value of the easement.

holding an interest in the land that is

item, however, list the schedule and

item number and describe the part

subject to the qualified conservation

You must reduce the reported value

easement. Include each person’s

subject to the easement. See the

of the easement by the amount of any

name, address, tax identifying number,

Instructions for Schedule A — Real

consideration received for the

Estate for information on how to

relationship to the decedent, and a

easement. If the date of death value of

description of their interest;

describe the land.

the easement is different from the value

3. The items of real property shown

at the time the consideration was

Line 3

on the estate tax return that are subject

received, you must reduce the value of

Using the general rules for describing

to the qualified conservation easement

the easement by the same proportion

real estate, provide enough information

(identified by schedule and item

that the consideration received bears to

so the IRS can value the easement.

number);

the value of the easement at the time it

Give the date the easement was

4. A description of the retained

was granted. For example, assume the

granted and by whom it was granted.

development right that is to be

value of the easement at the time it was

extinguished;

granted was $100,000 and $10,000

Line 4

5. A clear statement of consent that

was received in consideration for the

Enter on this line the gross value at

is binding on all parties under

easement. If the easement was worth

which the land was reported on the

applicable local law:

$150,000 at the date of death, you

applicable asset schedule on this Form

a. To take whatever action is

must reduce the value of the easement

706. Do not reduce the value by the

necessary to permanently extinguish

by $15,000 ($10,000/$100,000 ×

amount of any mortgage outstanding.

the retained development rights listed in

$150,000) and report the value of the

Report the estate tax value even if the

the agreement and

easement on line 10 as $135,000.

easement was granted by the decedent

b. To be personally liable for

Line 15

(or someone other than the decedent)

additional taxes under section

prior to the decedent’s death.

If a charitable contribution deduction for

2031(c)(5)(C) if this agreement is not

Note. If the value of the land reported

this land has been taken on Schedule

implemented by the earlier of:

on line 4 was different at the time the

O, enter the amount of the deduction

The date that is 2 years after the

•

easement was contributed than that

here. If the easement was granted after

date of the decedent’s death or

reported on Form 706, see the Caution

the decedent’s death, a contribution

The date of sale of the land subject

•

at the beginning of the Schedule U

deduction may be taken on Schedule

to the qualified conservation

Instructions.

O, if it otherwise qualifies, as long as no

easement;

income tax deduction was or will be

Line 5

6. A statement that in the event this

claimed for the contribution by any

agreement is not timely implemented,

The amount on line 5 should be the

person or entity.

that they will report the additional tax on

date of death value of any qualifying

Line 16

whatever return is required by the IRS

conservation easements granted prior

and will file the return and pay the

to the decedent’s death, whether

You must reduce the value of the land

additional tax by the last day of the 6th

granted by the decedent or someone

by the amount of any acquisition

month following the applicable date

other than the decedent, for which the

indebtedness on the land at the date of

described above.

exclusion is being elected.

the decedent’s death. Acquisition

indebtedness includes the unpaid

Note. If the value of the easement

All parties to the agreement must

amount of:

reported on line 5 was different at the

sign the agreement.

•

Any indebtedness incurred by the

time the easement was contributed

donor in acquiring the property;

For an example of an agreement

than at the date of death, see the

•

Any indebtedness incurred before the

containing some of the same terms,

Caution at the beginning of the

acquisition if the indebtedness would

see Part 3 of Schedule A-1 (Form 706).

Schedule U Instructions.

not have been incurred but for the

Line 7

Line 10

acquisition;

•

You must reduce the land value by the

Enter the total value of the qualified

Any indebtedness incurred after the

value of any development rights

conservation easements on which the

acquisition if the indebtedness would

retained by the donor in the

exclusion is based. This could include

not have been incurred but for the

-39-

Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 39

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