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land for the 3-year period ending on the

Conservation purpose. The term

Note. If the value of the retained

date of the decedent’s death.

conservation purpose means:

development rights reported on line 7 was

•

No later than the date the election is

The preservation of land areas for

different at the time the easement was

made, a qualified conservation easement

outdoor recreation by, or the education of,

contributed than at the date of death, see

on the land has been made by the

the public;

the Caution at the beginning of the

•

decedent, a member of the decedent’s

The protection of a relatively natural

Schedule U instructions.

family, the executor of the decedent’s

habitat of fish, wildlife, or plants, or a

You do not have to make this

estate, or the trustee of a trust that holds

similar ecosystem; or

reduction if everyone with an interest in

•

the land.

The preservation of open space

the land (regardless of whether in

•

The land is located in the United States

(including farmland and forest land)

possession) agrees to permanently

or one of its possessions.

where such preservation is for the scenic

extinguish the retained development right.

enjoyment of the general public, or under

The agreement must be filed with this

Member of Family

a clearly delineated federal, state, or local

return and must include the following

Members of the decedent’s family include

conservation policy and will yield a

information and terms:

the decedent’s spouse; ancestors; lineal

significant public benefit.

1. A statement that the agreement is

descendants of the decedent, of the

made under section 2031(c)(5);

Specific Instructions

decedent’s spouse, and of the parents of

2. A list of all persons in being holding

the decedent; and the spouse of any

an interest in the land that is subject to

Line 1

lineal descendant. A legally adopted child

the qualified conservation easement.

of an individual is considered a child of

If the land is reported as one or more item

Include each person’s name, address, tax

the individual by blood.

numbers on a Form 706 schedule, simply

identifying number, relationship to the

list the schedule and item numbers. If the

Indirect Ownership of Land

decedent, and a description of their

land subject to the easement comprises

interest;

The qualified conservation easement

only part of an item, however, list the

3. The items of real property shown

exclusion applies if the land is owned

schedule and item number and describe

on the estate tax return that are subject to

indirectly through a partnership,

the part subject to the easement. See the

the qualified conservation easement

corporation, or trust, if the decedent

instructions for Schedule A, Real Estate,

(identified by schedule and item number);

owned (directly or indirectly) at least 30%

in the Form 706 itself, for information on

4. A description of the retained

of the entity. For the rules on determining

how to describe the land.

development right that is to be

ownership of an entity, see Ownership

Line 3

extinguished;

rules, below.

5. A clear statement of consent that is

Using the general rules for describing real

Ownership rules. An interest in property

binding on all parties under applicable

estate, provide enough information so the

owned, directly or indirectly, by or for a

local law:

IRS can value the easement. Give the

corporation, partnership, or trust is

a. To take whatever action is

date the easement was granted and by

considered proportionately owned by or

necessary to permanently extinguish the

whom it was granted.

for the entity’s shareholders, partners, or

retained development rights listed in the

beneficiaries. A person is the beneficiary

Line 4

agreement; and

of a trust only if he or she has a present

Enter on this line the gross value at which

b. To be personally liable for

interest in the trust. For additional

additional taxes under section

the land was reported on the applicable

information, see the ownership rules in

asset schedule on this Form 706. Do not

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

section 2057(e)(3) (before its repeal by

implemented by the earlier of:

reduce the value by the amount of any

P.L. 107-16).

mortgage outstanding. Report the estate

•

The date that is 2 years after the date

Qualified Conservation Easement

tax value even if the easement was

of the decedent’s death, or

granted by the decedent (or someone

A qualified conservation easement is one

•

The date of sale of the land subject

other than the decedent) prior to the

that would qualify as a qualified

to the qualified conservation

decedent’s death.

conservation contribution under section

easement.

170(h). It must be a contribution:

6. A statement that in the event this

Note. If the value of the land reported on

•

Of a qualified real property interest,

agreement is not timely implemented, that

line 4 was different at the time the

•

To a qualified organization, and

they will report the additional tax on

easement was contributed than that

•

Exclusively for conservation purposes.

whatever return is required by the IRS

reported on Form 706, see the Caution

and will file the return and pay the

Qualified real property interest. The

at the beginning of the Schedule U

additional tax by the last day of the 6th

term qualified real property interest

instructions.

month following the applicable date

means any of the following:

•

Line 5

described above.

The entire interest of the donor, other

The amount on line 5 should be the date

than a qualified mineral interest;

•

All parties to the agreement must sign

of death value of any qualifying

A remainder interest; or

•

the agreement.

conservation easements granted prior to

A restriction granted in perpetuity on

For an example of an agreement

the use that may be made of the real

the decedent’s death, whether granted by

the decedent or someone other than the

containing some of the same terms, see

property. The restriction must include a

Schedule A-1 (Form 706).

prohibition on more than a de minimis use

decedent, for which the exclusion is being

elected.

for commercial recreational activity.

Line 10

Qualified organization. Qualified

Note. If the value of the easement

Enter the total value of the qualified

organizations include:

reported on line 5 was different at the

conservation easements on which the

•

The United States, a possession of the

time the easement was contributed than

exclusion is based. This could include

United States, a state (or the District of

at the date death, see the Caution at the

easements granted by the decedent (or

Columbia), or a political subdivision of

beginning of the Schedule U instructions.

someone other than the decedent) prior

them, as long as the gift is for exclusively

to the decedent’s death, easements

Line 7

public purposes;

granted by the decedent that take effect

•

A domestic entity that meets the

You must reduce the land value by the

at death, easements granted by the

general requirements for qualifying as a

value of any development rights retained

executor after the decedent’s death, or

charity under section 170(c)(2) and that

by the donor in the conveyance of the

some combination of these.

generally receives a substantial amount

easement. A development right is any

of its support from a government unit or

right to use the land for any commercial

Use the value of the easement as

from the general public; or

purpose that is not subordinate to and

of the date of death, even if the

•

Any entity that qualifies under section

directly supportive of the use of the land

easement was granted prior to the

CAUTION

170(h)(3)(B).

as a farm for farming purposes.

date of death. But, if the value of the

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Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2005 Page 25

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