In general, a deduction is not available for charitable contributions of partial interests in property and an easement, by definition, is a partial interest in property. But, an exception exists for an easement that is a “qualified conservation contribution.” A “qualified conservation contribution” is defined in as the contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes.
The amount of the deduction is tied to the value of a charitable contribution - its fair market value as of the date of the donation. On that point, the regulations define fair market value as: “the price at which property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.”
For real property, the "highest and best use" of the property is considered to be fair market value. When an easement is involved, a common valuation approach (if comparable sale aren’t available) is the "before and after" method – the value of the donated easement is the value of the property before the easement less the value of the property after the easement. Experts play a key role in determining easement values for tax purposes, with the courts often choosing the expert they feel has the best analysis. However, the courts sometimes reject the experts and go with their own valuation methodology.
The Tax Court, in an interesting recent opinion, dealt with the valuation of a perpetual conservation easement on a golf course that was donated by a Limited Liability Company (LLC) and deducted as a charitable contribution on its tax return.