Practice 10C: Avoiding Fraudulent or Abusive Transactions

This guidance covers Practice 10C, which has four elements:

1. Review, on the land trust’s own behalf, each transaction for consistency with federal state income tax deduction or credit requirements 

2. ⬤ Evaluate the Form 8283 and any appraisal to determine whether the land trust has substantial concerns about the appraised value or the appraisal 

3. ⬤ Discuss substantial concerns about the appraisal, the appraised value or other terms of the transaction with legal counsel and take appropriate action, such as

   1. ⬤ (a) documenting that the land trust has shared those concerns with the donor, 

   2. ⬤ (b) seeking additional substantiation of value, 

   3. ⬤ (c) withdrawing from the transaction prior to closing or

   4. ⬤ (d) refusing to sign the Form 8283 

4. ⬤ When engaging in transactions with pass-through entities of unrelated parties, particularly those offered or assembled by a third party or described as a syndication by the IRS, 

   1. ⬤ (a) require a copy of the appraisal prior to closing and 

   2. ⬤ (b) decline to participate in the transaction if the appraisal indicates an increase in value of more than 2.5 times the basis in the property within 36 months of the pass-through entity’s acquisition of the property, the value of the donation is $1 million or greater and the terms of the transaction do not satisfy the Land Trust Alliance Tax Shelter Advisory 

⬤ Accreditation indicator element | ■ Terrafirma enrollment prerequisite | ▲ Required for both