January 20, 2017 Comments (0) Blog

Syndicated Conservation Easements Investigation

Morgan Stanley
(Last Updated On: March 14, 2017)

Investigation of Syndicated Conservation Easements

The White Law Group is investigating potential claims against broker-dealer’s selling tax shelter land deals to unsuspecting investors.

Syndicated conservation easements are private placements that promise tax deductions worth four to four-and-a-half times a person’s investment. Now the IRS is investigating and at least one independent broker-dealer is pulling back from selling theses tax shelter land deals.

The IRS recently issued a notice about the deals, called syndicated conservation easements. International Assets Advisory raised more than $3 million last year for one such tax shelter land deal and was ready to raise more. Reportedly, they are now canceling plans to move forward.

Because the syndicated conservation easements are private placements, it is difficult to know exactly how many are sold or how much money was raised in 2016. One broker dealer Triloma Securities,  that sells the syndicated conservation easements, reported to Investment News that the market last year for the deals was likely between $300 million to $500 million.

The IRS has Questions

The IRS has raised questions about the accurate appraisals and valuations of properties. Some syndicated conservation easement deals are offering investors charitable contribution deductions on taxes for massive amounts, from four to four-and-a-half times the amount they invest, according to Investment News. That means an investor can turn a $100,000 investment into $400,000 or more of tax deductions.

The syndicated conservation easement sold by International Assets Advisory, Land Investors was promoting a potential deduction of four-and-a-half times the investor’s initial investment, according to Investment News. The clients who bought the deal were properly informed of the IRS guidelines and went ahead with the investment, according to reports.

According to the IRS, the federal government was concerned about valuations placed on such deals. Broker-dealers are currently “using promotional materials suggesting to prospective investors that an investor may be entitled to a share of a charitable contribution deduction that equals or exceeds an amount that is two and one-half times the amount of the investor’s investment.”

The IRS has seen abuses of this tax provision  Taxpayers are using questionable appraisals, take inappropriately large deductions for easements.

Congress has allowed an income tax deduction for owners of significant property who give up certain rights of ownership to preserve their land or buildings for the future, according to the IRS.

The IRS will be looking carefully at purchases of syndicated easement deals. From January 2010 through December 2016  investors who received charitable contribution deductions of more than 2.5 times their investment will possibly be audited.

Bad News for Investors?

This could be bad news for investors. If they are audited, they could be hit with a revised tax bill.

These syndicated conservation easements are sold through both independent broker-dealers and directly by attorneys and CPAs who create the syndications, industry observers said. Possibly because these products are high-commission private placements and broker-dealers are looking for a way make up lost revenue from the lost sales of nontraded REITs.

The key to advisers looking at such easement syndications is the quality of the appraisal and valuation, according to analysts.

If your broker recommended a tax shelter land deal to you and you are concerned about investment losses, The White Law Group may be able to help you.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be appropriate in light of the investor’s age, risk tolerance, net worth, and investment experience.

Broker dealers that fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses in a FINRA arbitration claim.

Recovery of Investment Losses

If you have invested in a tax shelter land deal and would like to speak to a securities attorney about the potential to recover your investment losses, please call The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida. To learn more about The White Law Group visit www.whitesecuritieslaw.com.