You may need or prefer to sell your property to a conservation agency for a number of reasons. You might want the land to be enjoyed by the public, decide that a conservation agency is better able to manage or protect it, or the taxes may have risen too high for you to continue to own or protect it. Agencies, budgets permitting, do have funds for purchasing property with special attributes, such as natural or recreational lands. In considering a sale you have the option of selling at fair market value, at a bargain sale, or in installments.
Sale at Fair Market Value
For this option, you would receive full market price of your land as determined by a qualified appraisal, following required guidelines for government agencies. Keep in mind that many conservation agencies have limited funds available for purchasing land and need to set priorities for land acquisition. If your land is sold for its full value, and it has appreciated since you originally purchased it, you are liable for income tax on the capital gain. This may significantly affect your net profit from the sale.
In a bargain sale, you would sell your land to a conservation agency at less than full market value. You would receive the sale price for your land. The difference between the selling price and the fair market appraised value is considered a donation. You are then eligible for a charitable income tax deduction equal to the difference between the full price and the bargain price.
For example, say you have land with a maket value of $100,000 which you bargain sell to a conservation agency for $40,000. You would receive a charitable deduction of $60,000 for the land value amount which you donated. Also, by selling at less than fair market value there would be a smaller capital gain to be taxed. Depending on your financial situation, a bargain sale may be advantageous. As always, you should consult a tax advisor for your best option.
For an installment sale, you would sell a portion of your land with an option to sell the remainder in successive years thereafter. You would be spreading the income from the sale over several years, thereby helping to reduce your capital gains tax.
Sale with a Reserved Life Estate
You may sell your property to a conservation agency and retain the right of lifetime tenancy for you or your immediate family. The capital gains tax would depend on whether the sale is at fair market value, at bargain sale or in installments.
Right of First Refusal
Perhaps you would like to sell your land to a conservation agency, but it is unable to purchase it immediately. You could sign a right of first refusal. This agreement does not obligate the agency to purchase your land, and it does not set a price for it. However, it does guarantee the conservation agency the opportunity to purchase your land. If another party offers to buy your land, you are legally bound to allow the conservation agency the chance to match the offered price.
Contact the McHenry County Conservation District for more information about selling your property for conservation.
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