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RULES and REGULATIONS
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, 25, and 602
[T.D. 8069]
Income Taxes; Qualified Conservation Contributions
Tuesday, January 14, 1986
*1496 AGENCY: Internal Revenue Service, Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final regulations relating to contributions not in trust of partial interests in
property for conservation purposes. Changes to the applicable law made by the Temporary Tax Provisions, Extension and the Tax Reform Act of 1984 are reflected in this document. These regulations provide necessary
guidance to the public for compliance with the law and affect donors and donees of qualified conservation contributions.
DATES: Except as otherwise provided in § 1.170A-14(g)(4)(ii), the regulations apply to contributions made on
or after December 18, 1980, and are effective on December 18, 1980.
FOR FURTHER INFORMATION CONTACT: Ada S. Rousso of the Legislation and Regulations Division, Office of Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224
(Attention: CC:LR:T), Telephone 202-566-3287 (not a toll free call).
SUPPLEMENTARY INFORMATION:
Background
On May 23, 1983, the Federal Register (48 FR 22940) published proposed amendments to the Income Tax Regulations (26 CFR Part 1) and Estate and Gift Tax Regulations (26 CFR Parts 20 and 25) under sections 170(h),
2055 and 2522 of the Internal Revenue Code of 1954 (Code). The amendments were proposed to conform the
regulations to section 6 of the Temporary Tax Provisions, Extension (Pub. L. 96-541, 96 Stat. 3206). A public
hearing was held on September 15, 1983. Subsequent to the hearing, section 170(h)(5) of the Code was amended
by section 1035(a) of the Tax Reform Act of 1984 (Pub. L. 98-369, 98 Stat. 1042). On December 10, 1984, the
Service issued a news release (IR-84-125) reminding taxpayers claiming deductions for donations of conservation easements that such deductions are limited to the fair market value of the easement at the time of the contribution. The news release further indicated that if the donation of the easement does not decrease the value of the
property on which the easement is granted, the fair market value of the easement, and thus, the deduction, is

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zero.
After consideration of all comments regarding the proposed amendments and of the revision made by the Tax
Reform Act of 1984, those amendments are adopted as revised by this Treasury decision.
*1497 Summary of Comments
Qualified Contribution of Entire Interest of Donor Other Than Qualified Mineral Interest
In response to many comments regarding the donation of an entire interest of the donor other than a qualified
mineral interest, proposed § 1.170A-14(b) has been revised to provide that section 170(h) will not disallow a deduction for a conservation contribution where the donor has previously transferred a portion of the entire interest
unless the donor has purposefully reduced his interest before the contribution is made, for example, by transferring a portion to a related person in order to retain control of more than a qualified mineral interest.
Access
The final regulations have been revised to clarify the extent of public access required for each type of qualified
conservation contribution under section 170(h). Thus, in order to qualify for a deduction under section 170(h),
donations of property to preserve land areas for outdoor recreation by or for the education of the general public,
for the preservation of a view, for the preservation of land pursuant to a governmenal conservation policy, or for
the preservation of historic structures or land areas must provide for either physical or visual access. Examples
have been included to clarify the public access requirement in specific circumstances.
Inconsistent Use
Section 1.170A-14(e)(2) provides that a deduction will not be allowed if a contribution would accomplish one of
the enumerated conservation purposes but would permit impairment of other enumerated conservation interests.
However, inconsistent use of the property is permitted if that use is necessary for the protection of the conservation interests that are the subject of the contribution. Commenters felt that the proposed regulations were not
specific enough regarding permitted inconsistent uses. Therefore, the final regulations have been revised to include examples of certain uses that are not prohibited if, under the circumstances, they do not impair significant
conservation interests. See § 1.170A-14(e)(2).
Third Party Mineral Rights
The proposed regulations provided that the interest in property that is retained by the donor (and the donor's successor in interest) must be subject to legally enforceable restrictions that will prevent uses of the retained interest inconsistent with the conservation purposes of the donation. In addition, there was a prohibition against
any method of mining on property that is the subject of a gift that would be inconsistent with the conservation
purposes of the donation. Furthermore, a contribution was disallowed if at any time there may be surface mining
on the property.
Many comments were received requesting relief from this rule because in many areas of the country, the mineral
rights are not and may never have been owned by the donor; thus the donor cannot ensure that a third party owner of the mineral rights will not engage in surface mining on the property that is the subject of the gift.
Subsequent to publication of the proposed regulations, section 1035(a) of the Tax Reform Act of 1984 amended

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section 170(h)(5)(B) (relating to surface mining) to provide an exception to the general rule precluding a deduction for a conservation contribution if there is any likelihood of surface mining occurring at any time on the
property to which the contribution relates. For conservation contributions made after July 18, 1984, the general
rule with respect to surface mining will not apply to preclude a deduction if the surface estate and mineral interests were separated before June 13, 1976, remain so separated up to and including the time of the gift, and the
probability of surface mining occurring on the property is so remote as to be negligible. Factors that may be considered in determining if the probability of surface mining is so remote as to be negligible are provided in the final regulations. In addition, the regulations provide that no deduction for a conservation contribution of the surface estate is permitted under this exception if the present owner is related to the owner of the surface estate at
the time of the gift. Finally, these regulations clarify that any person may retain the mineral interest so long as
the donor can guarantee observance of the restrictions to protect the conservation interests. See §
1.170A-14(g)(4) and the example thereunder.
Preservation of Open Space
In general, the statute provides that a donation of real property to preserve open space for conservation purposes
(including farmland and forestland) will qualify as a deductible contribution if either of two tests are met: (1)
The preservation must be pursuant to a clearly delineated governmental policy and must yield a significant public benefit, or (2) the preservation must be for the scenic enjoyment of the general public and must yield a significant public benefit. In connection with the first test, the final regulations retain the “sliding scale” approach adopted in the proposed regulations which is used to establish a relationship between the two requirements. Thus,
although the requirements of governmental policy and public benefit must be met independently, the more specific the governmental policy with respect to a particular site to be protected, the more likely the governmental
decision, by itself, will tend to establish the significant public benefit associated with the donation.
Commenters felt the regulations did not sufficiently clarify the standards under which deductions are allowed for
the preservation of open space. Many of the comments received suggested revisions in the final regulations to
provide donors with procedural “safe harbors” to avoid uncertainty regarding the deductibility of their donations. Commentators believed that without safe harbors, donors either will have to bear the expense of seeking
advance rulings, or will risk additional tax liability if their deductions are later disallowed. Generally, the commenters suggested the following:
(1) A declaration by a unit of government identifying a particular property as worthy of protection should meet
the clearly delineated governmental policy test and thus be sufficient to eliminate the need to meet the significant public benefit test.
(2) Acceptance of a donation by a unit of government (federal, state or local) or a duly constituted commission
of such unit of government, should establish both a clearly delineated governmental policy and significant public benefit.
(3) A sliding scale approach should be extended to the relationship between scenic enjoyment of the general
public and significant public benefit. Thus, the more scenic the view and the more people who see it, the more it
tends to confer a significant public benefit.
(4) The regulations should encourage donations of farmland for agricultural uses by expanding references to the
preservation of farmland to uses other than just the preservation of farmland pursuant to a state program for
flood prevention and control. See § 1.170A-14(d)(4)(iv)(B). Commenters believed the reference was misleading

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because it implied that such is the only use for which there can be a deductible donation of farmland.
(5) Acceptance of a donation by a qualified conservation organization should be conclusive evidence of deductibility. Because the Internal *1498 Revenue Service lacks the expertise to make the subjective determinations of
“ significant public benefit” and “scenic enjoyment”, that responsibility should be delegated to either a private
organization or to another governmental agency with acknowledged expertise in this area.
In general, the rules in the proposed regulations relating to open space easements have been retained in the final
regulations. However, in response to the comments, some clarifications have been made regarding such easements. First, the fact that a unit of government has identified a particular property as worthy of protection does
not by itself show the existence of a clearly delineated governmental policy, and thus, the significant public benefit associated with the donation must be independently demonstrated. Second, when there is a rigorous review
of a donation by a unit of government or a duly constituted commission of a unit of government, the acceptance
of a donation by such unit or commission of government tends to establish the clearly delineated governmental
policy.
An example of a rigorous review process has been included in the final regulations. The more specific the governmental policy with respect to a particular site to be protected, the more likely it is that the governmental decision to accept the donation will tend, by itself, to establish the significant public benefit associated with the
donation. A degree of certainty is available to donors in jurisdictions that have clearly articulated preservation
policies, but as with any subjective test, there must ultimately be some exercise of judgment and responsibility
by both donors and donees. Third, the terms “significant public benefit” and “scenic enjoyment” necessarily require a case-by-case factual determination and hence cannot be defined precisely. The list of factors included at
§ 1.170A-14(d)(4)(iv) with respect to “significant public benefit” and § 1.170A-14(d)(4)(ii) with respect to
“scenic enjoyment” are intended to be illustrative, rather than all-inclusive. In a particular case, other facts and
circumstances may be relevant. Fourth, the regulations clarify that farmland, as recognized by the statute, is
merely a category of open space that must meet either of the two prescribed tests in order to be a deductible contribution. Finally, acceptance of a donation by a qualified organization is not conclusive evidence of the deductibility of a donation. The Internal Revenue Service has the responsibility for making final determinations as to
the deductibility of donations. That responsibility cannot be delegated to a private organization or to another
governmental agency, although the Service accords substantial weight to the determinations of qualified organizations and governmental agencies in its decision-making process.
Donations of Mortgaged Property
Section 170(h)(5) provides that the conservation purposes of the donation must be protected in perpetuity. The
proposed regulations did not specifically address how this requirement applies to mortgaged property.
In response to comments received, the final regulations clarify that when a contribution of mortgaged property is
made to a qualified organization, the mortgagee must subordinate its rights under the mortgage to the right of the
qualified organization to enforce the conservation purposes of the gift in perpetuity. However, since certain donees, unaware of this clarification, accepted (or will have accepted) contributions of mortgaged property prior to
February 12, 1986, without requiring subordination of the mortgagee's rights in the property, a donor will be allowed a deduction for such a contribution provided that the donor can demonstrate that the conservation purposes of the gift are protected in perpetuity absent subordination.
Valuation

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Section 1.170A-14(h)(3)(i) of the final regulations has been revised to indicate that increases in the value of any
property owned by the donor or a related person—not just contiguous property—resulting from the granting of a
perpetual conservation restriction must be taken into account in determining the amount of the deduction.
Paperwork Reduction Act
The collection of information requirements contained in these regulations have been submitted to the Office of
Management and Budget in accordance with the requirements of the Paperwork Reduction Act of 1980. These
requirements have been approved by OMB.
Special Analyses
The Commissioner of Internal Revenue has determined that this final rule is not a major rule as defined in Executive Order 12291 and that a Regulatory Impact Analysis is therefore not required. Although a notice of proposed rulemaking which solicited public comments was issued, the Internal Revenue Service concluded when
the notice was issued that the regulations are interpretative and that the notice and public comment procedure requirement of 5 U.S.C. 553 did not apply. Accordingly, the final regulations do not constitute regulations subject
to the Regulatory Flexibility Act (5 U.S.C. chapter 6).
Drafting Information
The principal author of these regulations is Ada S. Rousso of the Legislation and Regulations Division of the
Office of Chief Counsel, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulations, both on matters of substance
and style.
List of Subjects
26 CFR 1.61-1—1.281-4
Income taxes, Taxable income, Deductions, Exemptions.
26 CFR Part 20
Estate taxes.
26 CFR Part 25
Gift taxes.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR Parts 1, 20, 25, and 602 are amended as follows:
PART 1—[AMENDED]Paragraph 1. The authority for Part 1 continues to read in part:

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Authority: 26 U.S.C. 7805. * * *
26 CFR § 1.167(a)-5
§ 1.167(a)-5 [Amended]
26 CFR § 1.167(a)-5
Par. 2. Section 1.167(a)-5 is amended by adding at the end thereof the following new sentence: “For the adjustment to the basis of a structure in the case of a donation of a qualified conservation contribution under section
170(h), see § 1.170A-14(h)(3)(iii).”
26 CFR § 1.170A-7
Par. 3. Section 1.170A-7 is amended as follows:
a. The first sentence of paragraph (b)(1)(ii) is amended to begin with the phrase “With respect to contributions
made on or before December 17, 1980.”.
b. Paragraph (b)(1)(ii) is amended by adding at the end the following new sentence: “For the deductibility of a
qualified conservation contribution, see § 1.170A-14”.
*1499 c. A new paragraph (b)(5) is added immediately after paragraph (b) (4), as set forth below.
d. The first sentence of paragraph (c) is amended to begin with the phrase “Except as provided in § 1.170A-14.”.
e. Paragraph (e) is revised as set forth below.
26 CFR § 1.170A-7
§ 1.170A-7 Contributions not in trust of partial interests in property.
* * * * *(b) Contributions of certain partial interests in property for which a deduction is allowed. * * *
(5) Qualified conservation contribution. A deduction is allowed under section 170 for the value of a qualified
conservation contribution. For the definition of a qualified conservation contribution, see § 1.170A-14.
* * * * *(e) Effective date. This section applies only to contributions made after July 31, 1969. The deduction
allowable under § 1.170A-7(b)(1)(ii) shall be available only for contributions made on or before December 17,
1980. Except as otherwise provided in § 1.170A-14(g)(4)(ii), the deduction allowable under § 1.170A-7(b)(5)
shall be available for contributions made on or after December 18, 1980.
26 CFR § 1.170A-14
26 CFR § 1.170A-13T
Par. 4. A new § 1.170A-14 is added after § 1.170A-13T to read as set forth below.
26 CFR § 1.170A-14

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§ 1.170A-14 Qualified conservation contributions.
(a) Qualified conservation contributions. A deduction under section 170 is generally not allowed for a charitable
contribution of any interest in property that consists of less than the donor's entire interest in the property other
than certain transfers in trust (see § 1.170A-6 relating to charitable contributions in trust and § 1.170A-7 relating
to contributions not in trust of partial interests in property). However, a deduction may be allowed under section
170(f)(3)(B)(iii) for the value of a qualified conservation contribution if the requirements of this section are met.
A qualified conservation contribution is the contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. To be eligible for a deduction under this section, the conservation
purpose must be protected in perpetuity.
(b) Qualified real property interest—(1) Entire interest of donor other than qualified mineral interest. (i) The entire interest of the donor other than a qualified mineral interest is a qualified real property interest. A qualified
mineral interest is the donor's interest in subsurface oil, gas, or other minerals and the right of access to such
minerals.
(ii) A real property interest shall not be treated as an entire interest other than a qualified mineral interest by
reason of section 170(h)(2)(A) and this paragraph (b)(1) if the property in which the donor's interest exists was
divided prior to the contribution in order to enable the donor to retain control of more than a qualified mineral
interest or to reduce the real property interest donated. See Treasury regulations § 1.170A-7(a)(2)(i). An entire
interest in real property may consist of an undivided interest in the property. But see section 170(h)(5)(A) and
the regulations thereunder (relating to the requirement that the conservation purpose which is the subject ot the
donation must be protected in perpetuity). Minor interests, such as rights-of-way, that will not interfere with the
conservation purposes of the donation, may be transferred prior to the conservation contribution without affecting the treatment of a property interest as a qualified real property interest under this paragraph (b)(1).
(2) Perpetual conservation restriction. A perpetual conservation restriction is a qualified real property interest. A
“perpetual conservation restriction” is a restriction granted in perpetuity on the use which may be made of real
property—including, an easement or other interest in real property that under state law has attributes similar to
an easement (e.g., a restrictive covennant or equitable servitude). For purposes of this section, the terms
“easement”, “conservation restriction”, and “perpetual conservation restriction” have the same meaning. The
definition of “perpetual conservation restriction” under this paragraph (b)(3) is not intended to preclude the deductibility of a donation of affirmative rights to use a land or water area under § 1.170A-13(d)(2). Any rights reserved by the donor in the donation of a perpetual conservation restriction must conform to the requirements of
this section. See e.g., paragraph (d)(4)(ii), (d)(5)(i), (e)(3), and (g)(4) of this section.
(c) Qualified organization—(1) Eligible donee. To be considered an eligible donee under this section, an organization must be a qualified organization, have a commitment to protect the conservation purposes of the donation, and have the resources to enforce the restrictions. A conservation group organized or operated primarily or
substantially for one of the conservation purposes specified in section 170(h)(4)(A) will be considered to have
the commitment required by the preceding sentence. A qualified organization need not set aside funds to enforce
the restrictions that are the subject of the contribution. For purposes of this section, the term “qualified organization” means:
(i) A governmental unit described in section 170(b)(1)(A)(v);
(ii) An organization described in section 170(b)(1)(A)(vi);

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(iii) A charitable organization described in section 501(c)(3) that meets the public support test of section
509(a)(2);
(iv) A charitable organization described in section 501(c)(3) that meets the requirements of section 509(a)(3)
and is controlled by an organization described in paragraphs (c)(1) (i), (ii), or (iii) of this section.
(2) Transfers by donee. A deduction shall be allowed for a contribution under this section only if in the instrument of conveyance the donor prohibits the donee from subsequently transferring the easement (or, in the case
of a remainder interest or the reservation of a qualified mineral interest, the property), whether or not for consideration, unless the donee organization, as a condition of the subsequent transfer, requires that the conservation
purposes which the contribution was originally intended to advance continue to be carried out. Moreover, subsequent transfers must be restricted to organizations qualifying, at the time of the subsequent transfer, as an eligible donee under paragraph (c)(1) of this section. When a later unexpected change in the conditions surrounding the property that is the subject of a donation under paragraph (b)(1), (2), or (3) of this section makes impossible or impractical the continued use of the property for conservation purposes, the requirement of this paragraph will be met if the property is sold or exchanged and any proceeds are used by the donee organization in a
manner consistent with the conservation purposes of the original contribution. In the case of a donation under
paragraph (b)(3) of this section to which the preceding sentence applies, see also paragraph (g)(5)(ii) of this section.
(d) Conservation purposes—(1) In general. For purposes of section 170(h) and this section, the term
“conservation purposes” means—
(i) The preservation of land areas for outdoor recreation by, or the education of, the general public, within the
meaning of paragraph (d)(2) of this section,
(ii) The protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem, within the
*1500 meaning of paragraph (d)(3) of this section,
(iii) The preservation of certain open space (including farmland and forest land) within the meaning of paragraph (d)(4) of this section, or
(iv) The preservation of a historically important land area or a certified historic structure, within the meaning of
paragraph (d)(5) of this section.
(2) Recreation or education—(i) In general. The donation of a qualified real property interest to preserve land
areas for the outdoor recreation of the general public or for the education of the general public will meet the conservation purposes test of this section. Thus, conservation purposes would include, for example, the preservation
of a water area for the use of the public for boating or fishing, or a nature or hiking trail for the use of the public.
(ii) Access. The preservation of land areas for recreation or education will not meet the test of this section unless
the recreation or education is for the substantial and regular use of the general public.
(3) Protection of environmental system—(i) In general. The donation of a qualified real property interest to protect a significant relatively natural habitat in which a fish, wildlife, or plant community, or similar ecosystem
normally lives will meet the conservation purposes test of this section. The fact that the habitat or environment
has been altered to some extent by human activity will not result in a deduction being denied under this section

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if the fish, wildlife, or plants continue to exist there in a relatively natural state. For example, the preservation of
a lake formed by a man-made dam or a salt pond formed by a man-made dike would meet the conservation purposes test if the lake or pond were a nature feeding area for a wildlife community that included rare, endangered,
or threatened native species.
(ii) Significant habitat or ecosystem. Significant habitats and ecosystems include, but are not limited to, habitats
for rare, endangered, or threatened species of animal, fish, or plants; natural areas that represent high quality examples of a terrestrial community or aquatic community, such as islands that are undeveloped or not intensely
developed where the coastal ecosystem is relatively intact; and natural areas which are included in, or which
contribute to, the ecological viability of a local, state, or national park, nature preserve, wildlife refuge, wilderness area, or other similar conservation area.
(iii) Access. Limitations on public access to property that is the subject of a donation under this paragraph (d)(3)
shall not render the donation nondeductible. For example, a restriction on all public access to the habitat of a
threatened native animal species protected by a donation under this paragraph (d)(3) would not cause the donation to be nondeductible.
(4) Preservation of open space—(i) In general. The donation of a qualified real property interest to preserve
open space (including farmland and forest land) will meet the conservation purposes test of this section if such
preservation is—
(A) Pursuant to a clearly delineated Federal, state, or local governmental conservation policy and will yield a
significant public benefit, or
(B) For the scenic enjoyment of the general public and will yield a significant public benefit.
An open space easement donated on or after December 18, 1980, must meet the requirements of section 170(h)
in order to be deductible.
(ii) Scenic enjoyment—(A) Factors. A contribution made for the preservation of open space may be for the scenic enjoyment of the general public. Preservation of land may be for the scenic enjoyment of the general public if
development of the property would impair the scenic character of the local rural or urban landscape or would interfere with a scenic panorama that can be enjoyed from a park, nature preserve, road, waterbody, trail, or historic structure or land area, and such area or transportation way is open to, or utilized by, the public. “Scenic enjoyment” will be evaluated by considering all pertinent facts and circumstances germane to the contribution. Regional variations in topography, geology, biology, and cultural and economic conditions require flexibility in the
application of this test, but do not lessen the burden on the taxpayer to demonstrate the scenic characteristics of
a donation under this paragraph. The application of a particular objective factor in to help define a view as
“scenic” in one setting may in fact be entirely inappropriate in another setting. Among the factors to be considered are:
(1) The compatibility of the land use with other land in the vicinity;
(2) The degree of contrast and variety provided by the visual scene;
(3) The openness of the land (which would be a more significant factor an urban or densely populated setting or
in a heavily wooded area);

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(4) Relief from urban closeness;
(5) The harmonious variety of shapes and textures;
(6) The degree to which the land use maintains the scale and character of the urban landscape to preserve open
space, visual enjoyment, and sunlight for the surrounding area;
(7) The consistency of the proposed scenic view with a methodical state scenic identification program, such as a
state landscape inventory; and
(8) The consistency of the proposed scenic view with a regional or local landscape inventory made pursuant to a
sufficiently rigorous review process, especially if the donation is endorsed by an appropriate state or local governmental agency.
(B) Access. To satisfy the requirement of scenic enjoyment by the general public, visual (rather than physical)
access to or across the property by the general public is sufficient. Under the terms of an open space easement
on scenic property, the entire property need not be visible to the public for a donation to qualify under this section, although the public benefit from the donation may be insufficient to qualify for a deduction if only a small
portion of the property is visible to the public.
(iii) Governmental conservation policy—(A) In general. The requirement that the preservation of open space be
pursuant to a clearly delineated Federal, state, or local governmental policy is intended to protect the types of
property identified by representatives of the general public as worthy of preservation or conservation. A general
declaration of conservation goals by a single official or legislative body is not sufficient. However, a governmental conservation policy need not be a certification program that identifies particular lots or small parcels of
individually owned property. This requirement will be met by donations that further a specific, identified conservation project, such as the preservation of land within a state or local landmark district that is locally recognized
as being significant to that district; the preservation of a wild or scenic river, the preservation of farmland pursuant to a state program for flood prevention and control; or the protection of the scenic, ecological, or historic
character of land that is contiguous to, or an integral part of, the surroundings of existing recreation or conservation sites. For example, the donation of a perpetual conservation restriction to a qualified organization pursuant
to a formal resolution or certification by a local governmental agency established under state law specificalty
identifying the subject properly as worthy of protection for conservation purposes will meet the requirement of
this paragraph. A *1501 program need not be funded to satisfy this requirement, but the program must involve a
significant commitment by the government with respect to the conservation project. For example, a governmental program according preferential tax assessment or preferential zoning for certain property deemed worthy of
protection for conservation purposes would constitute a significant commitment by the government.
(B) Effect of acceptance by governmental agency. Acceptance of an easement by an agency of the Federal Government or by an agency of a state or local government (or by a commission, authority, or similar body duly
constituted by the state or local government and acting on behalf of the state or local government) tends to establish the requisite clearly delineated governmental policy, although such acceptance, without more, is not sufficient. The more rigorous the review process by the governmental agency, the more the acceptance of the easement tends to establish the requisite clearly delineated governmental policy. For example, in a state where the
legislature has established an Environmental Trust to accept gifts to the state which meet certain conservation
purposes and to submit the gifts to a review that requires the approval of the state's highest officials, acceptance
of a gift by the Trust tends to establish the requisite clearly delineated governmental policy. However, if the

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Trust merely accepts such gifts without a review process, the requisite clearly delineated governmental policy is
not established.
(C) Access. A limitation on public access to property subject to a donation under this paragraph (d)(4)(iii) shall
not render the deduction nondeductible unless the conservation purpose of the donation would be undermined or
frustrated without public access. For example, a donation pursuant to a governmental policy to protect the scenic
character of land near a river requires visual access to the same extent as would a donation under paragraph
(d)(4)(ii) of this section.
(iv) Significant public benefit—(A) Factors. All contributions made for the preservation of open space must
yield a significant public benefit. Public benefit will be evaluated by considering all pertinent facts and circumstances germane to the contribution. Factors germane to the evaluation of public benefit from one contribution
may be irrelevant in determining public benefit from another contribution. No single factor will necessarily be
determinative. Among the factors to be considered are:
(1) The uniqueness of the property to the area;
(2) The intensity of land development in the vicinity of the property (both existing development and foreseeable
trends of development);
(3) The consistency of the proposed open space use with public programs (whether Federal, state or local) for
conservation in the region, including programs for outdoor recreation, irrigation or water supply protection, water quality maintenance or enhancement, flood prevention and control, erosion control, shoreline protection, and
protection of land areas included in, or related to, a government approved master plan or land management area;
(4) The consistency of the proposed open space use with existing private conservation programs in the area, as
evidenced by other land, protected by easement or fee ownership by organizations referred to in §
1.170A-14(c)(1), in close proximity to the property;
(5) The likelihood that development of the property would lead to or contribute to degradation of the scenic, natural, or historic character of the area;
(6) The opportunity for the general public to use the property or to appreciate its scenic values;
(7) The importance of the property in preserving a local or regional landscape or resource that attracts tourism or
commerce to the area;
(8) The likelihood that the donee will acquire equally desirable and valuable substitute property or property
rights;
(9) The cost to the donee of enforcing the terms of the conservation restriction;
(10) The population density in the area of the property; and
(11) The consistency of the proposed open space use with a legislatively mandated program identifying particular parcels of land for future protection.
(B) Illustrations. The preservation of an ordinary tract of land would not in and of itself yield a significant public

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benefit, but the preservation of ordinary land areas in conjunction with other factors that demonstrate significant
public benefit or the preservation of a unique land area for public employment would yield a significant public
benefit.
For example, the preservation of a vacant downtown lot would not by itself yield a significant public benefit, but
the preservation of the downtown lot as a public garden would, absent countervailing factors, yield a significant
public benefit. The following are other examples of contributions which would, absent countervailing factors,
yield a significant public benefit: The preservation of farmland pursuant to a state program for flood prevention
and control; the preservation of a unique natural land formation for the enjoyment of the general public; the preservation of woodland along a public highway pursuant to a government program to preserve the appearance of
the area so as to maintain the scenic view from the highway; and the preservation of a stretch of undeveloped
property located between a public highway and the ocean in order to maintain the scenic ocean view from the
highway.
(v) Limitation. A deduction will not be allowed for the preservation of open space under section
170(h)(4)(A)(iii), if the terms of the easement permit a degree of intrusion or future development that would interfere with the essential scenic quality of the land or with the governmental conservation policy that is being
furthered by the donation. See § 1.170A-14(e)(2) for rules relating to inconsistent use.
(vi) Relationship of requirements—(A) Clearly delineated governmental policy and significant public benefit.
Although the requirements of “clearly delineated governmental policy” and “significant public benefit” must be
met independently, for purposes of this section the two requirements may also be related. The more specific the
governmental policy with respect to the particular site to be protected, the more likely the governmental decision, by itself, will tend to establish the significant public benefit associated with the donation. For example,
while a statute in State X permitting preferential assessment for farmland is, by definition, governmental policy,
it is distinguishable from a s state statute, accompanied by appropriations, naming the X River as a valuable resource and articulating the legislative policy that the X River and the relatively natural quality of its surrounding
be protected. On these facts, an open space easement on farmland in State X would have to demonstrate additional factors to establish “significant public benefit.” The specificity of the legislative mandate to protect the X
River, however, would by itself tend to establish the significant public benefit associated with an open space
easement on land fronting the X River.
(B) Scenic enjoyment and significant public benefit. With respect to the relationship between the requirements
of “scenic enjoyment” and “significant public benefit,” since the degrees of scenic enjoyment offered by a variety of open space easements are subjective and not as easily delineated as are *1502 increasingly specific levels
of governmental policy, the significant public benefit of preserving a scenic view must be independently established in all cases.
(C) Donations may satisfy more than one test. In some cases, open space easements may be both for scenic enjoyment and pursuant to a clearly delineated governmental policy. For example, the preservation of a particular
scenic view identified as part of a scenic landscape inventory by a rigorous governmental review process will
meet the tests of both paragraphs (d)(4)(i)(A) and (d)(4)(i)(B) of this section.
(5) Historic preservation—(i) In general. The donation of a qualified real property interest to preserve an historically important land area or a certified historic structure will meet the conservation purposes test of this section.
When restrictions to preserve a building or land area within a registered historic district permit future develop-

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ment on the site, a deduction will be allowed under this section only if the terms of the restrictions require that
such development conform with appropriate local, state, or Federal standards for construction or rehabilitation
within the district. See also, § 1.170A-14(h)(3)(ii).
(ii) Historically important land area. The term “historically important land area” includes:
(A) An independently significant land area including any related historic resources (for example, an archaeological site or a Civil War battlefield with related monuments, bridges, cannons, or houses) that meets the National
Register Criteria for Evaluation in 36 CFR 60.4 (Pub. L. 89-665, 80 Stat. 915);
(B) Any land area within a registered historic district including any buildings on the land area that can reasonably be considered as contributing to the significance of the district; and
(C) Any land area (including related historic resources) adjacent to a property listed individually in the National
Register of Historic Places (but not within a registered historic district) in a case where the physical or environmental features of the land area contribute to the historic or cultural integrity of the property.
(iii) Certified historic structure. The term “certified historic structure,” for purposes of this section, means any
building, structure or land area which is—
(A) Listed in the National Register, or
(B) Located in a registered historic district (as defined in section 48(g)(3)(B)) and is certified by the Secretary of
the Interior (pursuant to 36 CFR 67.4) to the Secretary of the Treasury as being of historic significance to the
district.
A “structure” for purposes of this section means any structure, whether or not it is depreciable. Accordingly
easements on private residences may qualify under this section. In addition, a structure would be considered to
be a certified historic structure if it were certified either at the time the transfer was made or at the due date
(including extensions) for filing the donor's return for the taxable year in which the contribution was made.
(iv) Access. (A) In order for a conservation contribution described in section 170(h)(4)(A)(iv) and this paragraph (d)(5) to be deductible, some visual public access to the donated property is required. In the case of an historically important land area, the entire property need not be visible to the public for a donation to qualify under
this section. However, the public benefit from the donation may be insufficient to qualify for a deduction if only
a small portion of the property is so visible. Where the historic land area or certified historic structure which is
the subject of the donation is not visible from a public way (e.g., the structure is hidden from view by a wall or
shrubbery, the structure is too far from the public way, or interior characteristics and features of the structure are
the subject of the easement), the terms of the easement must be such that the general public is given the opportunity on a regular basis to view the characteristics and features of the property which are preserved by the easement to the extent consistent with the nature and condition of the property.
(B) Factors to be considered in determining the type and amount of public access required under paragraph
(d)(5)(iv)(A) of this section include the historical significance of the donated property, the nature of the features
that are the subject of the easement, the remoteness or accessibility of the site of the donated property, the possibility of physical hazards to the public visiting the property (for example, an unoccupied structure in a dilapidated condition), the extent to which public access would be an unreasonable intrusion on any privacy interests of

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individuals living on the property, the degree to which public access would impair the preservation interests
which are the subject of the donation, and the availability of opportunities for the public to view the property by
means other than visits to the site.
(C) The amount of access afforded the public by the donation of an easement shall be determined with reference
to the amount of access permitted by the terms of the easement which are established by the donor, rather than
the amount of access actually provided by the donee organization. However, if the donor is aware of any facts
indicating that the amount of access that the donee organization will provide is significantly less than the
amount of access permitted under the terms of the easement, then the amount of access afforded the public shall
be determined with reference to this lesser amount.
(v) Examples. The provisions of paragraph (d)(5)(iv) of this section may be illustrated by the following examples:
Example (1). A and his family live in a house in a certified historic district in the State of X. The entire house,
including its interior, has architectural features representing classic Victorian period architecture. A donates an
exterior and interior easement on the property to a qualified organization but continues to live in the house with
his family. A's house is surrounded by a high stone wall which obscures the public's view of it from the street.
Pursuant to the terms of the easement, the house may be opened to the public from 10:00 a.m. to 4:00 p.m. on
one Sunday in May and one Sunday in November each year for house and garden tours. These tours are to be
under the supervision of the donee and open to members of the general public upon payment of a small fee. In
addition, under the terms of the easement, the donee organization is given the right to photograph the interior
and exterior of the house and distribute such photographs to magazines, newsletters, or other publicly available
publications. The terms of the easement also permit persons affiliated with educational organizations, professional architectural associations, and historical societies to make an appointment through the donee organization
to study the property. The donor is not aware of any facts indicating that the public access to be provided by the
donee organization will be significantly less than that permitted by the terms of the easement. The 2 opportunities for public visits per year, when combined with the ability of the general public to view the architectural characteristics and features that are the subject of the easement through photographs, the opportunity for scholarly
study of the property, and the fact that the house is used as an occupied residence, will enable the donation to
satisfy the requirement of public access.
Example (2). B owns an unoccupied farmhouse built in the 1840's and located on a property that is adjacent to a
Civil War battlefield. During the Civil War the farmhouse was used as quarters for Union troops. The battlefield
is visited year round by the general public. The condition of the farmhouse is such that the safety of visitors will
not be jeopardized and opening it to the public will not result in significant deterioration. The farmhouse is not
visible from the battlefield or any public way. It is accessible only by way of a private road *1503 owned by B.
B donates a conservation easement on the farmhouse to a qualified organization. The terms of the easement
provide that the donee organization may open the property (via B's road) to the general public on four weekends
each year from 8:30 a.m. to 4:00 p.m. The donation does not meet the public access requirement because the
farmhouse is safe, unoccupied, and easily accessible to the general public who have come to the site to visit
Civil War historic land areas (and related resources), but will only be open to the public on four weekends each
year. However, the donation would meet the public access requirement if the terms of the easement permitted
the donee organization to open the property to the public every other weekend during the year and the donor is
not aware of any facts indicating that the donee organization will provide significantly less access than that permitted.

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(e) Exclusively for conservation purposes. (1) In general. To meet the requirements of this section, a donation
must be exclusively for conservation purposes. See paragraphs (c)(1) and (g)(1) through (g)(6)(ii) of this section. A deduction will not be denied under this section when incidental benefit inures to the donor merely as a
result of conservation restrictions limiting the uses to which the donor's property may be put.
(2) Inconsistent use. Except as provided in paragraph (e)(4) of this section, a deduction will not be allowed if the
contribution would accomplish one of the enumerated conservation purposes but would permit destruction of
other significant conservation interests. For example, the preservation of farmland pursuant to a State program
for flood prevention and control would not qualify under paragraph (d)(4) of this section if under the terms of
the contribution a significant naturally occurring ecosystem could be injured or destroyed by the use of pesticides in the operation of the farm. However, this requirement is not intended to prohibit uses of the property,
such as selective timber harvesting or selective farming if, under the circumstances, those uses do not impair
significant conservation interests.
(3) Inconsistent use permitted. A use that is destructive of conservation interests will be permitted only if such
use is necessary for the protection of the conservation interests that are the subject of the contribution. For example, a deduction for the donation of an easement to preserve an archaeological site that is listed on the National Register of Historic Places will not be disallowed if site excavation consistent with sound archaeological practices may impair a scenic view of which the land is a part. A donor may continue a pre-existing use of the property that does not conflict with the conservation purposes of the gift.
(f) Examples. The provisions of this section relating to conservation purposes may be illustrated by the following examples.
Example (1). State S contains many large tract forests that are desirable recreation and scenic areas for the general public. The forests' scenic values attract millions of people to the State. However, due to the increasing intensity of land development in State S, the continued existence of forestland parcels greater than 45 acres is
threatened. J grants a perpetual easement on a 100-acre parcel of forestland that is part of one of the State's scenic areas to a qualifying organization. The easement imposes restrictions on the use of the parcel for the purpose
of maintaining its scenic values. The restrictions include a requirement that the parcel be maintained forever as
open space devoted exclusively to conservation purposes and wildlife protection, and that there be no commercial, industrial, residential, or other development use of such parcel. The law of State S recognizes a limited public right to enter private land, particularly for recreational pursuits, unless such land is posted or the landowner
objects. The easement specifically restricts the landowner from posting the parcel, or from objecting, thereby
maintaining public access to the parcel according to the custom of the State. J's parcel provides the opportunity
for the public to enjoy the use of the property and appreciate its scenic values. Accordingly, J's donation qualifies for a deduction under this section.
Example (2). A qualified conservation organization owns Greenacre in fee as a nature preserve. Greenacre contains a high quality example of a tall grass prairie ecosystem. Farmacre, an operating farm, adjoins Greenacre
and is a compatible buffer to the nature preserve. Conversion of Farmacre to a more intense use, such as a housing development, would adversely affect the continued use of Greenacre as a nature preserve because of human
traffic generated by the development. The owner of Farmacre donates an easement preventing any future development on Farmacre to the qualified conservation organization for conservation purposes. Normal agricultural
uses will be allowed on Farmacre. Accordingly, the donation qualifies for a deduction under this section.

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Example (3). H owns Greenacre, a 900-acre parcel of woodland, rolling pasture, and orchards on the crest of a
mountain. All of Greenacre is clearly visible from a nearby national park. Because of the strict enforcement of
an applicable zoning plan, the highest and best use of Greenacre is as a subdivision of 40-acre tracts. H wishes
to donate a scenic easement on Greenacre to a qualifying conservation organization, but H would like to reserve
the right to subdivide Greenacre into 90-acre parcels with no more than one single-family home allowable on
each parcel. Random building on the property, even as little as one home for each 90 acres, would destroy the
scenic character of the view. Accordingly, no deduction would be allowable under this section.
Example (4). Assume the same facts as in example (3), except that not all of Greenacre is visible from the park
and the deed of easement allows for limited cluster development of no more than five nine-acre clusters (with
four houses on each cluster) located in areas generally not visible from the national park and subject to site and
building plan approval by the donee organization in order to preserve the scenic view from the park. The donor
and the donee have already identified sites where limited cluster development would not be visible from the park
or would not impair the view. Owners of homes in the clusters will not have any rights with respect to the surrounding Greenacre property that are not also available to the general public. Accordingly, the donation qualifies
for a deduction under this section.
Example (5). In order to protect State S's declining open space that is suited for agricultural use from increasing
development pressure that has led to a marked decline in such open space, the Legislature of State S passed a
statute authorizing the purchase of “agricultural land development rights” on open acreage. Agricultural land development rights allow the State to place agricultural preservation restrictions on land designated as worthy of
protection in order to preserve open space and farm resources. Agricultural preservation restrictions prohibit or
limit construction or placement of buildings except those used for agricultural purposes or dwellings used for
family living by the farmer and his family and employees; removal of mineral substances in any manner that adversely affects the land's agricultural potential; or other uses detrimental to retention of the land for agricultural
use. Money has been appropriated for this program and some landowners have in fact sold their “agricultural
land development rights” to State S. K owns and operates a small dairy farm in State S located in an area designated by the Legislature as worthy protection. K desires to preserve his farm for agricultural purposes in perpetuity. Rather than selling the development rights to State S, K grants to a qualified organization an agricultural
preservation restriction on his property in the form of a conservation easement. K reserves to himself, his heirs
and assigns the right to manage the farm consistent with sound agricultural and management practices. The preservation of K's land is pursuant to a clearly delineated governmental policy of preserving open space available
for agricultural use, and will yield a significant public benefit by preserving open space against increasing development pressures.
(g) Enforceable in perpetuity.—(1) In general. In the case of any donation under this section, any interest in the
property retained by the donor (and the donor's successors in interest) must be subject to legally enforceable restrictions (for example, by recordation in the land records of the jurisdiction in which the property is located)
that will prevent uses of the retained interest *1504 inconsistent with the conservation purposes of the donation.
In the case of a contribution of a remainder interest, the contribution will not qualify if the tenants, whether they
are tenants for life or a term of years, can use the property in a manner that diminishes the conservation values
which are intended to be protected by the contribution.
(2) Protection of a conservation purpose in case of donation of property subject to a mortgage. In the case of
conservation contributions made after February 13, 1986, no deducion will be permitted under this section for an
interest in property which is subject to a mortgage unless the mortgagee subordinates its rights in the property to

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the right of the qualified organization to enforce the conservation purposes of the gift in perpetuity. For conservation contributions made prior to February 12, 1986, the requirement of section 170 (h)(5)(A) is satisfied in the
case of mortgaged property (with respect to which the mortgagee has not subordinated its rights) only if the
donor can demonstrate that the conservation purpose is protected in perpetuity without subordination of the
mortgagee's rights.
(3) Remote future event. A deduction shall not be disallowed under section 170(f)(3)(B)(iii) and this section
merely because the interest which passes to, or is vested in, the donee organization may be defeated by the performance of some act or the happening of some event, if on the date of the gift it appears that the possibility that
such act or event will occur is so remote as to be negligible. See paragraph (e) of § 1.170A-1. For example, a
state's statutory requirement that use restrictions must be rerecorded every 30 years to remain enforceable shall
not, by itself, render an easement nonperpetual.
(4) Retention of qualified mineral interest—(i) In general. Except as otherwise provided in paragraph (g)(4)(ii)
of this section, the requirements of this section are not met and no deduction shall be allowed in the case of a
contribution of any interest when there is a retention by any person of a qualified mineral interest (as defined in
paragraph (b)(1)(i) of this section) if at any time there may be extractions or removal of minerals by any surface
mining method. Moreover, in the case of a qualified mineral interest gift, the requirement that the conservation
purposes be protected in perpetuity is not satisfied if any method of mining that is inconsistent with the particular conservation purposes of a contribution is permitted at any time. See also § 1.170A-14(e)(2). However, a deduction under this section will not be denied in the case of certain methods of mining that may have limited, localized impact on the real property but that are not irremediably destructive of significant conservation interests.
For example, a deduction will not be denied in a case where production facilities are concealed or compatible
with existing topography and landscape and when surface alteration is to be restored to its original state.
(ii) Exception for qualified conservation contributions after July 1984. (A) A contribution made after July 18,
1984, of a qualified real property interest described in section 170(h)(2)(A) shall not be disqualified under the
first sentence of paragraph (g)(4)(i) of this section if the following requirements are satisfied.
(1) The ownership of the surface estate and mineral interest were separated before June 13, 1976, and remain so
separated up to and including the time of the contribution.
(2) The present owner of the mineral interest is not a person whose relationship to the owner of the surface estate is described at the time of the contribution in section 267(b) of section 707(b), and
(3) The probability of extraction or removal of minerals by any surface mining method is so remote as to be negligible.
Whether the probability of extraction or removal of minerals by surface mining is so remote as to be negligible
is a question of fact and is to be made on a case by case basis. Relevant factors to be considered in determining
if the probability of extraction or removal of minerals by surface mining is so remote as to be negligible include:
Geological, geophysical or economic data showing the absence of mineral reserves on the property, or the lack
of commercial feasibility at the time of the contribution of surface mining the mineral interest.
(B) If the ownership of the surface estate and mineral interest first became separated after June 12, 1976, no deduction is permitted for a contribution under this section unless surface mining on the property is completely
prohibited.

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(iii) Examples. The provisions of paragraph (g)(4)(i) and (ii) of this section may be illustrated by the following
examples:
Example. (1) K owns 5,000 acres of bottomland hardwood property along a major watershed system in the
southern part of the United States. Agencies within the Department of the Interior have determined that southern
bottomland hardwoods are a rapidly diminishing resource and a critical ecosystem in the south because of the intense pressure to cut the trees and convert the land to agricultural use. These agencies have further determined
(and have indicated in correspondence with K) that bottomland hardwoods provide a superb habitat for numerous species and play an important role in controlling floods and purifying rivers. K donates to a qualified organization his entire interest in this property other than his interest in the gas and oil deposits that have been identified under K's property. K covenants and can ensure that, although drilling for gas and oil on the property may
have some temporary localized impact on the real property, the drilling will not interfere with the overall conservation purpose of the gift, which is to protect the unique bottomland hardwood ecosystem. Accordingly, the
donation qualifies for a deduction under this section.
Example (2). Assume the same facts as in example (1), except that in 1979, K sells the mineral interest to A, an
unrelated person, in an arm's-length transaction, subject to a recorded prohibition on the removal of any minerals
by any surface mining method and a recorded prohibition against any mining technique that will harm the bottomland hardwood ecosystem. After the sale to A, K donates a qualified real property interest to a qualified organization to protect the bottomland hardwood ecosystem. Since at the time of the transfer, surface mining and
any mining technique that will harm the bottomland hardwood ecosystem are completely prohibited, the donation qualifies for a deduction under this section.
(5) Protection of conservation purpose where taxpayer reserves certain rights. (i) Documentation. In the case of
a donation made after February 13, 1986, of any qualified real property interest when the donor reserves rights
the exercise of which may impair the conservation interests associated with the property, for a deduction to be
allowable under this section the donor must make available to the donee, prior to the time the donation is made,
documentation sufficient to establish the condition of the property at the time of the gift.
Such documentation is designed to protect the conservation interests associated with the property, which although protected in perpetuity by the easement, could be adversely affected by the exercise of the reserved
rights. Such documentation may include:
(A) The appropriate survey maps from the United States Geological Survey, showing the property line and other
contiguous or nearby protected areas;
(B) A map of the area drawn to scale showing all existing man-made improvements or incursions (such as roads,
buildings, fences, or gravel pits), vegetation and identification of flora and fauna (including, for example, rare
species locations, animal breeding and roosting areas, and migration routes), land use history (including present
uses *1505 and recent past disturbances), and distinct natural features (such as large trees and aquatic areas);
(C) An aerial photograph of the property at an appropriate scale taken as close as possible to the date the donation is made; and
(D) On-site photographs taken at appropriate locations on the property. If the terms of the donation contain restrictions with regard to a particular natural resource to be protected, such as water quality or air quality, the
condition of the resource at or near the time of the gift must be established. The documentation, including the

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maps and photographs, must be accompanied by a statement signed by the donor and a representative of the donee clearly referencing the documentation and in substance saying “This natural resources inventory is an accurate representation of [the protected property] at the time of the transfer.”.
(ii) Donee's right to inspection and legal remedies. In the case of any donation referred to in paragraph (g)(5)(i)
of this section, the donor must agree to notify the donee, in writing, before exercising any reserved right, e.g. the
right to extract certain minerals which may have an adverse impact on the conservation interests associated with
the qualified real property interest. The terms of the donation must provide a right of the donee to enter the property at reasonable times for the purpose of inspection the property to determine if there is compliance with the
terms of the donation. Additionally, the terms of the donation must provide a right of the donee to enforce the
conservation restrictions by appropriate legal proceedings, including but not limited to, the right to require the
restoration of the property to its condition at the time of the donation.
(6) Extinguishment. (i) In general. If a subsequent unexpected change in the conditions surrounding the property
that is the subject of a donation under this paragraph can make impossible or impractical the continued use of
the property for conservation purposes, the conservation purpose can nonetheless be treated as protected in perpetuity if the restrictions are extinguished by judicial proceeding and all of the donee's proceeds (determined under paragraph (g)(6)(ii) of this section) from a subsequent sale or exchange of the property are used by the donee
organization in a manner consistent with the conservation purposes of the original contribution.
(ii) Proceeds. In case of a donation made after February 13, 1986, for a deduction to be allowed under this section, at the time of the gift the donor must agree that the donation of the perpetual conservation restriction gives
rise to a property right, immediately vested in the donee organization, with a fair market value that is at least
equal to the proportionate value that the perpetual conservation restriction at the time of the gift, bears to the
value of the property as a whole at that time. See § 1.170A-14(h)(3)(iii) relating to the allocation of basis. For
purposes of this paragraph (g)(6)(ii), that proportionate value of the donee's property rights shall remain constant. Accordingly, when a change in conditions give rise to the extinguishment of a perpetual conservation restriction under paragraph (g)(6)(i) of this section, the donee organization, on a subsequent sale, exchange, or involuntary conversion of the subject property, must be entitled to a portion of the proceeds at least equal to that
proportionate value of the perpetual conservation restriction, unless state law provides that the donor is entitled
to the full proceeds from the conversion without regard to the terms of the prior perpetual conservation restriction.
(h) Valuation—(1) Entire interest of donor other than qualified mineral interest. The value of the contribution
under section 170 in the case of a contribution of a taxpayer's entire interest in property other than a qualified
mineral interest is the fair market value of the surface rights in the property contributed. The value of the contribution shall be computed without regard to the mineral rights. See paragraph (h)(4), example (1), of this section.
(2) Remainder interest in real property. In the case of a contribution of any remainder interest in real property,
section 170(f)(4) provides that in determining the value of such interest for purposes of section 170, depreciation
and depletion of such property shall be taken into account. See § 1.170A-12. In the case of the contribution of a
remainder interest for conservation purposes, the current fair market value of the property (against which the
limitations of § 1.17A-12 are applied) must take into account any pre-existing or contemporaneously recorded
rights limiting, for conservation purposes, the use to which the subject property may be put.
(3) Perpetual conservation restriction—(i) In general. The value of the contribution under section 170 in the case

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of a charitable contribution of a perpetual conservation restriction is the fair market value of the perpetual conservation restriction at the time of the contribution. See § 1.170A-7(c). If there is a substantial record of sales of
easements comparable to the donated easement (such as purchases pursuant to a governmental program), the fair
market value of the donated easement is based on the sales prices of such comparable easements. If no substantial record of market-place sales is available to use as a meaningful or valid comparison, as a general rule (but
not necessarily in all cases) the fair market value of a perpetual conservation restriction is equal to the difference
between the fair market value of the property it encumbers before the granting of the restriction and the fair market value of the encumbered property after the granting of the restriction. The amount of the deduction in the
case of a charitable contribution of a perpetual conservation restriction covering a portion of the contiguous
property owned by a donor and the donor's family (as defined in section 267(c)(4)) is the difference between the
fair market value of the entire contiguous parcel of property before and after the granting of the restriction. If the
granting of a perpetual conservation restriction after January 14, 1986, has the effect of increasing the value of
any other property owned by the donor or a related person, the amount of the deduction for the conservation
contribution shall be reduced by the amount of the increase in the value of the other property, whether or not
such property is contiguous. If, as a result of the donation of a perpetual conservation restriction, the donor or a
related person receives, or can reasonably expect to receive, financial or economic benefits that are greater than
those that will inure to the general public from the transfer, no deduction is allowable under this section.
However, if the donor or a related person receives, or can reasonably expect to receive, a financial or economic
benefit that is substantial, but it is clearly shown that the benefit is less than the amount of the transfer, then a
deduction under this section is allowable for the excess of the amount transferred over the amount of the financial or economic benefit received or reasonably expected to be received by the donor or the related person. For
purposes of this paragraph (h)(3)((i), related person shall have the same meaning as in either section 267(b) or
section 707(b). (See example (10) of paragraph (h)(4) of this section.)
(ii) Fair market value of property before and after restriction. If before and after valuation is used, the fair market value of the property before contribution of the conservation restriction must take into account not only the
current use of the property but *1506 also an objective assessment of how immediate or remote the likelihood is
that the property, absent the restriction, would in fact be developed, as well as any effect from zoning, conservation, or historic preservation laws that already restrict the property's potential highest and best use. Further, there
may be instances where the grant of a conservation restriction may have no material effect on the value of the
property or may in fact serve to enhance, rather than reduce, the value of property. In such instances no deduction would be allowable. In the case of a conservation restriction that allows for any development, however limited, on the property to be protected, the fair maket value of the property after contribution of the restriction
must take into account the effect of the development. In the case of a conservation easement such as an easement
on a certified historic structure, the fair market value of the property after contribution of the restriction must
take into account the amount of access permitted by the terms of the easement. Additionally, if before and after
valuation is used, an appraisal of the property after contribution of the restriction must take into account the effect of restrictions that will result in a reduction of the potential fair market value represented by highest and
best use but will, nevertheless, permit uses of the property that will increase its fair market value above that represented by the property's current use. The value of a perpetual conservation restriction shall not be reduced by
reason of the existence of restrictions on transfer designed solely to ensure that the conservation restriction will
be dedicated to conservation purposes. See § 1.170A-14 (c)(3).
(iii) Allocation of basis. In the case of the donation of a qualified real property interest for conservation purposes, the basis of the property retained by the donor must be adjusted by the elimination of that part of the total

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basis of the property that is properly allocable to the qualified real property interest granted. The amount of the
basis that is allocable to the qualified real property interest shall bear the same ratio to the total basis of the
property as the fair market value of the qualified real property interest bears to the fair market value of the property before the granting of the qualified real property interest. When a taxpayer donates to a qualifying conservation organization an easement on a structure with respect to which deductions are taken for depreciation, the reduction required by this paragraph (h)(3)(ii) in the basis of the property retained by the taxpayer must be allocated between the structure and the underlying land.
(4) Examples. The provisions of this section may be illustrated by the following examples. In examples illustrating the value or deductibility of donations, the applicable restrictions and limitations of § 1.170A-4, with respect
to reduction in amount of charitable contributions of certain appreciated property, and § 1.170A-8, with respect
to limitations on charitable deductions by individuals. must also be taken into account.
Example (1). A owns Goldacre, a property adjacent to a state park. A wants to donate Goldacre to the state to be
used as part of the park, but A wants to reserve a qualified mineral interest in the property, to exploit currently
and to devise at death. The fair market value of the surface rights in Goldacre is $200,000 and the fair market
value of the mineral rights in $100.000. In order to ensure that the quality of the park will not be degraded, restrictions must be imposed on the right to extract the minerals that reduce the fair market value of the mineral
rights to $80,000. Under this section, the value of the contribution is $200,000 (the value of the surface rights).
Example (2). In 1984 B, who is 62, donates a remainder interest in Greenacre to a qualifying organization for
conservation purposes. Greenacre is a tract of 200 acres of undeveloped woodland that is valued at $200,000 at
its highest and best use. Under § 1.170A-12(b), the value of a remainder interest in real property following one
life is determined under § 25.2512-5 of the Gift Tax Regulations. (See § 25.2512-9 with respect to the valuation
of annuities, life estates, terms for years, remainders, and reversions transferred after December 31, 1970 and
before December 1, 1983. With respect to the valuation of annuities, life estates, terms for years, remainders,
and reversions transferred before January 1, 1971, see T.D. 6334, 23 FR 8904, November 15, 1958, as amended
by T.D. 7077, 35 FR 18464, December 4, 1970). Accordingly, the value of the remainder interest, and thus the
amount eligible for an income tax deduction under sections 170(f), is $55,996 ($200,000 x.27998).
Example (3). Assume the same facts as in example (2), except that Greenacre is B's 200-acre estate with a home
built during the colonial period. Some of the acreage around the home is cleared; the balance of Greenacre, except for access roads, is wooded and undeveloped. See section 170(f)(3)(B)(i). However, B would like Greenacre to be maintained in its current state after his death, so he donates a remainder interest in Greenacre to a
qualifying organization for conservation purposes pursunt to section 170 (f)(3)(B)(iii) and (h)(2)(B). At the time
of the gift the land has a value of $200,000 and the house has a value of $100,000. The value of the remainder
interest, and thus the amount eligible for an income tax deduction under section 170(f), is computed pursuant to
§ 1.170A-12. See § 1.170A-12(b)(3).
Example (4). Assume the same facts as in example (2), except that at age 62 instead of donating a remainder interest B donates an easement in Greenacre to a qualifying organization for conservation purposes. The fair market value of Greenacre after the donation is reduced to $110,000. Accordingly, the value of the easement, and
thus the amount eligible for a deduction under section 170(f), is $90,000 ($200,000 less $110,000).
Example (5). Assume the same facts as in example (4), and assume that three years later, at age 65, B decides to
donate a remainder interest in Greenacre to a qualifying organization for conservation purposes. Increasing real

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estate values in the area have raised the fair market value of Greenacre (subject to the easement) to $130,000.
Accordingly, the value of the remainder interest, and thus the amount eligible for a deduction under section
170(f), is $41,639 ($130,000x.32030).
Example (6). Assume the same facts as in example (2), except that at the time of the donation of a remainder interest in Greenacre, B also donates an easement to a different qualifying organization for conservation purposes.
Based on all the facts and circumstances, the value of the easement is determined to be $100,000. Therefore, the
value of the property after the easement is $100,000 and the value of the remainder interest, and thus the amount
eligible for deduction under section 170(f), is $27,998 ($100,000 x.27998).
Example (7). C owns Greenacre, a 200-acre estate containing a house built during the colonial period. At its
highest and best use, for home development, the fair market value of Greenacre is $300,000. C donates an easement (to maintain the house and Green acre in their current state) to a qualifying organization for conservation
purposes. The fair market value of Greenacre after the donation is reduced to $125,000. Accordingly, the value
of the easement and the amount eligible for a deduction under section 170(f) is $175.000 ($300,000 less
$125,000).
Example (8). Assume the same facts as in example (7) and assume that three years later, C decides to donate a
remainder interest in Greenacre to a qualifying organization for conservation purposes. Increasing real estate
values in the area have raised the fair market value of Greenacre to $180.000. Assume that because of the perpetual easement prohibiting any development of the land, the value of the house is $120,000 and the value of the
land is $60,000. The value of the remainder interest, and thus the amount eligible for an income tax deduction
under section 170(f), is computed pursuant to § 1.170A-12. See § 1.170A-12(b)(3).
Example (9). D owns property with a basis of $20,000 and a fair market value of $80,000. D donates to a qualifying organization an easement for conservation purposes that is determined under this section to have a fair
market value of $60,000. The amount of basis allocable to the easement is $15,000
($60,000/$80,000=$15,000/$20,000). Accordingly, the basis of the property is reduced to $5,000 ($20,000
minus $15,000).
*1507 Example (10). E owns 10 one-acre lots that are currently woods and parkland. The fair market value of
each of E's lots is $15,000 and the basis of each lot is $3,000. E grants to the county a perpetual easement for
conservation purposes to use and maintain eight of the acres as a public park and to restrict any future development on those eight acres. As a result of the restrictions, the value of the eight acres is reduced to $1,000 an
acre. However, by perpetually restricting development on this portion of the land, E has ensured that the two remaining acres will always be bordered by parkland, thus increasing their fair market value to $22,500 each. If
the eight acres represented all of E's land, the fair market value of the easement would be $112,000, an amount
equal to the fair market value of the land before the granting of the easement
(8x$15,000=$120,000) minus the fair market value of the encumbered land after the granting of the easement
(8x$1,000=$8,000). However, because the easement only covered a portion of the deduction under section 170
is reduced to $97,000 ($150,000-$53,000), that is, the difference between the fair market value of the entire tract
of land before ($150,000) and after ((8x$1,000)+(2x $22,500)) the granting of the easement.
Example (11). Assume the same facts as in example (10). Since the easement covers a portion of E's land, only
the basis of that portion is adjusted. Therefore, the amount of basis allocable to the easement is $22,400
((8x$3,000) x($112,000/$120,000)). Accordingly, the basis of the eight acres encumbered by the easement is re-

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duced to $1,600 ($24,000-$22,400), or $200 for each acre. The basis of the two remaining acres is not affected
by the donation.
Example (12). F owns and uses as professional offices a two-building that lies within a registered historic district F's building is an outstanding example of period architecture with a fair market value of $125,000. Restricted to its current use, which is the highest and best use of the property without making changes to the facade, the
building and lot would have a fair market value of $100,000, of which $80,000 would be allocable to the building and $20,000 woud be allocable to the lot. F's basis in the property is $50,000, of which $40,000 is allocable
to the building and $10,000 is allocable to the lot. F's neighborhood is a mix or residential and commercial uses,
and it is possible that F (or another owner) could enlarge the building for more extensive commercial use, which
is its highest and best use. However, this would require changes to the facade. F would like to donate to a qualifying preservation organization and easement restricting any changes to the facade and promissing to maintain
the facade in perpetuity. the donation would qualify for a deduction under this section. The fair market value of
the easement is $25,000 (the fair market value of the property before the easement, $125,000, minus the fair
market value of the property after the easement, $100,000). Pursuant to § 1.170A-14(h)(3)(iii), the basis allocable to the easement is $10,000 and the basis of the underlying property (building and lot) is reduced to $40,000.
(i) Substantiation requirement. If a taxpayer makes a qualified conservation contribution and claims a deduction,
the taxpayer must maintain written records of the fair market value of the underlying property before and after
the donation and the conservation purpose furthered by the donation and such information shall be stated in the
taxpayer's income tax return if required by the return or its instructions. See also § 1.170A-13T(c) (relating to
substantiation requirements for deductions in excess of $5,000 for charitable contributions made after 1984), and
section 6659 (relating to additions to tax in the case of valuation overstatements).
(j) Effective date. Except as otherwise provided in § 1.170A-14(g)(4)(ii), this section applies only to contributions made on or after December 18, 1980.
PART 20—[AMENDED]Par. 5. The authority for Part 20 continues to read in part:
Authority: 26 U.S.C. 7805. * * *
26 CFR § 20.2055-2
Par. 6. Paragraph (e)(2) of § 20.2055-2 is amended as follows:
a. The sixth sentence of paragraph (e)(2)(i) is revised to read: “However, except as provided in paragraphs (e)(2)
(ii), (iii), and (iv) of this section, for purposes of this subdivision a charitable contribution of an interest in property not in trust where the decedent transfers some specific rights to one party and transfers other substantial
rights to another party will not be considered a contribution of an undivided portion of the decedent's entire interest in property.”.
b. The eight sentence of paragraph (e)(2)(i) is revised to read; “A bequest to chartiy made on or before December 17, 1980, of an open space easement in gross in perpetuity shall be considered the transfer to charity of an
undivided portion of the decedent's entire interest in the property.”.
c. Paragraphs (e)(2)(iv), (e)(2)(v), and (e)(2)(vi) and redesignated (e)(2)(v), (e)(2)(vi), and (e)(2)(vii), respectively.

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d. A new paragraph (e)(2)(iv) is inserted after paragraph (e)(2)(iii) to read as set forth below.
26 CFR § 20.2055-2
§ 20.2055-2 Transfers not exclusively for charitable purposes.
* * * * *(e) Limitations applicable to decedents dying after December 31, 1969. * * *
(2) Deductible interests. * * *
(iv)Qualified conservation contribution. The charitable interest is a qualified conservation contribution. For the
definition of a qualified conservation contribution, see § 1.170A-14
PART 25—[AMENDED]Par. 7. The authority for Part 25 continues to read in part:
Authority: 26 U.S.C. 7805. * * *
26 CFR § 25.2522
Par. 8. Paragraph (c)(2) of § 25.2522(c)—3 is amended as follows:
a. The sixth sentence of paragraph (c)(2)(i) is revised to read; “However, except as provided in paragraphs
(e)(2)(ii), (iii), and (iv) of this section, for purposes of this subdivision of charitable contribution of an interest in
property not in trust where the decedent transfers some specific rights to one party and transfers other substantial
rights to another party will not be considered a contribution of a undivided portion of the decedent's entire interest in property.”.
b. The eight sentence of paragraph (c)(2)(i) is revised to read; “A bequest to charity made on or before December 17, 1980, of open space easement in gross in perpetuity shall be considered the transfer to charity of an undivided portion of the decedent's entire interest in property.”.
c. Paragraphs (c)(2)(iv), (c)(2)(v), and (c)(2)(vi) are redesignated (c)(2)(v), (c)(2)(vi), and (c)(2)(viii), respectively.
d. A new paragraph (c)(2)(iv) is inserted after paragraph (c)(2)(iii), to read as set forth below.
26 CFR § 25.2522(c)-3
§ 25.2522(c)-3 Transfers not exclusively for charitable, etc., purposes in the case of gifts made after July 31,
1969.
* * * * *(c) Transfers of partial interest in property.
(2) Deductible interest. * * *
(iv) Qualified Conservation Contribution. The charitable interest is a qualified conservation contribution. For the
definition of a qualified conservation contribution, see § 1.170A-14.
* * * * *PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACTPar. 9.
The authority for Part 602 continues to read in part:

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Authority: 26 U.S.C. 7805. * * *
26 CFR § 602.101
Par. 10. Section 602.101(c) is amended by inserting in the appropriate place in the table “ § 1.170A-14 . . .
1545-0763”.
Roscoe L. Egger, Jr.,
Commissioner of Internal Revenue.
Approved: December 20, 1985.
Ronald A Pearlman,
Assistant Secretary of the Treasury.
[FR Doc. 86-727 Filed 1-13-86; 8:45 am]
BILLING CODE 4380-01-M
1986-9 I.R.B. 4, T.D. 8069, 51 FR 1496-01, 51 FR 1496, 1986 WL 91709 (IRS TD)
END OF DOCUMENT

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