If you are facing tax penalties because of an investment into a syndicated conversation easement, we understand your frustration and concern. Dishonest promoters of this type of investment often mislead individuals with promises of exceptionally high returns in the form of tax deductions. Fortunately, there is help for investors who sold a conservation easement. Because this type of program is illegal, lawyers are now actively helping clients recover losses associated with this scam.
This type of investment scheme is so widespread, that the IRS has assembled a team of attorneys who are especially focused on bringing those perpetrating this fraud to justice. These individuals will be aggressively pursued. Getting in contact with a knowledgeable lawyer now can help you recover from this financial nightmare and protect yourself from possible liability.
This article will provide you with more information on this type of tax scheme so that you can be aware of what your next steps need to be.
Why You Need A Lawyer?
You need a law team with expertise in representing investors who have suffered losses due to fraudulent investment schemes. There are intricacies in these types of cases that can be nearly impossible to untangle, but a team with experience can help.
The IRS is currently investigating these types of tax schemes and, unfortunately, without proper legal representation, some innocent investors could appear to be a guilty parties in the scam. This is one reason why it is critical that you have legal representation of your own to help build a case for your innocence and victimization in these issues. Without legal representation, innocent investors who were victimized by this scheme will face stiff tax penalties and possible legal action.
Reputable tax lawyers are only representing the innocent investors, not the promoters who sold SCEs.
Even if you did not realize that you were participating in a tax shelter scheme, you can still fall under the IRS investigation. A lawyer can help to determine whether a pass through entity has put you at risk for tax fraud. In addition to this, you may also be able to recover some of the losses you have suffered as well. If you feel that you were a victim of this tax scheme, please reach out to an attorney today.
You may also need a lawyer if you have received a settlement letter from the IRS. It is imperative that you speak with a legal team before you make any decision concerning the settlement offered. The way you respond to this letter is crucial and you should consult with an attorney before responding.
Understanding The Conservation Easement Scheme
High net worth individuals are often looking for safe, legal ways to reduce their tax liabilities each year. For those who fall into the highest tax brackets, there are many legal ways to do this. Conservation easements were promoted by fraudulent promoters as a way these individuals could accomplish this goal.
The process entails investing into properties which are protected from development. This can include commercial, industrial, or other intensive uses of the land. The promoters of SECs claim that investors will receive up to five times the deduction of whatever is contributed. This sounds very attractive for high net worth individuals who are specifically looking for tax breaks.
This type of investment is almost always fraudulent and is specifically targeted at wealthy individuals. The IRS has recently named SECs the top tax scam to avoid.
Promoters attempt to inflate the value of the land in order to cheat the government. This is in and of itself illegal. It is the innocent investors, however, who wind up facing the tax penalties for participating. Currently, there are up to 28,000 tax payers who are being audited for their involvement in an SEC scam. SECs have cost the government almost $21 billion dollars in lost income.
Commonly, the investor will be held responsible for both the original amount plus interest and penalties. These can reach up to 40%. If your participation in a conservation easement scheme was recommended to you by your financial advisor, you can sue. In some cases, individuals can recover their losses for the charitable contribution, losses, and penalties.
More Details On Conservation Easements
When a conservation easement has been created, the option to develop the land later on is forbidden. This protects the conservation value. Ultimately, this decreases the value of the property. Tax benefits were created by the IRS to help landowners who are willing to create conservation easements to make up for the loss of the land’s value.
Those that promote fraudulent SEC schemes, however, look at this an opportunity to make money. They think they can accomplish this by defrauding the government and the investor at the same time. They attempt to accomplish this by taking the following steps.
First, they will bring together investors by using a pass through entity.
Then, the investors are charged a fee and are asked to make their initial investment.
The pass through entity will then purchase the land.
An overvalued appraisal of the land is obtained through illegal means.
This appraised value will be much higher than the actual market value.
A conservation easement will then be obtained.
The land is then donated to charitable organizations, such as a land trust.
Some promoters will even obtain fraudulent letters from attorneys claiming that the transactions are legal. The huge tax deductions are passed on to the investor as promised. However, these deductions usually exceed legal limits. This creates a red flag for the IRS. Investors are then audited and held responsible for penalties for fraudulent transaction.
The promoters of these schemes use the complex nature of the legal transactions and the promise of big tax deductions and the apparent innocence of it being part of a land conservation program to trick wealthy individuals into participating.
This is a classic case of, “if it seems too good to be true, it probably is.”
The most damaging aspect of this scheme is that promoters will blatantly lie to investors telling them that the IRS deems the conservation easements eligible for the tax cuts. This is why it is so important for individuals to do their own research with the IRS to establish the legitimacy of any transactions that are being conducted for the explicit purpose of tax deductions. At the end of the day it is your responsibility to protect yourself from illegal activity.
It is also a good idea to always talk with an attorney before investing into anything that you do not fully understand.
Why Is This Scheme Suddenly So Popular?
It is not necessarily a matter of the scheme becoming popular right now, but rather that the IRS is now heavily cracking down on it. This is why it is a popular topic of discussion and often popping up in the news. This type of scheme has already been going on for a long time.
What Does A SEC Look Like?
Let’s look at an example of what this scheme might look like. Consider a high net worth individual who donates $100,000 worth of property that is then placed into a syndicated conservation easement. The tax deduction that is reported is not $100,000 but rather $900,000. This is obviously much larger than what is allowed under the law. This is why each of these transactions is a red flag to the IRS. When red flags go up it is the individual tax payer that is audited, not the promoter of the scheme, although steps are being taken to pinpoint these individuals too and hold them responsible.
What Are The Consequences For SECs?
The most common consequence to participating in this type of program is that you will be audited by the IRS. Anyone who has ever been audited knows that this can be an unpleasant and long experience. Not only is this an unpleasant experience, but in many cases, an audit will result in high tax penalties being levied against the individual.
The IRS is taking this type of scheme very seriously currently. Not only might a person face penalties and fees, but you may also face legal consequences as well.
How Can I Find Legitimate Tax Breaks?
If you are a high net worth individual looking for legitimate tax breaks, you can talk with reputable financial advisors to get information on where you can obtain these. It is also beneficial to have a lawyer on your side to help you when you do not understand certain financial details of transactions. You should never participate in a financial transaction that you do not fully understand, especially if it involves tax deductions.
Remember, you are the one held liable, not necessarily your financial advisor.
Will My Financial Advisor Be Investigated by the IRS?
Currently, it is the responsibility of the individual investor to try to hold their financial advisor accountable. This can be done through a law suit. This is another reason why you need a knowledgeable attorney on your side. Not only can they help you with the consequences of the easement scheme when dealing with the IRS, but if you choose to file a lawsuit against your financial advisor, they can help with this too.
If you are dealing with the fallout of investing in a syndicated conservation easement scheme, reach out to an experienced law firm today.