Conservation easements

The sweeping pension bill passed by the Senate last week also swept in some useful tax provisions not related to pension plans. For example, the preferential tax treatment of 529 education saving plans, previously scheduled for extinction after 2010, has been made permanent. Another is that permission to convert an inherited IRA to one's own IRA, a priviledge previously limited to surviving spouses, will be extended to all heirs. Sub silentio, the rollover right is therefore available to same-sex couples.

In the estate planning context, the incentives for conservation easements have been expanded for two years, 2006 and 2007. The deduction limit goes from 30% of AGI to 50%, except for full-time farmers, who may get a 100% deduction. Even more important, the carryforward period is nearly tripled, from the prior 6 years to 16 years. Farm incomes are not all that high, while the value of farmland may be, so it's easy to see that it might take more than a decade of tax-free income to work off the full deduction.

Tax publisher CCH notes the incongruity of these incentives against the recent backdrop of IRS testimony before Congress about a wide range of tax abuses of conservation easements.