26 C.F.R. § 1.6011-9 — Syndicated conservation easement listed transactions

(i) Example 1—(A) Facts. Individual A purchased an interest in P, a partnership that owns real property with a fair market value of $500,000 and marketable securities with a fair market value of $500,000. A is one of four equal investors in P, each of whom purchased its interest in P for $250,000 of cash. With respect to an investor's $250,000 payment for its interest in P, the promotional materials stated that P expected to allocate a $500,000 charitable contribution deduction to the investor (that is, a charitable contribution deduction that is two times the amount an investor paid for its interest in P). After all four investors have purchased their interests in P, P donates a conservation easement on all of its real property to a qualified organization as defined in section 170(h)(3) of the Code and reports a $2,000,000 charitable contribution on its Form 1065, U.S. Return of Partnership Income, based on P obtaining an appraisal indicating that the value of the conservation easement is $2,000,000. The Schedule K-1 (Form 1065) that P furnishes to A indicates that P allocated a charitable contribution deduction to A for the taxable year. A claims a charitable contribution deduction with respect to the charitable contribution on A's Federal income tax return. (B) Analysis. A's cost of acquiring its interest in P is $250,000. The real property on which a conservation easement was placed and that gave rise to the charitable contribution deduction described in paragraph (b)(3) of this section was P's property valued at $500,000. P's only other asset was marketable securities worth $500,000. Accordingly, half of A's share of the value of the assets held by P was attributable to the real property on which P placed a conservation easement and that gave rise to the charitable contribution deduction described in paragraph (b)(3) of this section. Therefore, under paragraph (d)(4)(i) of this section, for purposes of paragraph (b) of this section, the amount of A's investment in P is $125,000 (that is, half of A's $250,000 acquisition cost, which is the portion of A's acquisition cost that is attributable to the real property on which P placed a conservation easement and that gave rise to the charitable contribution deduction described in paragraph (b)(3) of this section). Because A's investment for purposes of the 2.5 times rule is $125,000 and A's expected charitable contribution deduction, based on the promotional materials, is $500,000 (that is, an expected deduction that is four times A's investment), the 2.5 times rule of paragraph (b)(1) of this section is met. The transaction also meets the other elements of a syndicated conservation easement within the meaning of paragraph (b) of this section and therefore is a listed transaction for purposes of § 1.6011-4(b)(2).