How is the value of the preservation agreement calculated?
The value of the easement is the difference between the value of the land without the easement restrictions and the value of the land after the restrictions have been applied and the development rights have been removed. The change in property value associated with a preservation agreement must be determined by a qualified real estate appraiser. Example: The Smith family conveys a preservation agreement on its 150 acre woodlot to the Saginaw Basin Land Conservancy. If the property’s current value is $3,000 an acre, its total fair market value-before the easement is in place-would be: 150 acres x $3,000/acre = $450,000. If removing the development rights lowers the value to $2100 an acre, then the total market value of the restricted property would be: 150 acres x $2100/acre = $315,000. The difference between the before and after values is the value of the Easement: $450,000 – $315,000 = $135,000 tax deduction.
