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However, the value you use on lines 4,

Indirect Ownership of Land

Specific Instructions

5, 7, and 10, of the worksheet is the

The qualified conservation easement

value for these items as of the date of

Line 1

exclusion applies if the land is owned

the contribution of the easement, not

indirectly through a partnership,

If the land is reported as one or more

the estate tax value. If the date of

corporation, or trust, if the decedent

item numbers on a Form 706 schedule,

contribution and the estate tax values

owned (directly or indirectly) at least

simply list the schedule and item

are the same, you do not need to do a

30% of the entity. For the rules on

numbers. If the land subject to the

separate computation.

determining ownership of an entity, see

easement comprises only part of an

Ownership rules below.

After completing the worksheet,

item, however, list the schedule and

enter the amount from line 14 of the

item number and describe the part

Ownership rules. An interest in

worksheet on line 14 of Schedule U.

subject to the easement. See the

property owned, directly or indirectly, by

Finish completing Schedule U by

Instructions for Schedule A — Real

or for a corporation, partnership, or trust

entering amounts on lines 4, 7, and 15

Estate, in the Form 706 itself, for

is considered proportionately owned by

through 20, following the instructions

information on how to describe the

or for the entity’s shareholders,

below for those lines. At the top of

land.

partners, or beneficiaries. A person is

Schedule U, enter ‘‘worksheet

the beneficiary of a trust only if he or

Line 3

attached.’’ Attach the worksheet to the

she has a present interest in the trust.

Using the general rules for describing

return.

For additional information, see the

real estate, provide enough information

ownership rules in section 2057(e)(3)

Under section 2031(c), you may

so the IRS can value the easement.

(before its repeal by P.L. 107-16).

elect to exclude a portion of the value

Give the date the easement was

of land that is subject to a qualified

Qualified Conservation

granted and by whom it was granted.

conservation easement. You make the

Easement

election by filing Schedule U with all of

Line 4

A qualified conservation easement is

the required information and excluding

Enter on this line the gross value at

one that would qualify as a qualified

the applicable value of the land that is

which the land was reported on the

conservation contribution under section

subject to the easement on Part

applicable asset schedule on this Form

170(h). It must be a contribution:

5 — Recapitulation, page 3, at item 11.

706. Do not reduce the value by the

•

Of a qualified real property interest,

To elect the exclusion, you must

amount of any mortgage outstanding.

•

To a qualified organization, and

include on Schedule A, B, E, F, G, or H,

Report the estate tax value even if the

•

Exclusively for conservation

as appropriate, the decedent’s interest

easement was granted by the decedent

purposes.

in the land that is subject to the

(or someone other than the decedent)

exclusion. You must make the election

Qualified real property interest. The

prior to the decedent’s death.

on a timely filed Form 706, including

term “qualified real property interest”

Note. If the value of the land reported

extensions.

means any of the following:

on line 4 was different at the time the

•

The entire interest of the donor, other

The exclusion is the lesser of:

easement was contributed than that

•

than a qualified mineral interest;

The applicable percentage of the

reported on Form 706, see the Caution

•

A remainder interest; or

value of land (after certain reductions)

at the beginning of the Schedule U

•

A restriction granted in perpetuity on

subject to a qualified conservation

Instructions.

the use that may be made of the real

easement or

•

Line 5

property. The restriction must include a

$500,000.

prohibition on more than a de minimis

The amount on line 5 should be the

Once made, the election is

use for commercial recreational activity.

date of death value of any qualifying

irrevocable.

conservation easements granted prior

Qualified organization. A qualified

to the decedent’s death, whether

General Requirements

organization includes:

•

granted by the decedent or someone

The United States, a possession of

other than the decedent, for which the

Qualified Land

the United States, a state (or the

exclusion is being elected.

District of Columbia), or a political

Land may qualify for the exclusion if all

subdivision of them, as long as the gift

Note. If the value of the easement

of the following requirements are met.

•

is for exclusively public purposes;

reported on line 5 was different at the

The decedent or a member of the

•

A domestic entity that meets the

time the easement was contributed

decedent’s family must have owned the

general requirements for qualifying as a

than at the date of death, see the

land for the 3-year period ending on the

charity under section 170(c)(2) and that

Caution at the beginning of the

date of the decedent’s death.

•

generally receives a substantial amount

Schedule U Instructions.

No later than the date the election is

of its support from a government unit or

made, a qualified conservation

Line 7

from the general public; or

easement on the land has been made

•

You must reduce the land value by the

Any entity that qualifies under section

by the decedent, a member of the

value of any development rights

170(h)(3)(B).

decedent’s family, the executor of the

retained by the donor in the

Conservation purpose. The term

decedent’s estate, or the trustee of a

conveyance of the easement. A

“conservation purpose” means:

trust that holds the land.

development right is any right to use

•

The preservation of land areas for

The land is located in the United

the land for any commercial purpose

outdoor recreation by, or the education

States or one of its possessions.

that is not subordinate to and directly

of, the public;

supportive of the use of the land as a

•

Member of Family

The protection of a relatively natural

farm for farming purposes.

Members of the decedent’s family

habitat of fish, wildlife, or plants, or a

Note. If the value of the retained

include the decedent’s spouse;

similar ecosystem; or

•

development rights reported on line 7

ancestors; lineal descendants of the

The preservation of open space

was different at the time the easement

decedent, of the decedent’s spouse,

(including farmland and forest land)

was contributed than at the date of

and of the parents of the decedent; and

where such preservation is for the

death, see the Caution at the beginning

the spouse of any lineal descendant. A

scenic enjoyment of the general public,

of the Schedule U Instructions.

legally adopted child of an individual is

or under a clearly delineated federal,

considered a child of the individual by

state, or local conservation policy and

You do not have to make this

blood.

will yield a significant public benefit.

reduction if everyone with an interest in

-28-

Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 28

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