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Baseline Documentation Report. Required by IRS prior to donation where donor reserves rights that could negatively affect easement in the future. Can assist appraiser in that it may:. Provide descriptive sections of the report.
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Baseline Documentation Report Required by IRS prior to donation where donor reserves rights that could negatively affect easement in the future
Can assist appraiser in that it may: • Provide descriptive sections of the report
Usually includes:Photos, maps, plats, and surveys Timber inventory Wetland and floodplain delineation Soil report Land and site improvements, including road and buildings Proposed covenants Scenic character
Always check zoning, encumbrances, and Comprehensive Plan—as you analyze a property’s pre-easement HBU
Larger Parcel The property to be appraised—a unitary holding • A tract, or tracts, which has a unity of ownership and the same HBU. • Consider contiguity (touching), unity of ownership, and unity of HBU. • It may differ from land identified in initial request • If so, client must amend assignment and appraiser, the scope of work
Tests • Unity of ownership(title) law on this issue unsettled; therefore may need to seek advice of legal counsel • Ownership vested in same persons or entity • Legal control of ownership required to meet this test • A crucial concern for IRS
Unity of use;i.e., highest and best use an appraisal question (Section B-11 UASFLA “Yellow Book”) • Property must have same, or integrated, HBU • If HBU’s differ, enhancement may be affected
Contiguity • It is not essential that the parcels be contiguous. Usually: • physical proximity of parcels considered to extent that it bears on the • physical and economic practicalities of a single unitary HBU
Enhancement • Whether enhanced or not, your reasoning must always be included. • In fact, this analysis must occur for you to reach a decision of inclusion or exclusion of the related-person parcel enhancement.
Obviously, if there is enhancement the appraiser first must convincingly estimate the value of the enhanced parcel, and then just as convincingly demonstrate the magnitude of said enhancement.
Inclusion of improvements’ value? • Existing improvements must be considered in every conservation easement appraisal assignment. • You should expect your report to be rejected if the extent of your reasoning is simply an unsubstantiated terse statement, “The value of the improvements are unaffected by the proposed conservation easement.” • Remember, we as valuation experts, produce substantiated opinions of value—nothing less! • Consider whether the improvements will have an effect on the HBU.
Value the improvements if: • The contributory value of the improvements will change as a result of the conservation easement. • The appraiser is uncertain whether the contributory value of improvements will change as a result of the easement. • The nature of the assignment (or client) requires that the value of the improvements is estimated. • The appraisal must meet Yellow Book standards.
Generally, the value of the improvements may not be required to satisfy IRS standards if: • After a thorough analysis, it is demonstrated that the contributory value of the improvements is not changed because of the conservation easement.
Regardless of whether the improvements are valued, the appraiser must address in the appraisal report: • The extent to which the improvements were considered • The reasons that the improvements were valued or not • If improvements are not valued, appraiser should consider whether a hypothetical condition is appropriate.
