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Some landowners seek a method of donating land
that allows them to continue to live on and use the property after
transferring the deed. Such a donation is a remainder interest.
Continued use of the property is known as a reserved life estate.
This method of land donation allows the landowner
- or another named person - to enjoy and/or live on the land the
rest of their lives. Though such a transaction can be complicated
and result in some estate tax liability if the life tenant is someone
other than the donor, charitable deductions are allowed.
A remainder interest qualifies for federal income
tax deduction with or without restrictions on future use. Only a
remainder interest given for conservation purposes to a qualified
conservation organization guarantees protection of the land values.
The size of the income tax deduction for a remainder interest is
figured by reducing the fair market value of the donated property
by the value of the reserved life interest of the landowner or his
or her designees. The more life tenants and the younger they are,
the lower the value of the remainder interest and the lower the
tax deduction.
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