8110 / Is a gift of a "facade easement" deductible?

A variation on the conservation easement (see Q 8108) is the use of a “facade easement,” wherein the grantor agrees not to alter the facade or modify the architectural characteristics of a building.

If the building, structure, or land is listed in the National Register or is located in a registered historic district, any easement that is a restriction with respect to the exterior of the building must preserve the entire exterior and its historical character.¹ If a deduction in excess of $10,000 is claimed with respect to such an exterior easement, a $500 filing fee is required with the tax return.²

The amount of the deduction for the contribution of a facade easement is the full fair market value of the easement at the time of the contribution.³ The fair market value of the facade donation has been determined by applying the “before and after” approach.⁴ A substantial record of sales of easements comparable to the one donated results in valuation of the fair market value of the donation based on the sale prices of the comparable easements.⁵ If the donation of a facade easement increases the value of the property it would appear that the donation would be reduced by the amount of such increase.⁶

A taxpayer who claims an investment credit for the rehabilitation of a historic structure may be required to recapture a portion of the credit upon the gift of a facade easement for the rehabilitated building. The qualified easement contribution is reduced if a rehabilitation credit was taken.