Facade Easements: Worth the Risk of Audit?
As we mentioned in yesterday’s Events post, Tim Gunn from the Trust for Architectural Easements gave a lecture last night about the tax write-off available to owners of historic buildings that donate a facade easement. Historically, people have been able to write off 10 to 15 percent of the value of their homes, not an…
As we mentioned in yesterday’s Events post, Tim Gunn from the Trust for Architectural Easements gave a lecture last night about the tax write-off available to owners of historic buildings that donate a facade easement. Historically, people have been able to write off 10 to 15 percent of the value of their homes, not an insignificant amount in this day and age. The only problem is that, despite the existence of case law in support of the easement, the IRS has decided that it doesn’t think that owners of houses that are already restricted by existing landmark laws should be able to take the write-off. As a result, 40 or so homeowners in Brooklyn that participated in the easement program in 2003 and 2004 have gotten hit with an audit in the last couple of years, according to one of the affected homeowners. We’d be interested to hear from any readers who attended last night’s program what Mr. Gunn’s spin on the audit threat was and whether he provided any compelling evidence that it’s still worth the risk for those in existing landmark districts. Sounds to us like people in areas that may be landmarked in the next couple of years should be all over this while those whose props are already landmarked would do better to sit tight.
Thursday Events [Brownstoner]
In addition to DUMBO and Sunset Park, here are a bunch of other Brooklyn National Register district that do NOT appear on Landmark’s list of historic districts: Cypress Avenue West HD; Floyd Bennett Field HD; Hunterfly Road HD; Lefferts Manor HD; Pratt Institute HD; Prospect Heights HD; Rockwood Chocolate Factory HD; Senator Street HD; and Willoughby Suydam HD. Some of these may overlap with or have different names than local districts.
There is also a Clinton Hill South district, a Fort Greene extension and a Stuyvesant Heights extension on the National Register.
Vinegar Hill, BAM, Crown Heights North and Prospect-Lefferts Gardens do not appear on the NR (Vinegar Hill may be part of the DUMBO listing, though, and the Lefferts Manor HD is within PLG HD).
Also, the boundaries of NR-listed districts do NOT have to conform to the boundaries of the local districts (see PLG, Lefferts Manor, above).
Greenpoint IS a New York historic district.
I’m the 10:44 and 11:21 poster. What wBer wrote is right on target.
A district (or building) can be listed on the National Register without being a local landmark. DUMBO, for instance, has an NR district, but is not (yet) a local landmark. [And Sunset Park – I didn’t know about that one.]
The tax attorney’s advice is probably worth listening to. There is a lot of room for abuse here – the value of the house itself (inflated appraisals), what per centage of the value of the house does the facade represent (and what per centage of a landmarked house), et., etc.
Keep in mind too that the Trust for Architectural Easements, while a non-profit, exists solely to take these easements and makes their money off a per centage of the value of the easement, and whoever you are dealing with there probably gets paid a commission off that. So it is entirely in their interest to inflate the numbers all down the line.
All that said, easements are a viable and important preservation tool. Hire an independent attorney and an independent accountant, and work with a “real” non-profit. “Real” non-profits will take a cut, but will use that money to monitor your maintenance and upkeep of the facade (that is after all what you are giving the non-profit – control over the exterior of your house, in perpetuity).
Bob, yes it’s a better bet than the landmarked nabes, although it still comes down to a matter of valuation. So if the deduction passes muster, the valuation can still be deeemed excessive, and result in some penalties to pay on top of the taxes and interest. Plus other items in the reutrn will be scrutinized. Not for the faint of heart.
This is worth it. I did it for my home in Cobble Hill and got a $220K tax deduction. I was audited last year and the deduction held up. The audit took about 3 hours of my time. The key was that my appraisal was reasonable. Some people had crazy appraisals and I think they might have had a harder time. Jeb
g man,
Thanks–details wsere never my strong point!
So, a question for “guest 10:44”:
Are facade easements a reasonable risk for property owners in the Dumbo, Greenpoint, Sunsert Park, or other HDs on the National Register but not designated as NYC HDs?
Bob, DUMBO is also on the state and national register, but not a New York City historic district … although that may change in the near future.
I wrote too soon–there’s also a Greenpoint Historic District on the National Register. I guess when I post a Googled URL I should actually READ the whole thing 🙁