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Promoters sell partnership interests that pass large charitable deductions through on a K-1, often four or five times the cash invested, backed by an appraisal. The IRS lists many of these as abusive. When the deduction is disallowed, the investor pays the tax, interest and penalties, not the promoter.
Serving United States, Virginia, Washington, DC, Maryland.
What we handle
In a syndicated conservation easement or similar donation scheme, investors buy into a partnership that donates an easement or property and reports a charitable deduction based on an inflated appraisal. The deduction reaches each investor on a Schedule K-1. Notice 2017-10 made these listed transactions, and section 170(h)(7), added in 2022, generally disallows partnership easement deductions above 2.5 times the partners' basis. The IRS also warns about overvalued art and property donations, abusive charitable remainder trusts and similar arrangements on its Dirty Dozen list.
A K-1 reports what the partnership claims, not what the law allows. Under the centralized partnership audit rules, the IRS adjusts the deduction at the partnership level and the investors bear the result. Gross valuation misstatement penalties under section 6662(h) are 40%, investors must disclose listed transactions on Form 8886 or face section 6707A penalties, and courts generally reject reliance on advice from the promoter as reasonable cause.
Speak with an advisorWhere we help
Upheld the IRS proceeds regulation and denied a conservation easement deduction that failed the perpetuity requirement.
The Tax Court rejected the donor's appraisal of donated paintings and allowed a much lower value.
Reliance on advice from a promoter with a conflict of interest was not reasonable cause, so penalties applied.
A 40% penalty for gross valuation misstatements, with very limited reasonable cause relief for charitable property.
Our approach
A senior advisor reviews your facts and documents.
Scope, fees and timeline in an engagement letter.
Returns, elections and forms prepared and reviewed.
IRS contact and planning all year.
Questions
If your question isn't here, call (703) 880-8412 and you'll reach a person.
No. If the IRS disallows the deduction at the partnership level, each investor owes the resulting tax, interest and often penalties. The promoter's appraisal and opinion letters usually do not protect investors.
Have an independent advisor review the deal, confirm Form 8886 disclosure was made and evaluate amending, any IRS settlement initiative and your penalty exposure before the IRS contacts you.
Warning signs include deductions several times the cash invested, short holding periods, appraisals arranged by the promoter and marketing aimed at year-end tax savings.
Yes. Donations that meet the perpetuity, valuation and appraisal rules remain deductible. The problem is inflated, promoted deals.
Latest updates
Authorized representatives can now make balance-due, amended return, extension, proposed assessment and federal tax deposit payments for business clients online. Appropriate authorization for the client and tax matter is required.
Source: IRS (IR-2026-134)
For 2027 the joint-return standard deduction rises to $33,200, the estate tax basic exclusion to $15,480,000, the annual gift exclusion to $20,000 and the Section 179 expensing limit to $2,640,000. Our advisors recommend revisiting year-end gifting and equipment purchase plans with these figures in mind.
Source: IRS (IR-2026-133)
All 6,576 nominated census tracts, including 2,594 rural tracts eligible for enhanced benefits, become Opportunity Zones on January 1, 2027 for ten years. Investors with capital gains should review the new map before committing funds.
Source: IRS (IR-2026-132)
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