Sterling Family

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Chapter 61B
Bargain sale of conservation restriction (CR)
Reserving future building lots

When Mrs. Sterling and her three cousins inherited 64 acres of mostly wooded land in Western Massachusetts, she knew she wanted to see the land preserved in its natural state rather than sold for house lots. To make that wish a reality, she worked with her cousins to buy them out via a family mortgage, but with that added monthly cost, she was having trouble making ends meet. Her attorney recommended that she contact her local land trust, the Minnechaug Land Trust, which was very interested in seeing her land conserved.

First, the land trust advised her to enroll her land in Chapter 61B to reduce her property tax burden. Second, the land trust inventoried the land and determined that 50 acres were valuable for habitat conservation. The land trust proposed purchasing a conservation restriction (CR) on the 50 acres, which would keep the land in Mrs. Sterling’s ownership but eliminate the development potential of the land. The remaining 14 acres, containing most of the road frontage, remained untouched and available for future building lots.

Mrs. Sterling hired an appraiser to conduct a conservation appraisal to document the market value of the land both for development and conservation purposes. The difference in the values, and thus the CR price, was appraised at $165,000. The land trust applied to a state grant program for land conservation to help the trust pay the cost of the purchase of a CR. The land trust managed to raise $120,000 to purchase the CR. Mrs. Sterling agreed to sell the CR through a bargain sale at the $120,000 price. The difference—$45,000—was a charitable donation to the land trust, which helped offset Mrs. Sterling’s capital gains tax from the sale of the CR. Mrs. Sterling will continue to own all the land and manage it as she sees fit, knowing that the majority of the land will remain in its natural condition forever.