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Conservation Easements

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Conservation Easements

by Ravish » Tue Dec 07, 2010 12:45 pm
Came in as a question of the day for me. I got the correct answer using POE but am having a hard time dissecting the argument.

OA will be posted by days end today.


In many states landowners may make use of a conservation easement, a legal agreement that restricts the use of land. A landowner can donate an easement to a land trust, which amounts to a charitable donation equal to the difference between the market value of the land and its value under the easement restrictions. Normally, owners of unused farmland and other undeveloped property are often under market pressure to sell to developers, who can offer much more for it than could be made from renting the property. These owners should take advantage of conservation easements to prevent unwanted development.

Which of the following, if true, most seriously weakens the argument?
(A) Some land trusts are for-profit enterprises that buy and sell properties whose use is restricted.

(B) Land donated using an easement is usually located in areas with very low population density.

(C) Some landowners are able to split up their properties such that part of the land is donated to a trust and the rest continues to earn rents for the owner.

(D) Most property owners can make more money by renting their property than by donating an easement and taking the corresponding tax benefits.

(E) When land use is restricted, the value of surrounding unrestricted land rises.
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by rkanthilal » Tue Dec 07, 2010 3:27 pm
I'll go with D...

P1: In many states landowners may make use of a conservation easement, a legal agreement that restricts the use of land.
P2: A landowner can donate an easement to a land trust, which amounts to a charitable donation equal to the difference between the market value of the land and its value under the easement restrictions.
P3: Normally, owners of unused farmland and other undeveloped property are often under market pressure to sell to developers, who can offer much more for it than could be made from renting the property.
C1: These owners should take advantage of conservation easements to prevent unwanted development.

The passage basically states the following. Conservation easements are legal agreements that restrict the use of land. These easements help prevent unwanted development, however, by placing these easements (restrictions) on the land they reduce the land's value.

Normally, landowners of unused farmland and other undeveloped property are under market pressure to sell to developers. The developers can offer much more money for the land than what the landowner can make from renting the property.

If a landowner creates a conservation easement and donates it to a land trust, they are entitled to certain tax benefits. The tax benefits from donating an easement are equivalent to the tax benefits one would receive from making a charitable donation equal to the difference between the market value of the land and its value under the easement restrictions.

So according to this passage, a landowner with unproductive land has two options.
1) He can either sell the land to a developer.
or
2) He can create a conservation easement and reap the tax benefits.

The passage concludes that "these owners should take advantage of conservation easements to prevent unwanted development". The author is proposing that landowners pursue option (2).

Which of the following, if true, most seriously weakens the argument?

We need to weaken the argument. The conclusion assumes that donating an easement and getting the tax benefits is an attractive alternative to selling to a developer. Any answer that demonstrates that a landowner should not create a conservation easement will be correct.

(A) "Some land trusts are for-profit enterprises that buy and sell properties whose use is restricted." Incorrect. This doesn't change anything. The fact that certain land trusts are for-profit enterprises doesn't make any difference.

(B) "Land donated using an easement is usually located in areas with very low population density." Incorrect. This answer also does not weaken the argument. The argument is that landowner should create easements rather than sell to developers. Where the land is located is irrelevant.

(C) "Some landowners are able to split up their properties such that part of the land is donated to a trust and the rest continues to earn rents for the owner." Incorrect. In my opinion this answer actually strengthens the argument. This answer states that some landowners can section off their unproductive land from their productive land. This will allow the landowner to derive tax benefits from the unused land while keeping the productive land. A developer may not offer the option of only buying part of a parcel. In certain situations, this answer makes creating an easement a better option than selling to a developer.

(D) Most property owners can make more money by renting their property than by donating an easement and taking the corresponding tax benefits. Correct. The argument is that landowners should donate easements rather than sell to developers. This answer weakens the argument by demonstrating that in most situations creating the easement is actually worse than doing nothing at all. The tax benefits are less than what the landowner would make by renting the land.

The conclusion positions the easement as a viable alternative to selling to a developer. This answer weakens the argument by showing that, financially speaking, it is a much worse alternative.

(E) "When land use is restricted, the value of surrounding unrestricted land rises." Incorrect. This answer suggests when easements are created the value of surrounding unrestricted land rises. The value of the surrounding land has no effect on the conclusion.
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by im2crazyin » Tue Dec 07, 2010 11:24 pm
D it is.
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by Ravish » Wed Dec 08, 2010 6:23 pm
@rkanthilal

Thanks for the detailed explanation buddy. Makes a lot more sense now. I was having trouble figuring out which of 'selling to developers' and 'renting the property' was linked to conservation easements. Makes a lot more sense now.

OA is D
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by rkanthilal » Wed Dec 08, 2010 8:49 pm
You're welcome, Ravish.

I didn't particularly like this question. I tried to explain it without using any outside information, however, the question seems to require certain outside knowledge. It helps to be familiar with conservation easements, land trusts, and developers. It is essential to understand that charitable donations are tax deductible. The passage references charitable donations but it never connects donations to any kind of tax benefit.

How are you supposed to make sense of the argument if you do not know that donating easements results in some kind of financial benefit for the landowner? You can probably figure out the correct answer by POE but I think the passage should be more clear.

I'm sure this question is confusing for students outside the USA.
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