Taxation Considerations 

Landowners who wish to preserve and protect their land from harmful alteration in the future may establish a relationship with a land trust. This might involve the donation of land or the registration of a conservation covenant to be held by a land trust such as the Central Okanagan Land Trust (COLT). The various strategies have a variety of tax consequences. The following is a brief outline only and the specific circumstances should be discussed with a professional tax advisor.

Donations of land 

If donation is being considered, the following steps are taken.

a. The land is appraised for its current fair market value.
b. The difference between the current value of the donated land and the original cost of the land may be considered a capital gain. If it is, then
    50% of the amount must be included as income in the year of donation.
c. When land is donated to a charitable organization such as COLT, a charitable receipt will be issued which can be used to offset up to 75% of
     the income in the first year with any unused portion carried forward for five years.
d. If the land is considered Ecologically Sensitive by Environment Canada (a branch of the Ministry of the Environment ), the entire value of the
    donation can be claimed ( rather than the 75% limit referred to in c. above).
e. Even when land is donated to a trust, arrangements can be made allowing the owners to continue living on the land until they no longer wish to.

Conservation Covenants 

These are agreements between the landowner and the organization holding the covenant that restrict the ways in which the land may used. COLT’s intention is to protect these lands from harmful development forever.

a. Similar to the situation with donation, the first step is to have the land  appraised.
b. Establishment of a covenant often reduces the appraised value of the land ( because it limits what can be done to the land ). The difference
    between the covenanted and noncovenanted values of the land is considered to be the value of the covenant.
c. As with a land donation, this covenant value may be considered a capital gain and be subject to tax. The land trust will issue a charitable receipt
    for the value of the covenant and this can be used to offset tax on capital gains. The offset can be carried forward for up to five years.
d. As the value of the covenanted land may be reduced compared to the uncovenanted value, there may be property tax benefits to the landowner.