U.S. Tax Court Denies Conservation Easement Deductions, Upholds Gross Valuation Penalties

The U.S. Tax Court, in a memorandum decision, held that taxpayers were not entitled to claimed charitable contribution deductions exceeding $12 million for conservation easements because the properties were substantially overvalued. Taxpayer, a limited liability company, claimed a $12,765,000 charitable contribution deduction for granting a conservation easement over 226 acres in the State, while individual taxpayers claimed a $12,715,000 deduction for an easement over 192 acres. Both deductions were premised on appraisals valuing the properties at over $50,000 per acre based on alleged granite mining potential. The IRS disallowed the deductions and imposed accuracy-related penalties under IRC section 6662. The ...