Easement donation and Tax Court ruling

In 2017, Savannah Shoals, LLC, donated a conservation easement over a 103-acre property in Hart County, Georgia. On its tax return, it claimed a $23 million charitable contribution deduction under IRC § 170. This value was based on the assertion that the property’s “highest and best use” before the easement was as an aggregate quarry. The IRS rejected the deduction and assessed a 40% gross valuation misstatement penalty.

The taxpayer challenged the IRS’ determination in the U.S. Tax Court, but the court agreed with the IRS, finding that the proposed quarry was not the highest and best use of the property because it was not a viable use. The court concluded that the property’s value before the easement was $580,000, and its value after the easement was $100,000, resulting in a correct deduction of only $480,000.

To dig deeper, visit the original article on the Thomson Reuters blog.