U.S. Tax Court Upholds Conservation Easement Deductions but Sustains Gross Overvaluation Penalties

The U.S. Tax Court held that Taxpayers’ conservation easement donations were valid charitable contributions but were grossly overvalued, sustaining the IRS’s valuation adjustments and gross overvaluation penalties. Taxpayers (two partnerships) purchased vacant, forested properties in the Atlanta area for $500,000 and $198,000, respectively, and then donated conservation easements on the properties, valued at nearly $30 million combined. The IRS audited the partnerships and issued notices of final partnership administrative adjustments, disallowing the claimed deductions and asserting gross overvaluation penalties. The Tax Court held that the partnerships were bona fide entities that made valid charitable contributions because they objectively transferred property ...