United States Tax Court

United States Tax Court

T.C. Memo. 2026-36

KIMBERLY ROAD FULTON 25, LLC, KIMBERLY ROAD

MANAGER, LLC, TAX MATTERS PARTNER,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

SOUTH FULTON PARKWAY 58, LLC, SOUTH FULTON 58

MANAGER, LLC, TAX MATTERS PARTNER,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket Nos. 17852-21, 23934-21. 1

Filed May 4, 2026.

__________

Anson H. Asbury, Robert B. Gardner III, Ethan J. Vernon, Scott C. St.

Lifer, Caitlin S. Colley, and Lauren H. White, for petitioners.

Andrea L. Medley, Yvette Nunez, Sheila R. Pattison, Roberta L.

Shumway, Dustin R. Webber, and Bethany E. Ortiz, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HOLMES, Judge: Jeffrey Grant’s grandfather taught him a

saying that has stuck with him all his life: “Sometimes, a fast nickel is

worth more than a slow dime.” A self-identified “land man,” Grant has

1 We consolidated these cases for trial, briefing, and opinion.

Served 05/04/26

2

[*2] made a career of buying vacant land in Georgia and quickly turning

it into enough “fast nickels” to make a good living.

These cases involve two parcels of vacant land near Atlanta,

bought by Grant and partnerships in which he held interests. They paid

$500,000 for one and $198,000 for the other. They turned these into

charitable deductions of conservation easements that they valued at

nearly $30 million combined.

The Commissioner says this was way too many fast nickels.

FINDINGS OF FACT

I.

The Properties

The conservation easements at issue here were placed on two

pieces of land in the Atlanta area: Kimberly Road and South Fulton.

A.

Kimberly Road

The Kimberly Road property is 25.4 acres divided between two

tracts in southwestern Atlanta. It’s approximately 10 miles west of

Atlanta’s downtown but was vacant during 2017, the year at issue. The

property contains mature oak-hickory-pine forest and is zoned RG-3 in

the City’s zoning classification, which the partnerships say is valuable

because it allows for 18 to 24 housing units per acre.

Grant had a lengthy history with this land. He first bought it in

2008 with a loan from a Georgia bank and put it in Kimberly Road, LLC.

He thought it could be developed because he saw water lines and

manholes on the property. This was another value purchase for Grant,

as he obtained a 70% loan-to-value construction loan on the property

from the Republic Bank of Georgia.

But then the Great Recession hit, the bank faltered, and the FDIC

took over the loan and sold it to another financial institution. The new

lender wanted the principal to be repaid immediately. That didn’t

happen, so Grant lost the property to foreclosure. A Grant-affiliated

entity, Golden Eagle Capital Investments, LLC, then reacquired the

property for all of $500,000 in 2016. Grant says the seller had

overlooked the property’s RG-3 zoning.

3

[*3]

B.

South Fulton

The South Fulton property consists of three tracts that total

roughly 130 acres in the Atlanta suburb of Union City. It’s located off

the South Fulton Parkway, which was built in 2009 to expand

development in the area, though this property didn’t have access to that

road in 2017. South Fulton was vacant land, like Kimberly Road. Like

Kimberly Road, it is covered by oak-hickory-pine forest.

Grant bought the South Fulton property in 2016 through one of

his entities, Southern Consulting Services, LLC, in a bundle with two

other properties in Alabama and South Carolina for $350,000. Grant

bought the out-of-state land sight unseen, but for him it was worth it

because the South Fulton property was zoned Town Center Mixed Use

by Union City. Grant found this valuable because it allows for a mix of

residential, commercial, and industrial uses. Shortly thereafter he

transferred the property to South Fulton Parkway 58, LLC.

II.

The Syndication

A.

Jeffrey Grant

Grant is a high school graduate who worked his way from

trucking to running a business moving pallets between the paper-supply

companies that dot his native Georgia. He sold that business and used

part of the proceeds to buy land in Henry County, Georgia, for $400 an

acre. Grant quickly flipped that parcel to an individual interested in its

timber for a 13% profit, and ever since then he’s made a living buying

properties cheap and selling at a profit.

And that’s just how Grant deployed his grandfather’s “Fast

Nickel” maxim. Teaming up with an area doctor and then his widow, 2

Grant received capital to buy undervalued properties that were

favorably zoned or for which he could obtain favorable rezoning. He’d

commission engineering plans for potential developments, hold the land,

and then sell it to developers. Grant typically doesn’t develop the land

himself, though he does do so occasionally.

2 This widow is Qin Meng, who was married to Grant’s former orthopedic

surgeon—the man who Grant says saved his right hand after a trucking accident.

Meng remained partners with Grant by way of her co-ownership (along with Southern

Consulting Services) of Golden Eagle Capital Investments, LLC.

4

[*4]

B.

Dan Carbonara

Whereas Grant learned how to transact real estate from the

“school of hard knocks,” Daniel Carbonara received his education from

such blue-chip institutions as Duke University, KPMG, and Credit

Suisse, and he holds a Series 7 license for securities transactions from

the Financial Industry Regulatory Authority. He formed Old Ivy

Capital, LLC, a smaller private equity firm, in Atlanta in 2011 as a

vehicle to obtain and syndicate low-income housing credits. Carbonara

owned Old Ivy in its entirety during 2017.

The credits Carbonara wanted to sell require land, and Jeffrey

Grant finds land. An Old Ivy client referred Carbonara to Grant in 2014.

Grant liked working with Carbonara because of his decisiveness.

C.

Putting the Deals Together

1.

Entity Formation

At this point Grant had already owned and lost the Kimberly

Road property, but Carbonara says he wasn’t aware of this history.

Within a couple years, however, Kimberly Road Fulton 25, LLC

(Kimberly Road) 3 was organized as a Georgia limited liability company.

Upon its inception, its members were NY HY Management, Inc., and an

investor named Qingjun Sun. Its manager was Golden Eagle Capital

Investments, LLC—the same entity that Grant later used to reacquire

the Kimberly Road property. 4

3 We’ll refer to the partnership in docket number 17852-21 as “Kimberly Road”

throughout. We’ll do the same for the “South Fulton” partnership in docket number

23934-21.

4 We’ll likewise use the partnerships’ names followed by “property” or “land”

throughout when referring to the subject properties in these cases.

5

[*5]

After the land was reacquired in late 2016, NY HY Management,

LLC, and Sun transferred the majority of their interests in Kimberly

Road to Kimberly Road Investments, LLC (Kimberly Road Investments)

and Kimberly Road Manager, LLC (Kimberly Road Manager). Kimberly

Road Manager was wholly owned by Carbonara by way of Old Ivy. Both

these new members were organized as Delaware limited liability

companies.

6

[*6] South Fulton was organized and acquired its property in much

the same way. It was formed as a Georgia limited liability company in

October 2016. It was originally owned by Fortune Tai Investments,

LLC, and Golden Eagle Capital Investments, LLC, with the latter also

serving as its manager.

These original owners then transferred the majority of their

interests to South Fulton Manager, LLC (South Fulton Manager)—

which was organized under the laws of Georgia—and Emerald

Acquisitions 2017, LLC (Emerald Acquisitions). South Fulton Manager

was in turn owned by Carbonara by way of Old Ivy. Grant’s Southern

Consulting Services, LLC, deeded the South Fulton property to South

Fulton in October 2016.

7

[*7]

2.

Finding Investors

With the legal structures in place, Carbonara next had to go about

finding investors for the land projects. One of these, Aaron Kowan, was

an attorney who specialized in syndications and who ran Emerald

Acquisitions as a private equity fund. Kowan and Emerald Acquisitions

had completed previous deals with both Carbonara and Grant.

Including Emerald Acquisitions on the South Fulton deal was a way for

that fund’s investors to get in on the potential tax benefits. As for the

Kimberly Road property, it acquired investors by way of Kimberly Road

Investments, which was owned by Kimberly Road Manager, NxGen

MDX, LLC, and Louis Joseph.

Carbonara engaged the Malik Law Group, LLC—with assistance

from Kowan’s former firm—to draft private-placement memoranda

(PPMs), 5 operating agreements, and membership-unit purchase

agreements for these investors for both projects. Carbonara and Kowan

found it a good practice to include in their PPMs information akin to

5 Under a safe harbor of section 4(a) of the Securities Act of 1933 and its

regulations, some entities and investment funds can offer securities to accredited

investors (commonly through PPMs) without jumping through many of the SEC’s

registration hoops. 15 U.S.C. § 77d; 17 C.F.R. § 230.506 (2021).

8

[*8] what one would find in a prospectus, and they did so with both the

Kimberly Road and South Fulton partnerships. These disclosures

included the Commissioner’s inclusion of syndicated conservation

easements as “listed transactions.” They also forecasted that the

partnerships would own investments that would promote

environmental responsibility while generating a targeted return of

145% of each investor’s investment.

Carbonara also engaged the law firm Baker, Donelson, Bearman,

Caldwell & Berkowitz, PC, to advise the partnerships about the tax

effects of the expected conservation easement transactions. Baker

Donelson looked at the LLCs’ operating agreements and the

membership-interest purchasing agreement and drafted opinion letters

on the transactions. These letters blessed the transactions, but they did

not opine on the proper values of the subject properties to be reported

on the partnerships’ returns.

There was one final bit of costume design for this ensemble.

Carbonara drafted for members of Kimberly Road both a development

plan and a conservation-easement plan for the property.

The

development plan envisioned a 600-unit senior and assisted-living

facility (ALF) with an initial capital contribution of $2.3 million. Adam

Price, a professional engineer who is the managing partner of the

Atlanta-based engineering firm Falcon Design Consultants, drafted a

concept plan for this potential development and a boundary survey of

the Kimberly Road property.

It seems highly implausible that the partnership would vote for

these plans for development.

Grant had previously considered

developing the property but, like everyone who had attempted to do so,

he lost both fast nickels and slow dimes in the process. Were this a goodfaith consideration of trying, yet again, to develop the land, it still lacked

key elements; for example, there was no grading plan for the property.

The resulting proposal was for a 450-unit ALF apparently built on top

of a rugged, 50-foot cliff in a state where the largest number of units in

an ALF is 214. That the partnership would have voted for this plan

seems even more unlikely given that one investor, Louis Joseph,

testified that he was altogether unfamiliar with the development plan.

The timeline also shows that Kimberly Road’s baseline documentation

report was prepared months before the partners ever voted for the

conservation-easement plan.

9

[*9] There is no surprise, then, that the partners voted for the

conservation-easement plan on December 27, 2017. The same process

took place with the South Fulton investors. Its development plan

included a combination of mixed-use, multifamily-housing, and

commercial/retail/office development in each of that property’s three

tracts, for an initial investment of a little over $2 million. These

investors also voted for a conservation-easement option on December 27,

2017.

3.

Granting the Easements

The easements restricted how the partnerships could use the

properties by limiting development on them. They didn’t contain any

clauses granting reversionary interests in the properties to the

partnerships. They did reserve certain rights, though. One of these was

to permit logging of up to half of the trees on the properties every five

years. South Fulton’s also allowed its owners to use the property for

agriculture, forestry, and recreational activities such as hunting and

horseback riding. The Commissioner says these reserved rights mean

the easements weren’t granted exclusively for conservation purposes

within the meaning of section 170(h)(1)(C) and (5)(A). 6

The donation of a conservation easement under section 170 needs

a donee. The partnerships chose Southern Conservation Trust, Inc.

(SCT), which the parties agree was a qualified charitable organization

under section 501(c)(3) during the year at issue. The agreement with

SCT required that SCT be allowed on the properties to monitor them so

it could confirm that the terms of the easements were being adhered to.

SCT prepared land-management plans for both properties that

described how the organization would monitor them and recommended

corrective actions—such as removing trash—to preserve them. The

partnerships put cash aside to hire a sort of on-again-off-again warden,

and he posted “No Trespassing” signs and removed trash that had

accumulated on the properties.

SCT also played a role in documenting the easements. Section

170’s regulations require “baseline documentation reports” (known as

BDRs) that describe the property’s conservation value so that they meet

6 Unless we state otherwise, all statutory references are to the Internal

Revenue Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, and all

regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in

effect at all relevant times.

10

[*10] the Code’s “perpetuity” requirement. I.R.C. § 170(h)(5)(A); Treas.

Reg. § 1.170A-14(g)(5).

SCT engaged two different third-party

conservation consultants to prepare Kimberly Road’s and South Fulton’s

BDRs.

4.

Appraising and More Papering

More papering would be needed to attempt to document the deal.

The partnerships hired Thomas Spears, an appraiser with Global

Valuation and Consulting, Inc., to appraise both properties. Grant

provided Spears with the deeds of easement, the Falcon Design concept

plans, and the boundary surveys to inform his appraisals. Spears

appraised the Kimberly Road property at $9.9 million, and the South

Fulton property at $16.3 million, before the easements were granted.

The partnerships’ operating agreements and PPMs disclosed

administrative and management fees to Grant and Carbonara for

setting up the transactions. After the members of the partnerships

voted for the conservation options in December 2017, Carbonara worked

with the investors and their financial advisors to close the deal by the

end of that year. This then led to the circulation of various forms to

document the investors’ respective tax deductions.

III.

Tax Return Preparation and Reporting

Both Kimberly Road and South Fulton are partnerships for tax

purposes and filed partnership returns. Carbonara, through Old Ivy,

hired Carr, Riggs, & Ingram, a CPA firm, to prepare the partnerships’

returns. They included with their Forms 1065, U.S. Return of

Partnership Income, the disclosure statements that the Commissioner

requires for certain reportable transactions such as syndicated

conservation easements.

Obtaining a deduction for a donation of a partial interest in real

property under section 170(h) requires filing a qualified appraisal of the

donated property with a return. This is done by attaching the appraisal

signed by an appraiser, with a Form 8283, Noncash Charitable

Contributions. Treas. Reg. § 1.170A-16.

Spears signed the appraisal portion of the returns, Form 8283,

and on them stated that Kimberly Road’s basis in the contributed

property was about $500,000 and that he appraised it at about $9.9

million. He stated that South Fulton’s basis in its property was

$630,000 and that he appraised it at $15.9 million. The partners

11

[*11] attached the Kimberly Road and South Fulton appraisals—the

latter of which was also signed by Lori Coffey—to their returns as

required by Treasury Regulation § 1.170A-16.

The partners hired Tammy Duke of RE Appraisal Group, Inc., to

review Spears’s appraisals in what appears to be an act of due diligence.

Duke concluded that Spears’s analyses, opinions, and conclusions in his

appraisal reports were reasonable. Her review reports weren’t attached

to the partnerships’ returns, though, and she didn’t sign their Forms

8283.

Kate Pace Quattlebaum did sign the partnerships’ Forms 8283.

She had recently started as the director of SCT when the partnerships

donated the easements to that nonprofit. In addition to the easement

contributions, Kimberly Road claimed a deduction for a cash

contribution of $38,766 and South Fulton claimed one for $38,500. The

partnerships attached to their returns letters from SCT acknowledging

receipt of these cash and noncash donations.

IV.

The Commissioner’s Response

As we noted above, the partnerships included Forms 8886,

Reportable Transaction Disclosure Statement, with their 2017 tax

returns. They did so because the Commissioner by this point had

promulgated I.R.S. Notice 2017-10, 2017-4 I.R.B. 544, which named

syndicated conservation easement transactions as “listed transactions”

under sections 6111 and 6112, and Treasury Regulation § 1.6011-4. 7

He audited Kimberly Road and South Fulton under the rules of

TEFRA, which the parties agree govern these cases. 8 The Commissioner

7 We have since set aside Notice 2017-10 as having been improperly issued by

the Commissioner in violation of the Administrative Procedure Act. Green Valley Invs.,

LLC v. Commissioner, 159 T.C. 80 (2022). Penalties under section 6662A are thus

inapplicable here. We do note that the Commissioner has preserved in his briefs his

argument that we were wrong in Green Valley.

8 Before its repeal, see Bipartisan Budget Act of 2015,

Pub. L. No. 114-74,

§ 1101(a), 129 Stat. 584, 625, part of the Tax Equity and Fiscal Responsibility Act of

1982 (TEFRA), Pub. L. No. 97-248, §§ 401–407, 96 Stat. 324, 648–71, governed the tax

treatment and audit procedures for many partnerships. TEFRA partnerships were

subject to special tax and audit rules. See I.R.C. §§ 6221–6234. TEFRA required the

uniform treatment of all “partnership item[s]”—a term defined by section 6231(a)(3)—

and its general goal was to have a single point of adjustment for the IRS rather than

having it make separate partnership-item adjustments on each partner’s individual

return. See H.R. Rep. No. 97-760, at 599–601 (1982) (Conf. Rep.), as reprinted in 19822 C.B. 600, 662–63. If the IRS decided to adjust any partnership items on a partnership

12

[*12] issued a Notice of Final Partnership Administrative Adjustment

(FPAA) in May 2021 for Kimberly Road and in July for South Fulton.

The Commissioner made the following adjustments:

Conservation

Contribution

Deduction

Claimed

Conservation

Contribution

Deduction

Allowed

Cash

Charitable

Contribution

Deduction

Claimed

Cash

Charitable

Contribution

Deduction

Allowed

Kimberly

Road

$9,866,000

-0-

$38,766

$38,766

South

Fulton

15,871,000

-0-

38,500

38,500

Partnership

He also asserted penalties for gross overvaluation under section

6662(h) against the partnerships, or, in the alternative, penalties for

negligence or intentional disregard of tax rules or regulations under

section 6662(b)(1), for substantial understatements of income tax under

section 6662(b)(2), and for substantial valuation misstatements under

section 6662(b)(3). 9

The TMPs for Kimberly Road and South Fulton timely filed

petitions for readjustments of partnership items. We tried the cases in

Atlanta. Appellate venue presumptively lies in the Eleventh Circuit.

See I.R.C. § 7482(b)(1)(A).

OPINION

I.

The Issues

The parties settled all but five issues:

return, it had to notify the individual partners of the adjustments by issuing an FPAA.

I.R.C. § 6223(a).

Under TEFRA, a partnership designated one of its partners as the tax matters

partner (TMP) to handle any issues with the Commissioner. I.R.C. § 6231(a)(7).

Affiliated LLCs, of which Carbonara is the managing member, are the TMPs in these

cases.

9 He also asserted penalties under section 6662A which, we reiterate, Green

Valley, 159 T.C. 80, prohibits us from upholding.

13

[*13]

II.

•

whether Kimberly Road and South Fulton were in fact

partnerships and made charitable contributions;

•

whether Kimberly Road and South Fulton each failed to attach

qualified appraisals to their returns;

•

whether the donated easements had qualified conservation

purposes;

•

what the values of the donated easements were; and

•

whether any penalties apply.

Whether the Purported Partnerships Were Bona Fide and Made

Charitable Contributions

At the threshold we need to examine whether to keep treating

these cases as partnership-level proceedings, and whether the

deductions should be entirely disallowed for lack of donative intent. The

Commissioner first says that the partnerships and their partners were

motivated only by tax benefits, that seeking such benefits isn’t a

legitimate business purpose, and that Kimberly Road and South Fulton

lacked any intent to share in profits and losses. This means, he says,

the partnerships aren’t bona fide and should be disregarded.

The Commissioner also says that Kimberly Road’s and South

Fulton’s hunger for tax benefits means they lacked donative intent when

they contributed the conservation easements. Therefore, he says, these

contributions weren’t “charitable” as described in section 170(a) and (c)

and they therefore shouldn’t be allowed any deductions.

Does the alleged absence of any business purpose or donative

intent matter? Kimberly Road and South Fulton first argue that it

doesn’t matter if their purported partners lacked a business purpose

because this dispute involves deductions for donations and not for

business expenses. We agree. The Commissioner relies on Historic

Boardwalk Hall, LLC v. Commissioner, 694 F.3d 425, 448–49 (3d Cir.

2012), rev’g and remanding 136 T.C. 1 (2011), which did hold that a

partnership doesn’t exist if the partners share neither meaningful

downside risk nor upside potential in their activity. Deductions for

donating property interests to a nonprofit organization are, however,

specifically authorized by the Code and, like the tax credits at issue in

14

[*14] Historic Boardwalk, do not require an investment or business

purpose. Id. at 429, 452. And whether the purported partners were

subjectively motivated by the tax benefits of a contribution of

conservation easements is immaterial to the objective fact that they

donated conservation easements on the properties to SCT. See Mill Rd.

36 Henry, LLC v. Commissioner, T.C. Memo. 2023-129, at *28.

Contributing the easements had an objective economic effect that

limited the partnerships’ rights as to the properties. See Grodt & McKay

Realty, Inc. v. Commissioner, 77 T.C. 1221, 1236 (1981) (stating that a

transaction’s economic substance governs its bona fides); RERI

Holdings I, LLC v. Commissioner, 107 T.C.M. (CCH) 1488, 1493 (2014).

The partnerships did, in fact, put up the funds to buy interests in the

properties and then donate easements on those properties to SCT. See

RERI Holdings, 107 T.C.M. (CCH) at 1493.

The presence or absence of a subjective charitable purpose on the

part of a donor is likewise immaterial. In tax law, gifts are either given

or they aren’t—a donor’s subjective intent in giving a gift is irrelevant

absent a quid pro quo. Hernandez v. Commissioner, 490 U.S. 680, 701–

02 (1989); Mill Rd., T.C. Memo. 2023-129, at *28. Subjective intent can

be relevant in asking whether a contribution was given in expectation

of some certain specific and direct economic benefit from the recipient of

the contribution. Stubbs v. United States, 428 F.2d 885, 887 (9th Cir.

1970). But the sine qua non of a charitable contribution is the act of

transferring property without adequate consideration in return. United

States v. Am. Bar Endowment, 477 U.S. 105, 118 (1986).

The Commissioner stipulated that SCT is a charitable

organization under the Code. Did the partnerships’ granting of

conservation easements and receipt of tax benefits rise to, as the

Commissioner argues, a quid pro quo? We think not. They granted

conservation easements to SCT and received nothing in return from that

organization. Compare Hernandez v. Commissioner, 490 U.S. at 690–91

(payments for auditing and training sessions were quid pro quo), with

Weitz v. Commissioner, 56 T.C.M. (CCH) 1422, 1426 (1989) (taxpayers

lacked expectation of consideration from donee).

Kimberly Road and South Fulton may have expected their

contributions to give them substantial tax benefits, but SCT itself was

not their source. See Am. Bar Endowment, 477 U.S. at 116. Only

Congress was, by enacting section 170(h). We find that this makes these

benefits merely incidental to the donation of the easements to SCT. See

Singer Co. v. United States, 449 F.2d 413, 423 (Ct. Cl. 1971).

15

[*15] III.

Qualified Appraisal

For donations of noncash charitable contributions of more than

$5,000, the regulation requires a “qualified appraisal.” Treas. Reg.

§ 1.170A-13(c)(2)(i)(A); see I.R.C. § 170(f)(11)(C). For an appraisal to be

qualified, it must contain a description of the property in sufficient detail

and of how it was acquired; the name, address, and identifying number

of the appraiser; and his signature on an appraisal summary—all

attached to a Form 8283. Treas. Reg. § 1.170A-13(c)(3), (4)(ii).

That leads to the Commissioner’s next argument—that the

partnerships failed to support their deductions with “qualified

appraisals” because they were done by appraisers who themselves

should be disqualified. And the reason they should be disqualified is

that Carbonara and Grant themselves should have realized that the

appraised values were much too high. See Treas. Reg. § 1.170A13(c)(5)(ii); see also Mill Rd., T.C. Memo. 2023-129, at *42.

These are procedural requirements distinct from whether an

appraisal’s valuation was correct or overstated—even if it was grossly

overstated. See Kaufman v. Commissioner, 107 T.C.M. (CCH) 1262,

1278 (2014), aff’d, 784 F.3d 56 (1st Cir. 2015). We judge these

requirements on whether the partnerships substantially complied with

them. See Bond v. Commissioner, 100 T.C. 32, 41 (1993). And we’ll look

at the two appraisers that the partnerships say were qualified.

A.

Thomas Spears

The Commissioner says Spears’s appraisals run afoul of Treasury

Regulation § 1.170A-13(c)(5)(ii) because Carbonara knew or should have

known that Spears’s valuations were falsely overstated due to his and

Grant’s knowledge of vacant land prices in Fulton County. He thinks

that Carbonara and Grant fed Spears their preferred uses and values of

the subject properties.

Grant, Spears, and Carbonara may have discussed the properties,

and even discussed them extensively, before Spears made

determinations about their values. Such discussions would have made

sense in light of Spears’s having been unfamiliar in 2017 with

appraising conservation easements. After hearing his testimony and

reviewing his appraisals, however, we find that a reasonable person

would not expect Spears’s objectivity to be fatally compromised and that

he did not act solely as an advocate for the partnerships’ views of the

values of the properties. See Kaufman, 107 T.C.M. (CCH) at 1272.

16

[*16] That’s enough for Spears’s Kimberly Road appraisal, because the

Commissioner doesn’t point to significant procedural defects, and we

therefore find that appraisal to be qualified. The Commissioner does

have an additional argument for why the South Fulton appraisal was

not qualified—a missing signature from Lori Coffey, an appraiser who

worked with Spears on the appraisal. Coffey did fail to sign South

Fulton’s Form 8283. Whether this is fatal turns on whether South

Fulton otherwise substantially complied with Treasury Regulation

§ 1.170A-13(c).

A taxpayer substantially complies with the regulatory

requirements if he provides sufficient information to permit the

Commissioner to evaluate his reported contribution.

Smith v.

Commissioner, 94 T.C.M. (CCH) 574, 586 (2007), aff’d, 364 F. App’x 317

(9th Cir. 2009). Here, Coffey signed both the South Fulton appraisal

and a certification of appraisal as required by the regulation. It turns

out that this certification has the same language found on the portion of

the Form 8283 that the Commissioner says Coffey was required to sign.

This is not a scenario where the Form 8283 was incomplete or

devoid of the property’s description or appraisal information. See id.

The partnerships didn’t make one of the “common errors” of an appraisal

by failing to meet an essential requirement of the Code, such as failing

to get an appraisal at all, failing to fill out section B of the form, having

someone without expertise in appraisals complete the appraisal, or

having insufficient information in it. Mohamed v. Commissioner, 103

T.C.M. (CCH) 1814, 1819 (2012).

We find that South Fulton

substantially complied with Treasury Regulation § 1.170A-13(c).

We therefore also find that Spears’s South Fulton appraisal was

qualified under Treasury Regulation § 1.170A-13(c)(5). We will still

weigh the information he received, his adherence to appraisal

standards, and his assumptions in appraising the properties in

determining whether the valuations that he arrived at were correct.

B.

Tammy Duke

The Commissioner also says that Duke, due to her “professional

contributions” of reviewing Spears’s appraisals, was required to sign the

reports and the Forms 8283 for the partnerships. According to Spears

and some emails, Duke suggested a few corrections to Spears’s

appraisals, including pointing out updated zoning for one of the

properties and proposing alternative comparable sales to use.

17

[*17] But we didn’t hear this directly from Duke because neither party

called her to testify even though the Commissioner identified her as a

potential witness in his pretrial memorandum. The partnerships say

this is a new issue first raised on brief that should be precluded from

consideration. See Smalley v. Commissioner, 116 T.C. 450, 457 n.4

(2001).

Is this a new issue as the partnerships say? Or merely a new

argument about whether the partnerships attached qualified appraisals

under Treasury Regulation § 1.170A-13(c)(2)(i)(A)? We find it’s the

former. New issues require new or different factfinding, but new

arguments don’t. Sells v. Commissioner, 121 T.C.M. (CCH) 1072, 1075

(2021). To know the full extent of Duke’s involvement would require

additional factfinding. Even if we were to consider this issue, though,

we’d be inclined to find that Duke’s role—based on the information we

do have—was so minor as not to require her to sign the appraisals nor

the Forms 8283.

IV.

Qualified Conservation Purpose

A.

Background

Donations of partial interests in property are generally ineligible

for deductions under the Code. I.R.C. § 170(f)(3)(A). But there’s an

important exception for qualified conservation contributions. I.R.C.

§ 170(f)(3)(B)(iii). Section 170(h)(1) specifies that such a contribution

must be (1) of a qualified real-property interest, (2) to a qualified

organization, and (3) exclusively for conservation purposes. See also

Atkinson v. Commissioner, 110 T.C.M. (CCH) 550, 560 (2015).

Qualified real-property interests under section 170(h) can include

property with restrictions—like easements—on the use of the property

if they are made in perpetuity and otherwise meet the requirements of

section 170(h)(3). See I.R.C. § 170(h)(2); Mill Rd., T.C. Memo. 2023-129,

at *27.

The parties stipulated that SCT is a qualified organization under

section 170(h)(3) but didn’t stipulate that the easements meet the

granted-in-perpetuity requirement. We’ll begin, however, with the

thorny issue under section 170 of whether Kimberly Road’s and South

Fulton’s contributions were made exclusively for conservation purposes.

See I.R.C. § 170(h)(1)(C).

18

[*18] B.

Possible Conservation Purposes

Section 170 lists various conservation purposes:

•

the preservation of land for outdoor recreation or the education of

the general public;

•

the preservation of a relatively natural habitat of fish, wildlife, or

plants, or of a similar ecosystem;

•

the protection of open space that will yield a significant public

benefit if it’s for (1) the scenic enjoyment of the general public or

(2) pursuant to a clearly delineated federal, state, or local

governmental conservation policy; or

•

the preservation of a historically important land area or a

certified historic structure.

I.R.C. § 170(h)(4)(A).

Any one of these purposes is good enough if the donation is

exclusively for conservation purposes. See Glass v. Commissioner, 124

T.C. 258, 280 (2005), aff’d, 471 F.3d 698 (6th Cir. 2006). The parties

here contest whether Kimberly Road and South Fulton qualify under

the second and third purposes. We look to the deeds to decide if they

did. Murphy v. Commissioner, T.C. Memo. 2023-72, at *42–43.

C.

Habitat Protection

1.

General Principles

One conservation purpose is “the protection of a relatively natural

habitat of fish, wildlife, or plants, or similar ecosystem.” I.R.C.

§ 170(h)(4)(A)(ii). The regulations more specifically state that the

donation must protect a significant relatively natural habitat in which

a fish, wildlife, or plant community, or a similar ecosystem, normally

lives. Treas. Reg. § 1.170A-14(d)(3)(i).

The parties spar about the key terms “relatively,” “habitat,” and

“significant” in the Code and regulation. Let’s start with the least

abstract of the three. We’ve defined a “habitat” in this context to mean

an “area or environment where an organism or ecological community

normally lives or occurs,” as well as “the place where a person or thing

19

[*19] is most likely to be found.” Glass, 124 T.C. at 281–82 (quoting

American Heritage Dictionary of the English Language (4th ed. 2000)).

So that’s a habitat. What makes one “significant”? 10 We know

that if a habitat is a home for a rare, endangered, or threatened species

it is by its very nature significant. Champions Retreat Golf Founders,

LLC v. Commissioner, 959 F.3d at 1036. The regulations offer some

additional guidance:

Significant habitats and ecosystems include, but are not

limited to, habitats for rare, endangered, or threatened

species of animal, fish, or plants; . . . and natural areas

which are included in, or which contribute to, the ecological

viability of a local, state, or national park, nature preserve,

wildlife refuge, wilderness area, or other similar

conservation area.

Treas. Reg. § 1.170A-14(d)(3)(ii).

The last questions in this part of the conservation catechism are:

What does it mean to be a “relatively” significant habitat? How natural

does the habitat need to be? Is one rare, endangered, or threatened

species inhabiting the property enough? And to what level and

geographic footprint of rarity is sufficient? See Loper Bright Enters., 144

S. Ct. at 2296 (Kagan, J., dissenting) (“What makes one population

segment ‘distinct’ from another? Must the Service treat the Washington

State population of western gray squirrels as ‘distinct’ because it is

geographically separated from other western gray squirrels? Or can the

10 The partnerships say Treasury Regulation § 1.170A-14(d)(3)(ii) exceeds the

statutory text by eliminating the word “relatively” from the description of natural

habitat and replacing it with “significant.” It turns out not to matter here, but this

could be problematic under our duty to give effect to every clause and word of a statute

while no longer deferring to an agency’s interpretation of a perceived statutory

ambiguity. Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244, 2273 (2024), overruling

Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984); United States

v. Menasche, 348 U.S. 528, 538–39 (1955).

We don’t need to reach this issue, though. We agree with and are bound by the

Eleventh Circuit in interpreting Treasury Regulation § 1.170A-14(d)(3)(ii)’s use of

“significant” as simply being synonymous with “non-trivial” and thus not construe it

to mean more than the Code supports. Champions Retreat Golf Founders, LLC v.

Commissioner, 959 F.3d 1033, 1036 (11th Cir. 2020), vacating and remanding T.C.

Memo. 2018-146.

20

[*20] Service take into account that the genetic makeup of the

Washington population does not differ markedly from the rest?”).

It’s all relative. The regulation permits some of the property to

be altered to some extent by human activity so long as wildlife continues

to exist in the property in a relatively natural state. Treas. Reg.

§ 1.170A-14(d)(3)(i).

And the presence of rare, endangered, or

threatened species and their level of rarity is a fact-specific inquiry.

Compare Atkinson, 110 T.C.M. (CCH) at 558 (rare doesn’t necessarily

mean globally imperiled), with Butler v. Commissioner, 103 T.C.M.

(CCH) 1359, 1364 (2012) (one rare, endangered, or threatened species is

enough).

The Eleventh Circuit has described how to cobble these provisions

together to decide whether an easement was donated for the protection

of a relatively natural habitat. In Champions Retreat, the donor placed

a conservation easement on land that included a golf course. Champions

Retreat Golf Founders, LLC v. Commissioner, 959 F.3d at 1034. Despite

the presence of development and the land’s not being readily accessible

to the public, the taxpayer’s experts still identified species of rare birds

and plants as well as a regionally declining squirrel species on the

property. Id. The Eleventh Circuit held that the Code requires only a

relatively natural habitat or similar ecosystem—not that the land itself

be relatively natural. Id. at 1037; see also Glass, 124 T.C. at 282

(easements protected environment that was habitat of a rare or

endangered species).

We find no reason to depart from the Eleventh Circuit’s flexible

reading of “rare,” “endangered,” and “threatened” in the Code to

distinguish between species that “reasonably warrant protection . . .

from commonly occurring species for which the loss of habitat is not of

significant concern.” Champions Retreat Golf Founders, LLC v.

Commissioner, 959 F.3d at 1036. We’ll use this approach in determining

whether the Kimberly Road and South Fulton easements preserved a

relatively natural habitat of fish, wildlife, or plants, or of a similar

ecosystem under section 170(h)(4)(A)(ii).

2.

Kimberly Road

The Kimberly Road BDR identified the high-priority habitat of

mature oak-hickory-pine forest on the property and concluded it was a

relatively natural habitat. It noted a number of migratory bird species

on the property but didn’t identify any rare species. It also noted that

21

[*21] the forest provided habitat for more common species such as

raccoons, armadillos, squirrels, and box turtles, and that the protection

of a mature hardwood forest in a large metropolitan area like Atlanta

provides important habitat for migratory birds.

The partnerships also hired Stephen Echols and Christopher

Wilson to survey and draft assessments of the wildlife on the properties.

Wilson is a former staff biologist at the North American Land Trust and

now specializes in taking wildlife inventories. We recognized him as an

expert in wildlife biology and conservation. Echols has worked for the

North American Land Trust as an ecologist. We recognized him as an

expert in botany, ecology, and conservation.

Echols and Wilson identified four rare and threatened species on

the property. These are the downy arrowwood, which is a shrub that

Georgia has identified as a critically imperiled species; the brownheaded nuthatch, a small songbird listed by the Atlantic Coast Joint

Venture (ACJV) as a high-priority species; the Carolina chickadee,

another small bird that the ACJV recognized as having moderate

priority; 11 and the tricolored bat, which is threatened and has been

proposed for listing under the Endangered Species Act. Echols also

spotted the pink ladyslipper, an orchid that Georgia identifies as an

“unusual species.”

The Commissioner’s expert, conservation consultant Dr. Reed

Noss, 12 credibly said that he trusted Wilson’s and Echols’s

identifications in their wildlife surveys. We do as well. These are all

examples of rare, endangered, or threatened species, and their presence

on the property speaks to its being a significant habitat. See Champions

Retreat Golf Founders, LLC v. Commissioner, 959 F.3d at 1037.

But the Commissioner says that the Kimberly Road property isn’t

a high-quality example of relatively natural habitat because it is too

small, the oak-hickory-pine forest takes up less than half the property,

and the forest has been degraded.

We do not think that an oak-hickory-pine forest, a high-priority

habitat as identified by the state of Georgia, located on more than 40%

of this 25-acre property, is insufficiently large. The Code doesn’t require

a minimum size for a conservation easement. Glass v. Commissioner,

11 Both birds were also present on the property discussed in Champions Retreat

Golf Founders, LLC v. Commissioner, 959 F.3d at 1038.

12 We recognized Dr. Noss as an expert in conservation, biology, and ecology.

22

[*22] 471 F.3d at 711. And the Code doesn’t require that a species

inhabit the entire property. If it did, that might cut against the

property’s being a relatively natural habitat. See Champions Retreat

Golf Founders, LLC v. Commissioner, 959 F.3d at 1039 (“one might

reasonably doubt that land consisting entirely of knotweed would

provide a relatively natural habitat or would support the many bird

species present on the land”).

This is even more so the case for the Kimberly Road property,

because it is in an urban county. We agree with the partnerships that

the conservation purpose of section 170(h) is especially important in an

urban area when the alternative is the continued decline and human

impact on natural areas in areas surrounding the property. See

Champions Retreat Golf Founders, LLC v. Commissioner, 959 F.3d at

1039.

The Commissioner does argue that the land-management plans

weren’t sufficient to maintain the properties’ conservation values

because they lacked a proper controlled burn plan and the accumulation

of trash, car tires, and an old car chassis on the property reduced the

ecological viability of the site.

While we don’t dispute Dr. Noss’s testimony that toxic chemicals

from the tires could leach into and degrade the property, the fact

remains that Dr. Noss observed oak-hickory-pine forest that covered

much of the property without major human disturbance. And he

admitted that a controlled burn plan might not even be legal in a large,

populated city like Atlanta. We therefore find the Commissioner’s

argument here unavailing and also find that the Kimberly Road

property has the conservation purpose of a relatively natural habitat

under section 170(h)(4)(A)(ii).

3.

South Fulton

The South Fulton BDR also identified a regrown oak-hickory-pine

forest, as well as streams and wetlands already spotted by the U.S. Fish

and Wildlife Service National Wetland Inventory. It noted no manmade

features other than some trails on the site.

Echols and Wilson assessed the wildlife on the South Fulton

property. They found it a habitat for the tricolored bat. They also found

four bird species that the ACJV numbers among its priorities, including

the brown-headed nuthatch and the Carolina chickadee, as well as

23

[*23] nesting for the four-toed salamander—a lungless amphibian

which the state identifies as vulnerable.

They spotted as well the bay starvine, a shrub that Georgia

classifies as threatened. The Commissioner argues that the starvine

should be considered only rare and not threatened or endangered. 13 He

also says that South Fulton doesn’t adequately serve as a habitat for it

because it is too narrow and thus susceptible to invasive species and

“edge effects.”

We’ve held that the lack of a proper “edge” in a donated

conservation easement property can cause us to find that a property

doesn’t provide a significant natural habitat for plants and wildlife.

Atkinson, 110 T.C.M. (CCH) at 561. But the easement placed on the

subject property in Atkinson was located on a residential development,

not vacant land as is the case here. Id. at 551. And the presence and

abundance of the aforementioned species on the 100-plus acres of the

vacant South Fulton property lead us to find that any potential edge

effects don’t significantly affect the ability of the easement on the South

Fulton property to protect a relatively significant natural habitat.

The Commissioner also argues that South Fulton’s BDR is

insufficient. The South Fulton BDR is laconic compared to the Kimberly

Road BDR, which included a more detailed description of species

inhabiting the property. We find no reason to doubt Dr. Noss’s

statement that it was the worst BDR he had ever seen. But it did

include, as the regulation suggests, a boundary survey, a map, photos of

the property, its title and development histories, vantage points in

which to view the property, descriptions of the hardwood forest, and a

certification of accuracy.

We find that these inclusions meet Treasury Regulation

§ 1.170A-14(g)(5)(i)’s documentation requirement. We therefore find

that the South Fulton property also meets the conservation purpose of

a relatively natural habitat under section 170(h)(4)(A)(ii).

4.

Increased Viability of Adjoining Habitat

Another way in which a property can satisfy the regulation’s

“significant” requirement is by increasing or contributing to the

13 Why this distinction is relevant is beyond us. The regulation states that the

habitat or ecosystem can be but isn’t limited to a home for rare, threatened, or

endangered species. Treas. Reg. § 1.170A-14(d)(3)(ii).

24

[*24] ecological viability of a state, local, or national park, a wildlife

refuge, or a similar conservation area. Treas. Reg. § 1.170A-14(d)(3)(ii).

The partnerships argue that the Kimberly Road property satisfies this

requirement because it contributes to an adjoining conservation

easement.

Just north of the Kimberly Road property sits another

conservation easement owned by Kim Road, LLC. Kim Road, LLC,

granted a conservation easement on 48 acres of land to the Atlantic

Coast Conservatory in 2013. It shares the same oak-hickory-pine forest

as the Kimberly Road property. Echols testified that the northern edge

of the Kimberly Road conservation easement contributes to Kim Road,

LLC’s larger and adjoining conservation easement’s viability.

The Commissioner nevertheless says the combined size of these

two properties is too small to meet this regulatory requirement. We

disagree. Again, the conservation purpose of section 170(h) can be

enhanced when the property in question is in an urban area and would

otherwise be at risk of continued human impact and development. See

Champions Retreat Golf Founders, LLC v. Commissioner, 959 F.3d at

1039; Mill Rd., T.C. Memo. 2023-129, at *19 (“But in a suburban setting,

an easement covering 33 acres is hardly negligible”).

D.

Open Space Protection

1.

General Principles

The other conservation purpose at issue here is whether the

subject properties preserve open space that will yield a significant public

benefit. See I.R.C. § 170(h)(4)(A); Treas. Reg. § 1.170A-14(d)(4). This

purpose is accomplished if open space allows for the scenic enjoyment of

the general public or is pursuant to a clearly delineated federal, state,

or local governmental conservation policy.

Treas. Reg.

§ 1.170A-14(d)(4).

A good example of protecting open space is preserving the land in

its “natural state.” See Turner v. Commissioner, 126 T.C. 299, 313

(2006). But that may not mean much if the property is not held for the

scenic enjoyment of the general public or pursuant to a government

policy. See Atkinson, 110 T.C.M. (CCH) at 562 (easement areas confined

in gated golf community not visible from public highways or waterways).

The Eleventh Circuit reminds us that scenic enjoyment is relative

and context specific. Recall that in Champions Retreat the subject

25

[*25] property included a private golf course and wasn’t readily

observable or accessible to the public. In that case, the court observed

that members of the public could boat and view the easement from a

river that ran alongside it, and that—when compared to dense

residential development such as condos—the easement property

qualified as open space that provided scenic enjoyment. Champions

Retreat Golf Founders, LLC v. Commissioner, 959 F.3d at 1034, 1040.

2.

Scenic Value

Do the properties here have scenic value? We consider the eight

factors that the regulation lists:

•

the compatibility of the land use with other land in the vicinity;

•

the degree of contrast and variety provided by the visual scene;

•

the openness of the land (which would be a more significant factor

in an urban or densely populated setting or in a heavily wooded

area);

•

relief from urban closeness;

•

the harmonious variety of shapes and textures;

•

the degree to which the land use maintains the scale and

character of the urban landscape to preserve open space, visual

enjoyment, and sunlight for the surrounding area;

•

the consistency of the proposed scenic view with a methodical

state scenic-identification program, such as a state landscape

inventory; and

•

the consistency of the proposed scenic view with a regional or local

landscape inventory made pursuant to a sufficiently rigorous

review process, especially if the donation is endorsed by an

appropriate state or local governmental agency.

Treas. Reg. § 1.170A-14(d)(4)(ii)(A).

Travelers can see the Kimberly Road property and its forest along

700 feet of Kimberly Road. Travelers can see the forested South Fulton

property while traveling at least 1,000 feet along three different roads.

And both the Kimberly Road and South Fulton deeds had specific

26

[*26] provisions to protect these views from those roads. See Turner,

126 T.C. at 314.

We find that the easements contributed to scenic enjoyment of

their respective areas by providing a degree of contrast and variety to

these developing parts of the Atlanta area and providing relief from

urban closeness.

3.

Pursuant to a Government Policy

Which government do we look to for this requirement? The Code

says a state, a local, or the federal government.

I.R.C.

§ 170(h)(4)(A)(iii)(II). And how clearly delineated must this policy be?

At least some specificity in identifying a government policy under

section 170(h)(4)(A) is required. See Atkinson, 110 T.C.M. (CCH) at 562

(mentioning state law does not establish clearly delineated policy).

The partnerships point to the Georgia State Wildlife Action Plan

(SWAP), a plan overseen by the Georgia Department of Natural

Resources, in arguing that the easements were granted pursuant to a

government policy. The Georgia SWAP is specifically mentioned in the

deeds of conservation easement, and it identifies the oak-hickory-pine

forests that are found on both subject properties as high-priority

habitats in the state. See also Butler, 103 T.C.M. (CCH) at 1364 (noting

that oak-hickory-pine forest has recently been affected by urban sprawl

in the southeastern United States). And the BDRs, SCT monitoring

reports, and land-management plans for the properties identify the

Georgia SWAP’s classification of the forests as a relevant government

policy.

The Commissioner says that the Georgia SWAP doesn’t

specifically mention the subject properties and that the easements

therefore weren’t granted pursuant to a government policy. He cites the

finding in Champions Retreat Golf Founders, LLC v. Commissioner, 959

F.3d at 1036, that a county designating land as greenspace was an

insufficiently specific and delineated governmental policy.

We decline to read section 170(h)(4)(A)(iii)(II) so narrowly as to

require a government policy to mention specific tracts of land to meet

this criterion. The exact type of forest protected by the Georgia SWAP

was located throughout the subject properties. We find that the

easements were granted pursuant to the Georgia SWAP, which is a

clearly delineated governmental policy.

27

4.

[*27]

Significant Public Benefit

Even if we find that the easement contributions were made for

scenic enjoyment or pursuant to a government policy, we must also find

that they yielded a significant public benefit. I.R.C. § 170(h)(4)(A)(iii).

The regulation lists 11 factors to consider. Of those, the partnerships

say that the properties satisfy four:

•

the uniqueness of the property to the area;

•

the intensity of land development in the vicinity of the property

(both existing and foreseeable trends in development);

•

the consistency of the proposed open-space use with public

programs for conservation in the region; and

•

the likelihood that development of the property would lead to or

contribute to the degradation of the scenic, natural, or historical

character of the area.

Treas. Reg. § 1.170A-14(d)(4)(iv)(A).

The partnerships also argue that the Kimberly Road property

satisfies another factor: the consistency of the proposed open-space use

with existing private conservation programs in the area—because it

adjoins the Kim Road, LLC, conservation easement granted to the

Atlantic Coast Conservancy. Just as we found that the Kimberly Road

property increased the viability of the adjoining Kim Road, LLC, habitat

under Treasury Regulation § 1.170A-14(d)(3)(ii), so also we find that

Kimberly Road meets this factor.

We find that both properties will yield a significant public benefit.

Both properties’ forested habitats can be viewed along significant

portions of major thoroughfares in the Atlanta region. See id. subpara.

(4)(ii)(B) (entire property need not be visible to public, but inadequate if

only small portion is). They are also consistent with the Georgia SWAP’s

government policy to preserve oak-hickory-pine forests of the type found

on both the Kimberly Road and South Fulton properties. See Townley

v. United States, 729 F. Supp. 3d 1320, 1328 (M.D. Ga. 2024).

E.

The Reserved Rights Problem

Section 170(h)(1) requires a contributed easement be exclusively

for conservation purposes. This requires proof of both conservation

28

[*28] purpose and perpetuity.

See Valley Park Ranch, LLC v.

Commissioner, 162 T.C. 110, 131 (2024).

The Commissioner contends that the sheer number of reserved

rights in the Kimberly Road and South Fulton easements undermines

any conservation purpose because they might allow such extensive

development. These reserved rights include logging on both properties

and agricultural, forestry, and hunting and horseback riding on the

South Fulton property.

We’ve held that a conservation easement did not protect a

relatively natural habitat of longleaf pine trees if the easement allowed

for the removal of a large number of trees on the property. Atkinson,

110 T.C.M. (CCH) at 556. But in that case it wasn’t clear from the record

how much of the property was actually covered by the protected tree

species. Id. The subject property there was a residential development

with a golf course, in contrast to the mostly vacant land of South Fulton.

Id. at 551, 557. We also found the purported conservation easement

lacked a management plan—including prescribed burning or cutting—

to ensure that the protected tree species would reach and maintain a

relatively natural state. Id. at 557.

These defects aren’t present here. These easements restrict use

by limiting development on the properties. The deeds do not provide for

reversionary interests in the properties to the partnerships. And their

management plans prohibit the use of all-terrain vehicles on the

properties to limit the environmental effects of the reserved rights to use

the properties for recreation.

We find credible Quattlebaum’s testimony that, in her experience,

allowing hunting on conserved lands is a useful monitoring mechanism

against dumping and other trespassers. She helped draft the easement

deeds and recommended to Carbonara that he find someone to hunt on

the property. We also find credible SCT’s monitoring efforts and

management, which also distinguish these cases from Atkinson.

We decline to find that the easements’ reserved rights undermine

their conservation purposes.

F.

Entire Interest

A donated easement must perpetually protect its conservation

purposes, and the Commissioner notes that there are energy-pipeline

and utility easements on the Kimberly Road property that, because of

29

[*29] their priority, prevent SCT from enforcing its rights and thus that

the property isn’t perpetually protected as required by section

170(h)(5)(A).

It turns out these easements were granted during World War II.

There’s no evidence in the record to show that, during the 80-plus years

since these easements were granted, a pipeline was actually placed on

the property. We agree with the partnerships that the likelihood that

this right would be exercised is so remote as to be negligible. See Treas.

Reg. § 1.170A-14(g)(3). We therefore find that these utility easements

don’t violate the protected-in-perpetuity requirement of section

170(h)(5)(A). See Valley Park Ranch, 162 T.C. at 131.

G.

Conclusion

We conclude that the easements have the conservation purpose of

preserving a relatively natural habitat of fish, wildlife, or plants, or of a

similar ecosystem as well as the preservation of open space that yields

a significant public benefit. This makes them qualified conservation

contributions under section 170(h).

V.

Valuation

A.

Background

1.

The General Rule

The fair-market value of a conservation easement is measured at

the time it was contributed. Treas. Reg. § 1.170A-14(h)(3)(i). The

regulation defines that value as the price at which the property would

be exchanged between a willing buyer and a willing seller. Treas. Reg.

§ 1.170A-1(c)(2). And the regulations want us to determine that value,

if possible, by comparing the donated easement to sales of comparable

easements. Treas. Reg. § 1.170A-14(h)(3)(i).

This never seems to work because conservation easements

generally don’t trade on the open market.

See Symington v.

Commissioner, 87 T.C. 892, 895 (1986). The Kimberly Road and South

Fulton easement deeds also limit their transferability.

If there’s no substantial record of comparable easement sales—as

the parties stipulate that there isn’t here—then we look to sales of

comparable properties, taking into account the properties’ highest and

best uses (HBUs) before and after creation of the easements. See Treas.

30

[*30] Reg. § 1.170A-14(h)(3)(ii); Hilborn v. Commissioner, 85 T.C. 677,

689–90 (1985). But we are not to mechanically apply this method if

there are other reliable market indicators available. Treas. Reg.

§ 1.170A-14(h)(3)(i); Dorsey v. Commissioner, 59 T.C.M. (CCH) 592, 599

(1990).

2.

Comparable Sales Approach

The parties agree that the best way to estimate the before values

of these properties is to find comparable sales. See Hilborn, 85 T.C. at

689. They both professed to find sales of properties similar to the subject

properties in arm’s-length transactions that occurred within a

reasonable time of the appraisal dates. See Wolfsen Land & Cattle Co.

v. Commissioner, 72 T.C. 1, 19 (1979).

The parties hired experts in real-estate appraisal to testify about

this method and apply it in these cases. We admit an expert opinion if

we find it helpful to understand a factual issue and weigh it in the light

of the demonstrated qualifications of the offered expert and all other

credible evidence. Fed. R. Evid. 702; Johnson v. Commissioner, 85 T.C.

469, 477 (1985).

3.

The Parties’ Experts

Kimberly Road and South Fulton retained Spears to prepare

appraisals of the subject properties. He is certified as an appraiser in

Florida and Georgia and started Global Valuation to conduct appraisals

of international properties for clients, including entire islands in the

Caribbean Sea. These appraisals were some of his first conservation

easements, although he testified that he took courses to become

competent in this subset of the appraisal profession. We recognized him

as an expert in the appraisal of real estate.

Spears focused his appraisals on the subject properties’ zoning

and HBU. He then found vacant land with similar zoning in the Atlanta

metro region that was sold and later actually developed for such a use.

This, he testified, justified his use of the properties that housed large

tenants such as Top Golf and LA Fitness. In focusing his appraisal this

way, Spears included in his before-and-after approach sales from Fulton

County as well as more suburban and rural Georgia counties and

municipalities such as Cobb, Kennesaw, Johns Creek, and Roswell.

Spears appraised both properties. He appraised the Kimberly

Road property in 2017 before the granting of the easement at

31

[*31] $10,442,000, and its “after” value at $85,941. He appraised South

Fulton’s “before” value at $23,681,000 and appraised its “after” value at

$466,000. Spears was not concerned with the subject properties’

topography—as an appraiser in Georgia since the 1980s, he’s used to

appraising land with rolling terrain.

South Fulton bolstered its valuation by retaining another expert

to testify specifically about that property’s physical limits because it

included so much uneven ground. That expert, Mary Michael, focused

on the “physically possible” component of that subject property’s HBU. 14

She is the principal at her own architecture firm which advises on realestate projects in the Atlanta area, and is a registered landscape

architect in Georgia. We recognized Michael as an expert in urban land

planning. Her reports looked at the zoning, topography, and building

types included in Union City’s zoning ordinance as applied to the South

Fulton property, and she designed concept plans for what she thought

could be the most valuable and densest developments that would fit on

it. She determined that it was physically possible—from an engineering

perspective—to fit a six-story residential building on South Fulton by

using a subsurface parking garage to counteract the effects of its steep

grade. She did not, however, provide any estimate of the cost of such a

feat.

The Commissioner countered with the report and testimony of

Raymond Krasinski.

He reviewed Spears’s reports—specifically

whether they complied with The Appraisal Foundation’s standards,

whose acronym our court has become increasingly familiar with in

resolving these conservation easement cases: USPAP. 15 He has taught

appraisal for 25 years. We recognized him as an expert in real-property

appraisal, appraisal review, and USPAP.

Krasinski concluded that Spears’s Kimberly Road report wasn’t

reliable. He concluded that many of Spears’s comparable sales weren’t

comparable, including one that was listed rather than sold and another

that was a valuable parcel just off an interstate interchange. He found

14 Spears incorporated Michael’s architectural assumptions into his appraisal,

although he had never met Michael when he drafted his appraisal and didn’t seem at

trial to know what exactly her profession was.

15 This stands for the Uniform Standards of Professional Appraisal Practice.

It’s a widely accepted and recognized standard in the appraisal profession, adherence

to which we may take as evidence that an appraiser’s valuation report is reliable. See

Buckelew Farm, LLC v. Commissioner, T.C. Memo. 2024-52, at *48–49, aff’d, No. 2413268, 2025 WL 2502669 (11th Cir. Sep. 2, 2025).

32

[*32] similar issues with the comparables that Spears selected for South

Fulton, although he conceded that its Town Center Mixed Use Zoning is

generally considered a lucrative zoning designation.

The Commissioner also submitted his own appraisals of the

subject properties. He hired Charles Brigden, who has 20 years of

experience as an appraiser and is currently employed by the

international real-estate services behemoth Jones Lang LaSalle.

Brigden has appraised or reviewed close to 500 conservation easements

for both the government and taxpayers. We recognized him as an expert

in real-estate valuation, qualified conservation-easement contribution

valuations, and USPAP.

Brigden’s appraisals used the “before and after” approach for

valuing the properties and drew on comparable sales of vacant land.

Brigden presented these comparables visually in a market analysis that

the partnerships have termed “Brigden Boxes” in which he drew

rectangles on a map surrounding the subject properties’ market areas,

plotted in those boxes sales of vacant land that had occurred around the

time of the transactions, and removed from his analyses those he

concluded to be in significantly different market areas, such as those

next to interstate interchanges.

Brigden concluded that the “before” fair-market value of the

Kimberly Road property was $470,000 in 2017 without the easement,

and that the “after” value with the easement was $40,000. Brigden

appraised the “before” value of the South Fulton property at $700,000 in

2017, and the “after” value encumbered with the easement at $90,000.

Brigden made adjustments to his valuations based on what he described

as the challenging topography of the subject properties in contrast to

some of the comparables in his market analyses.

Kimberly Road and South Fulton on rebuttal introduced an

appraiser to review Brigden’s appraisals. Douglas Kenny grew up in

Fulton County and holds the prestigious MAI designation from the

Appraisal Institute. We recognized him as an expert in appraisal, realestate appraisal, and appraisal review. Kenny thought that Brigden’s

market analyses undervalued the subject properties’ higher density

zoning and overstated the topographical challenges which Brigden

claimed hindered high-density development.

33

[*33] B.

The Inventory Rule

There’s an exception that the Commissioner says is in play.

Because Grant was a “land man” and helped contribute the subject

properties to the partnerships, the Commissioner urges us to find that

the subject properties were inventory.

Such a finding could limit the amount of the charitable deductions

allocated to the partners. Section 170(e)(1)(A) reduces the amount of

that deduction by the amount of gain that wouldn’t have been long-term

capital gain on the property contributed had it been sold at fair-market

value. Sections 724(d)(2) and 751(d) also apply to inventory property.

The Commissioner cites an Eleventh Circuit case that he says should

guide our inquiry into whether the subject properties were held by the

partnerships in the ordinary course of business. See Sanders v. United

States, 740 F.2d 886, 888–89 (11th Cir. 1984).

But there will be no Sanders analysis here. The Commissioner

mentions this inventory rule or inventory accounting only in his

answering brief. Because of this, the partnerships don’t mention it in

either of their briefs. It’s within our discretion to permit a new issue or

ground if we find that the opposing party isn’t prejudiced by such

permission. Leahy v. Commissioner, 87 T.C. 56, 64 (1986). Raising this

argument in the Commissioner’s answering brief, however, means that

the partnerships never had a chance to mount an opposition at trial. We

thus find it to be a new issue and preclude its consideration. See

Smalley, 116 T.C. at 457 n.4.

C.

The Before and After Values of the Properties

1.

Before

a.

Legal Background

That finally lands us on the big-money issue in these cases—what

are the properties’ before-and-after values? We first consider HBU

before the easements were granted to determine their “before” values.

Treas. Reg. § 1.170A-14(h)(3)(ii). Appraisers look to four things: legal

permissibility, physical possibility, economic viability, and maximal

productivity. Whitehouse Hotel Ltd. P’ship v. Commissioner, 139 T.C.

304, 331 (2012), aff’d in part, remanded on other grounds, 755 F.3d 236

(5th Cir. 2014); Appraisal Institute, The Appraisal of Real Estate 307

(15th ed. 2020).

34

[*34] The parties differ wildly on the before values of the properties.

And many of their differences stem from their disagreement about the

HBUs of the properties before the easements.

b.

Petitioners’ Arguments

Spears identified the HBU of the Kimberly Road property as an

ALF and the HBU of the South Fulton property as a mix of high-density

residential and commercial uses. He led off both of his appraisals by

stating these assumptions and extrapolating the various rental rates

from such uses into his market study to identify comparable sales.

Spears found an ALF legally permissible because Kimberly Road

was zoned RG-3. He noted that a certificate of need is legally required

in Georgia before such a facility can be built, though, and a certificate of

occupancy before it begins housing residents. Kimberly Road had

applied for neither. He nevertheless found it reasonable that such

certificates would be granted due to the property’s zoning.

Spears found a 600-unit ALF physically possible because the

Falcon Design concept plan showed that such a unit could fit on the

property. He found it financially feasible based on his market

extrapolation of the ALF rents around Atlanta. He thought an ALF

would be maximally productive due to other market analyses showing

that the retirement-community industry is expected to see exceptional

growth during the next two decades.

He applied a similar analysis to South Fulton. He found that a

mixed-use development was legally permissible in Union City due to the

property’s Town Center Mixed Use zoning, that its large size made such

a development physically possible, that it would be financially feasible

after he compared the sale price per acre to other mixed-use

developments that had sold in the Atlanta region, and that it would be

maximally productive due to the strong demand for mixed-use

developments around the region.

Sales of properties that were developed into ALFs surrounding

the Kimberly Road property were lacking. Spears therefore drew on a

21-county area to find sales of comparable properties for the Kimberly

Road property. He did the same for the South Fulton property.

This large market area led to Spears’s identifying comparable

sales both near the subject properties and dozens of miles away in

wealthy enclaves of Atlanta and its suburbs. One of these comparables

35

[*35] was a strip mall with an LA Fitness. Another had a Whole Foods.

After identifying comparable sales in this manner and adjusting for the

properties’ size and other factors like topography, Spears averaged their

prices per acre—which ranged from the low $200,000s up to $700,000

per acre. He then extrapolated near the mean of these ranges to come

up with his before values of the subject properties.

c.

The Commissioner’s Arguments

The Commissioner says Spears’s appraisals are flawed. He

argues that Spears presumed particular HBUs for the properties before

conducting his market analyses and appraisals to see what the market

would support. He also argues that Spears’s multicounty market

analyses were much too large to accurately value these vacant

properties in a specific corner of the Atlanta area. Spears should have,

the Commissioner says, looked to land sales of comparable size, zoning,

and topography located near the subject properties.

The Commissioner’s experts agree.

Brigden testified that

Spears’s comparables were too far away from the subject properties’

markets and were often superior parcels in part because of their

locations. Brigden also took issue with Spears’s including in comparable

sales a property that was merely listed and hadn’t sold, as well as

multiple sales including a large conservation-easement promoter in

Atlanta whose motivations he says don’t necessarily reflect those of the

broader real estate market for vacant land. He noted that a property

neighboring the South Fulton property sold for only $100,000 an acre—

a fourth of the value that Spears assigned in his appraisal.

Krasinski testified that Spears used accepted appraising

methodologies but failed to perform them properly. He found Spears’s

comparables for the Kimberly Road property unsupportable because,

unlike the subject property, they already had the requisite land-use

entitlements, demand, and higher population density to actually

support ALFs. He called the southwest quadrant of the Atlanta market,

where the subject properties are located, the “wicked stepchild” of the

market and stated that property values there are lagging as compared

to the rest of the “booming” Atlanta market.

Brigden’s appraisal reports took these factors into account when

appraising the properties. For the Kimberly Road property, he selected

four comparables that were located within 17 miles of the subject

property and of similar size and topography. He made adjustments for

36

[*36] nine areas where at least one of the comparables differed,

including location, size, water amenities, zoning, and access to roads.

He concluded that the Kimberly Road property’s HBU before the

easement was granted was vacant land/future low density residential or

recreational use, and that it was worth $470,000.

He did the same type of market analysis and made the same

adjustments for the South Fulton property. Despite its larger size,

Brigden found comparable sales within nine miles of the South Fulton

property. He made a downward adjustment due to the property not

having access to the South Fulton Parkway. He concluded its highest

and best use was low-density single-unit residential/hold for future

development, and that it was worth $700,000 when the easement was

donated.

d.

Analysis

A property’s HBU is the highest and most profitable use for which

it’s adaptable and needed or likely to be needed in the reasonably near

future. Olson v. United States, 292 U.S. 246, 255 (1934). If different

from the current use of a property, though, we typically require a

proposed HBU to be close in time to the current use and reasonably

probable. Hilborn, 85 T.C. at 689.

The classification of the use—whether it be commercial,

residential, or vacant, recreational land—is significant and relates

directly to the value of the properties. Estate of Lloyd v. Commissioner,

71 T.C.M. (CCH) 1903, 1910 (1996). The mere fact that current zoning

restrictions do or don’t permit a particular use doesn’t necessarily

preclude a consideration of an unpermitted use when considering a

property’s HBU, but there must be a reasonable possibility that such

legal hurdles will change shortly thereafter the granting of the

easement. Id. at 1911. We may consider how zoning and related landuse laws may restrict the property’s development before the placing of

the easement, but not necessarily how the owner of the property says he

intends to use the property. Dorsey, 59 T.C.M. (CCH) at 599.

The fair-market value of a property ultimately turns on its

realistic and objective potential use. Stanley Works & Subs. v.

Commissioner, 87 T.C. 389, 400 (1986). And we often rely on experts to

give us their opinions about these uses and valuations. We find

appraisers credible who, after identifying a property’s HBU, find

“comparables with a similar highest and best use at the same stage of

37

[*37] development (e.g. raw land)” (emphasis added) or make

reasonable adjustments if the comparables aren’t at the same stage of

development as the subject property.

Cave Buttes, LLC v.

Commissioner, 147 T.C. 338, 365 (2016). This is the comparable-sales

method, and we have found it is “usually the most reliable indicator of

value when sufficient information exists about sales of properties

resembling the subject property.” N. Donald LA Prop., LLC v.

Commissioner, T.C. Memo. 2026-19, at *50; see also Excelsior

Aggregates, LLC v. Commissioner, T.C. Memo. 2024-60, at *33. It

determines the fair-market value of a property by considering the sale

prices realized for similar properties in arm’s-length transactions near

in time to the valuation date. Ranch Springs, LLC v. Commissioner, 164

T.C. 93, 135 (2025). The most persuasive comparable sales are those

dealing with property whose location, size, topography, use, and

physical characteristics precisely resemble those of the subject property.

See Excelsior Aggregates, T.C. Memo. 2024-60, at *49.

This is not at all what Spears did. We agree with the

Commissioner that Spears’s comparables for both properties weren’t

sufficiently similar to Kimberly Road or South Fulton. The key problem

lay in Spears’s method: He looked for sales of raw land that were then

developed into what he identified as the HBU for each of the subject

properties. But this meant that he excluded a great many sales

comparable to those properties and much closer to them. That’s not

what a land buyer interested in building an ALF or a large, mixed-use

development would do. Such a hypothetical buyer wouldn’t look to pay

what a competitor paid 50 or more miles away in a heavily developed

area. He would look to pay the least amount of money for raw land that

was physically capable and legally permissible to develop near where he

wanted to build. The comparable sales that he drew were all over the

metropolitan Atlanta area and were primarily sales of developed

properties. We find that these constituted a different market and were

thus not comparable. See Butler, 103 T.C.M. (CCH) at 1389.

Spears also included some syndicated conservation easement

sales, as well as an offer rather than a sale, in his analysis. We find

these to have limited probative weight in estimating the value of a

property. Sharp v. United States, 191 U.S. 341, 348 (1903). A

reasonable buyer or seller would take into account physical access to the

South Fulton property and the costs in grading, obtaining government

approvals, and developing the properties to the high-density HBUs that

Spears identified. See Cave Buttes, 147 T.C. at 365. And even though

building these high-density developments was likely physically possible

38

[*38] on the properties, Spears should have adjusted his valuations to

account for the higher costs of grading both of the properties and

delivering materials to the South Fulton site. See id. at 367.

Spears’s most fundamental problem, however, was that the

starting point in his appraisals—that ALFs and mixed-use

developments were the HBUs of the properties regardless of the

properties’ locations and market conditions or the financial feasibility of

such developments—wasn’t based on reliable market data or specific

attributes of the properties apart from their zoning. See Kaufman, 107

T.C.M. (CCH) at 1273; see also Dunlap v. Commissioner, 103 T.C.M.

(CCH) 1689, 1700 (2012) (finding appraisal report doesn’t properly state

a property’s HBU when appraiser vacillated between both vacant and

developed uses).

There isn’t evidence in the record that the partnerships actually

reached out to state and local licensing and zoning agencies to build

ALFs or mixed-use developments on the subject properties. See Dorsey,

59 T.C.M. (CCH) at 600 (reviewing testimony of a zoning commissioner

and a director of a permitting office and finding that the city would have

approved the use proposed by the taxpayers, thus finding it legally

possible).

Brigden’s appraisals were much more reasonable.

The

comparables that he used for Kimberly Road were raw land, zoned

similarly if not identically, and needed only minor adjustments for

topography, location, and size. His analysis is entirely reasonable, and

so we adopt his before value of Kimberly Road of $470,000 as our finding

on this issue. He likewise used four comparable properties to value the

South Fulton property. These were all vacant land and all had more

favorable topography. But we found his report credible on the

adjustments that he made to the comparables for topography, zoning,

lot size, etc. This leads us to adopt his before value of South Fulton of

$700,000 as our finding on this issue, and we adopt these two valuations

as our findings of the properties’ before values.

2.

After

Brigden identified the after value of the Kimberly Road property

as $40,000. He identified the after value of the South Fulton property

as $90,000. He based these conclusions on numerous sales of land

encumbered with conservation easements. He used those properties

that had reserved rights for one residence. We find this reasonable for

39

[*39] both properties because the donations each excluded a small, oneacre slice of the property and these slices were thus not subject to any

restrictions on development. He also carefully noted that the sale of

hunting rights (one of the few uses reserved under the easement’s terms)

to the South Fulton property supported this valuation.

3.

Conclusion

Subtracting the after values from the before values means that

the partnerships are entitled to charitable deductions for conservation

easements of $430,000 for Kimberly Road and $610,000 for South

Fulton.

VI.

Penalties

The FPAAs determined the applicability of section 6662(h) grossvaluation misstatement penalties. This penalty applies if the value of

property claimed on a return is 200% or more of the amount determined

to be the correct value. It’s a 40% penalty, and there’s no reasonablecause defense. I.R.C. § 6664(c)(3). This is a math question, and it is a

math question that we must find the Commissioner got right. The

parties stipulated that the Commissioner complied with the

supervisory-approval requirement of section 6751(b)(1) in asserting

these penalties, and we therefore uphold them. 16

VII.

Conclusion

Because these are TEFRA cases,

An appropriate order will be issued.

16 The FPAA also asserted a reportable-transaction penalty under section

6662A, but—as we’ve already stated—Green Valley precludes us from upholding it.

We also need not determine whether the Commissioner was right to determine an

accuracy-related penalty under section 6662(a).