Riddle Aggregates, LLC, Ornstein-Schuler, LLC, Tax Matters Partner, Petitioner

31104-21Tax

Texte intégral

United States Tax Court
T.C. Memo. 2026-117
RIDDLE AGGREGATES, LLC,
ORNSTEIN-SCHULER, LLC, TAX MATTERS PARTNER,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
__________
Docket No. 31104-21. 	Filed November 10, 2026.
__________
Maxwell W. Brown, Michael B. Coverstone, Merima Mahmutbegovic, Jay
R. Nanavati, Macdonald A. Norman, Daniel A. Rosen, Andrew W.
Steigleder, Andrew M. Weiner, Michael Todd Welty, and Daniel B.
Wharton, for petitioner.
Stephen A. Haller, Peter J. Kuylen, Christopher A. Pavilonis, Randi N.
Raj, and H. Barton Thomas, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KERRIGAN, Judge: 	This case is a partnership-level proceeding
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
Pub. L. No. 97-248, §§ 401–407, 96 Stat. 324, 648–71,1 involving
syndicated conservation easement (SCE) donations.
This SCE case is one of 14 cases involving charitable contribution
deductions claimed for the donation of conservation easements and/or
1 Before its repeal, TEFRA governed the tax treatment and audit process for
many partnerships, including Riddle Aggregates, LLC (Riddle).
Served 11/10/26
2
[*2] fee simple interests mostly in Morgan County, Alabama.2 Eight of
the 14 cases, including this case, relate to the donation of conservation
easements on, and/or fee simple interests in, land Freeman Five, LLC
(Freeman Five), formerly owned. We set this case for trial as a test case
for the Freeman Five cases. After the trial was set, the parties in each
of the six non-Freeman Five cases also filed a stipulation to be bound in
which the parties agree that those cases will be resolved consistently
with the outcome of this case.
The partnership in this case is Riddle Aggregates, LLC (Riddle).
Riddle’s tax matters partner is petitioner, Ornstein-Schuler, LLC (OS
LLC).3 	On its Form 1065, U.S. Return of Partnership Income, for the
period beginning December 6 and ending December 31, 2017, Riddle
reported a charitable contribution of $44,995,000 related to a donated
conservation easement and a charitable contribution of $355,000 related
to a donated fee simple interest. 	Riddle claimed noncash charitable
contribution deductions for these amounts. 	On August 23, 2021,
respondent 	issued 	a 	Notice 	of 	Final 	Partnership 	Administrative
Adjustment (FPAA) to Riddle. In the FPAA respondent disallowed the
entire conservation easement contribution deduction and $10,000 of the
fee simple deduction under section 170,4 and asserted penalties.
After 	the 	parties 	filed 	Stipulations 	of 	Settled 	Issues,5 	the
remaining issues for consideration are (1) the fair market value of the
2 Kellum Resources, LLC v. Commissioner, No. 2585-23 (T.C. filed Mar. 3,
2023), is the only case where the property is not in Morgan County, Alabama.
3 Throughout the Opinion, we refer to OS LLC both as petitioner and as OS
LLC. We generally refer to “petitioner” when OS LLC’s position as the tax matters
partner of Riddle is of particular import to the discussion. 	We generally refer to
“OS LLC” when the principal focus of the discussion is on OS LLC’s actions outside of
these proceedings.
4 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.C. (Code), in effect at all relevant times, regulation references are
to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times,
and Rule references are to the Tax Court Rules of Practice and Procedure. 	All
monetary amounts are rounded to the nearest dollar.
5 In the Stipulation of Settled Issues filed September 19, 2025, the parties
agreed that (1) each of the real property interests at issue in this case is a qualified
conservation contribution as that term is defined in section 170(h) and inclusive of
paragraphs (1) through (5); and that (2) Riddle met the substantiation requirements
under section 170(f)(8) for its donation of the conservation and fee simple interest.
Additionally, respondent conceded that (1) the section 6663 fraud penalty does not
apply for the taxable year ending December 31, 2017, inclusive of the partnership
adjustments in the FPAA issued to petitioner on August 23, 2021; and that (2) the
section 6662A reportable transaction understatement penalty does not apply for the
3
[*3] conservation 	easement 	and 	(2) 	whether 	the 	accuracy-related
penalty under section 6662 applies.
FINDINGS OF FACT
Some of the facts are stipulated and so found. 	The Stipulations
of Facts and the attached Exhibits are incorporated herein by this
reference.
Riddle is a limited liability company with its principal place of
business in Alabama. 	It is treated as a partnership for federal tax
purposes and is subject to the audit procedures of TEFRA. 	Petitioner,
Riddle’s tax matters partner, had its principal place of business in
Georgia when the Petition was timely filed. 	The parties agree that
appeal of this case would lie to the U.S. Court of Appeals for the
Eleventh Circuit. See § 7482(b)(1)(E).
I. 	History and Characteristics of the Property at Issue
A. 	The Riddle Property
On May 8, 2006, Freeman Five acquired approximately 2,744.30
acres of land in Morgan County (Freeman Five Parent Tract). 	The
consideration listed on the corporation warranty deed conveying the
Freeman Five Parent Tract to Freeman Five was $10. The conservation
easement was granted on a 231.22 acre tract (Riddle Property) that was
originally part of the Freeman Five Parent Tract.
taxable year ending December 31, 2017, inclusive of the partnership adjustments in
the FPAA. The parties further stipulated that all other penalty adjustments in the
FPAA remained at issue.
In the second Stipulation of Settled Issues, filed December 8, 2025, the parties
agreed that (1) Riddle is entitled to a deduction under section 170 for the donation of
the conservation easement; (2) Riddle is entitled to a deduction under section 170 for
the donation of the fee simple interest; and that (3) section 170(e) does not apply to
limit any charitable contribution deduction that may be allowed to Riddle in this case.
In the third Stipulation of Settled Issues, filed August 26, 2026, the parties
agreed that (1) the fair market value of the Riddle Property after the conservation
easement was granted on December 8, 2017, was $345,000 and that (2) respondent
does not assert the application of an accuracy-related penalty pursuant to section
6662(a), (c), (d), (e), and (h) to the adjustment of $10,000 for the after value in the FPAA
dated August 23, 2021.
4
[*4] 	Morgan 	County, 	Alabama, 	is 	in 	the 	Huntsville-Decatur-
Albertville Combined Statistical Area. 	In 2017 the population of
Morgan County was approximately 120,000.
Decatur, Hartselle, and Huntsville are the major cities in Morgan
County, although most of the population of Huntsville lives in Madison
County, which is northeast of Morgan County. 	Marshall County is
immediately east of the Riddle Property, Cullman and Blount Counties
are south, and Limestone County is northwest.
Joshua Rains is the chief appraiser for Morgan County. 	He
produced records of land sales of more than 50 acres in Morgan County
between October 1, 2014, and September 30, 2019. 	Of the 28 sales of
more than 50 acres of vacant land, the highest sale price was $21,934
per acre, which was for a parcel of land purchased by the city of Decatur
as a site for a new high school. The sale prices of the remaining 27 land
sales ranged from $1,458 to $11,089 per acre.
Part of the Riddle Property was historically farmed, but the
portion of the Riddle Property suitable for farmland was fallow as of the
retrospective date of valuation. There is no evidence in the record that
the Riddle Property was historically used for mining.
B. 	Limestone Mining in Northern Alabama
Limestone aggregate is used in construction. The U.S. Geological
Survey defines the construction aggregates industry as those companies
that mine and process crushed stone and/or construction sand and
gravel. The Alabama Department of Transportation (ALDOT) provides
specifications 	to 	determine 	the 	quality 	of 	quarried 	materials 	for
construction aggregate. 	Aggregates are generally produced close to
where they are consumed because transportation costs play a large part
in the price of aggregates delivered.
The Alabama Department of Labor (ALDOL) releases annual
reports that detail the production of minerals, including limestone.
Morgan County represented about 6.25% of the average total limestone
production in Alabama between 2013 and 2017. There were no pits for
any other mineral operating in Morgan County between 2013 and 2017.
5
[*5] II. 	Individuals and Entities Involved
A. 	OSI and OSI-Affiliated Entities
Matthew Ornstein and Frank A. Schuler IV are promoters of
SCEs.6 	As part of their business ventures, Messrs. Ornstein and
Schuler created or 	directed the 	creation 	of 	many 	limited liability
companies, including petitioner, to effect their SCE transactions. 	For
the purposes of this Opinion, we will refer to such entities as OSI-
affiliated entities when relevant, and we will refer to Messrs. Ornstein
and 	Schuler, 	OSI-affiliated 	entities, 	and 	their 	relevant 	employees
collectively as OSI unless it is necessary to specifically reference a
particular entity or individual.
B. 	Riddle Aggregates, LLC
Riddle was an OSI-affiliated entity formed by Matthew Kaynard,
an employee of petitioner, on August 16, 2016. 	Riddle served as the
property-owning entity in the SCE transaction.
C. 	Riddle Aggregates Group
Mr. Kaynard formed Riddle Aggregates Group (RAG), another
OSI-affiliated entity, on August 17, 2016. RAG served as the investment
company in the SCE transaction, meaning it was the entity used to raise
funds from outside investors.
D. 	Freeman Five
Freeman Five was organized in the State of Georgia in December
2002. For the taxable year ended December 31, 2017, Freeman Five had
seven members, who each held between 1% and 19% membership
interests. 	James Freeman Sr. was the manager of Freeman Five in
2017. 	Mr. Freeman established Freeman Five to hold real estate. 	He
was an experienced and knowledgeable real estate trader who had
conducted over 50 real estate transactions during his lifetime. Freeman
6 “Promoter” is sometimes viewed as a loaded term in the tax world because of
the penalty imposed by section 6700(a) for “[p]romoting abusive tax shelters.” In this
Opinion we use the term “promoter” in its ordinary sense, making no determination as
to whether the activities of Messrs. Ornstein and Schuler, or of the entities they
managed, would subject them to a civil penalty under section 6700(a), a question that
is not before us.
6
[*6] Five was the landholder of the Riddle Property before the SCE
transaction.
III. 	Ornstein-Schuler’s Acquisitions of Freeman Five Properties
In 2016 Freeman Five solicited the assistance of Duke Baker
Woller Land Co. to sell the Freeman Five Parent Tract. 	At this time
Freeman Five was not under any financial strain.
Longleaf 	Ventures, 	LLC 	(Longleaf), 	an 	OSI-affiliated 	entity
controlled by petitioner, submitted to Duke Baker Woller Land Co. a
letter of intent dated March 20, 2017, to purchase approximately 894
acres of the Freeman Five Parent Tract for $2,500 per acre. 	Longleaf
was not related to Freeman Five. Longleaf submitted a separate letter
of intent dated April 11, 2017, to Duke Baker Woller Land Co. to
purchase approximately 557 additional acres of the Freeman Five
Parent Tract for $2,500 per acre.
As part of the Longleaf purchase transactions, Freeman Five
subdivided the Freeman Five Parent Tract. 	A certificate to subdivide
recorded September 6, 2017, in the Morgan County deed records shows
the Freeman Five Parent Tract divided into seven tracts as follows:
Tract Number 	Acres
One 	339.85
Two 	231.22
Three 	309.49
Four 	149.38
Five 	175.98
Six 	250.31
Seven 	1288.28
Riddle 	came 	to 	own 	the 	231.22-acre 	Tract 	Two, 	the 	Riddle
Property, after a series of transactions. 	Pursuant to a Membership
Interest and Purchase Agreement dated September 12, 2017, Freeman
Five agreed to contribute Tracts One, Two, and Three to Quorum
Holdings, LLC (Quorum Holdings), in exchange for a 100% interest in
Quorum Holdings. 	Mr. Kaynard formed Quorum Holdings, an OSI-
affiliated entity. 	Pursuant to the same agreement, the members of
Freeman Five then sold 98% of their partnership interests in Quorum
Holdings to Longleaf for $2,236,175. 	The real estate sales validation
7
[*7] form filed in connection with the transfer of the 880.56 acres of
Tracts One, Two, and Three, recorded on September 18, 2017, lists the
combined value of those tracts as $2,236,175.
Quorum Holdings conveyed the Riddle Property to Riddle via
statutory warranty deed, recorded on October 13, 2017, for 100% of the
partnership interests in Riddle. 	The real estate sales validation form
filed in connection with the transfer of the Riddle Property lists the
value of the 231.22 acres of the Riddle Property as $613,440. On October
13, 2017, Quorum Holdings distributed its interests in Riddle pro rata
to its members, so that Longleaf owned 98% of Riddle and the members
of Freeman Five owned 2% of Riddle. 	On the same day Longleaf
distributed its 98% interest in Riddle to its members, OS LLC, Workout,
LLC, New Rapids Land, LLC, Schuler Investments, LLC, and Turtle
Bluff, LLC.
IV. 	Appraisal of the Riddle Property
While the discussions and steps of the ownership transfers were
ongoing, various reports regarding the Riddle Property were completed.
On June 1, 2017, Longleaf engaged ECS Southeast LP (ECS) to conduct
a geotechnical exploration and environmental assessment of the Riddle
Property. 	ECS performed two exploratory borings with rock coring on
the Riddle Property and prepared a field log with information about the
rock core samples. 	ECS performed laboratory testing on selected
representative rock core samples from the borings to evaluate pertinent
chemical composition and engineering properties. After taking two rock
cores and testing one sample from each rock core, ECS issued a report
(ECS Report) of geotechnical exploration and rock testing to Riddle on
August 7, 2017. 	The ECS Report showed the subject site is underlain
by 	bedrock 	of 	the 	Bangor 	limestone 	formation 	and 	the 	Pottsville
formation is also present. 	For the Bangor Limestone formation, the
primary rock is limestone. 	For the Pottsville formation, the primary
rock is sandstone. 	Next, ECS issued a Phase 1 Environmental Site
Assessment of the Riddle Property on August 29, 2017.
On October 13, 2017, Riddle entered into a consulting agreement
with Galt Mining Investments, LLC, another OSI-affiliated entity. Galt
Mining Investments engaged Blethen Mine Consultants, LLC (Blethen),
to analyze the feasibility of investing in a mining operation on the Riddle
Property. On October 13, 2017, Blethen issued a report titled “Technical
Due Diligence Prefeasibility Study Business Plan and Valuation Riddle
Aggregates LLC Morgan County, Alabama” (October Blethen Report).
8
[*8] 	In the October Blethen Report, Blethen concluded on the basis of
a geologic review of the Riddle Property, including the drilling data in
the ECS Report, that the Riddle Property contained 25,596,000 tons of
proven mineral reserves. 	On the basis of a discounted cashflow (DCF)
analysis that used a 15-year period and a 12% discount rate, the October
Blethen Report stated that a hypothetical mine on the Riddle Property
had a present value of $45,412,000.
Riddle engaged Weibel & Associates, Inc. (Weibel), to appraise the
Riddle Property. 	Weibel issued appraisals of a conservation easement
on the Riddle Property on October 20 and November 6, 2017, both of
which valued the conservation easement at $44,995,000. Weibel relied
on the October Blethen Report for both of these appraisals. 	Blethen
issued 	a 	nearly 	identical 	report 	(November 	Blethen 	Report) 	on
November 22, 2017, after visiting the Riddle Property that reached the
same conclusions regarding mineral reserves and present value.
V. 	Syndication of Riddle Aggregates Group
RAG served as the investment company in the conservation
easement transaction. Longleaf held 100% of the interests in RAG upon
its 	formation. 	RAG 	issued 	an 	offering 	summary 	outlining 	the
opportunity for accredited investors to purchase membership units in
RAG from Longleaf. Then RAG would purchase Longleaf’s membership
interests in Riddle. 	The offering summary attached the conclusions of
Weibel’s October 20, 2017, appraisal, and described the Riddle Property
as “a limestone rich site with millions of tons of proven limestone
reserves” with an estimated value of $45,340,000.
RAG 	issued 	a 	confidential 	private 	placement 	memorandum
(PPM), dated October 30, 2017, offering up to $7,397,000, in 999 units,
with a minimum subscription of $100,000, equal to 13.5 units. The PPM
presented 	investors 	with 	four 	options 	for 	the 	Riddle 	Property:
(1) conserve 	the 	Riddle 	Property 	and make 	a 	charitable 	donation;
(2) develop the Riddle Property as a limestone quarry; (3) hold the
Riddle Property for long-term appreciation and future sale; or (4) lease
the Riddle Property to a third party for the purpose of operating a
limestone quarry.
The PPM represented to potential investors that the development
strategy 	and 	the 	leasing 	strategy 	could 	be 	profitable 	but 	warned
investors that there were significant risks because they involved “a
highly 	complex, 	expensive, 	and 	potentially 	dangerous 	process 	of
9
[*9] mining.” 	It included additional warnings that if the development
option was chosen the company “would probably require significant
additional capital.” 	The PPM further pointed out that because of the
possibility of the placement of a conservation easement, “only potential
Investors who are not focused on maximizing the potential cash return
from an investment in the membership interest in the Company should
consider subscribing.” 	The offering was fully subscribed, with 74
investors contributing a total of $7,397,000 to acquire 999 units in RAG,
and Longleaf retaining one unit in RAG.
On December 5, 2017, OS LLC retained a .01% interest in Riddle,
and Longleaf’s other members sold their combined 97.99% interest in
Riddle to RAG for $6,923,466. 	After this sale of the partnership
interests, the interests in Riddle were held as follows: 97.99% by RAG,
.01% by OS LLC, and 2% by the members of Freeman Five.
VI. 	Donation of Conservation Easement and Fee Simple Interest and
Riddle’s Tax Return
On December 8, 2017, Riddle executed a deed of conservation
easement on 227.95 acres of the 231.22-acre Riddle Property in favor of
Atlantic Coast Conservancy, Inc. 	The deed of conservation easement
was recorded on December 13, 2017. Also on December 13, 2017, Riddle
conveyed the 	fee 	simple 	interest 	in 	the 	entire 	231.22-acre 	Riddle
Property, subject to the deed of conservation easement, to Atlantic Coast
Conservancy Properties, LLC, via warranty deed. The real estate sales
validation form recorded with the warranty deed lists the assessor’s
market value of the Riddle Property as $352,071.
On February 14, 2018, Weibel issued a final appraisal (Easement
Appraisal) of the conservation easement on the Riddle Property. 	The
Easement Appraisal relied on the November Blethen Report and valued
the conservation easement on the Riddle Property at $44,995,000 as of
December 8, 	2017. 	Weibel 	issued another appraisal 	(Fee 	Simple
Appraisal) on February 14, 2018, that valued the fee simple interest in
the Riddle Property subject to the conservation easement at $355,000 as
of December 13, 2017.
On its Form 1065 for the period beginning December 6, 2017, and
ending December 31, 2017, Riddle reported a charitable contribution of
$44,995,000 	related 	to 	the 	donated 	conservation 	easement 	and 	a
charitable contribution of $355,000 related to the donated fee simple
interest. Riddle claimed noncash charitable contribution deductions for
10
[*10] these amounts. Riddle attached the Easement Appraisal and the
Fee Simple Appraisal to its Form 1065.
VII. 	Summary of Expert Testimony
A. 	Petitioner’s Experts
1. 	Gregory Gold
Gregory 	Gold 	has 	worked 	in 	the 	mining 	industry 	for
approximately 27 years and has held various positions in the mining
industry. 	Currently, he works at Stantec Consulting Services, Inc.
(Stantec). 	We recognized Mr. Gold as an expert in mineral valuation,
mineral evaluation, mining engineering, and mining operations.
Mr. Gold prepared a report on the feasibility of operating a mine
on the Riddle Property. Mr. Gold’s report relied on the ECS Report, and
a geological map prepared by the Geological Society of Alabama. 	Mr.
Gold concluded that the Riddle Property contains approximately 32
million tons of minable limestone suitable for aggregate production, and
he developed a two-phase mine plan that estimated a hypothetical mine
on the Riddle Property would produce 27,963,169 tons of limestone over
a 30-year mine life.
2. 	Darrell Chodorow
Darrell Chodorow is an economist and a principal of the Brattle
Group, an economic consulting firm. 	We recognized Mr. Chodorow as
an expert in valuation.
Mr. Chodorow’s testimony focused on valuation methodology and
how a DCF method could be used to value assets. His report addressed
how a DCF method could be used to value undeveloped land so long as
cashflows and risks could be modeled reliably.
3. 	Michael Stine
Michael Stine works at Stantec, where he manages the mining
advisory and risk group. 	Before joining Stantec, he worked as an
analyst with the Central Intelligence Agency, primarily covering global
mineral supply chains. We recognized Mr. Stine as an expert in mineral
valuation and aggregate market studies.
11
[*11] Mr. Stine’s valuation of the mineral resource on the Riddle
Property was based on the income method. 	He prepared a DCF model
to determine the fair market value of the economically recoverable
limestone resource on the Riddle Property. 	He relied on Mr. Gold’s
report that the Riddle Property contained approximately 32 million tons
of minable limestone that could be sold as aggregate. 	Mr. Stine’s DCF
model assumed a total sales volume of 27,963,169 tons over a 30-year
mine life. He calculated the fair market value of the limestone resource
on the Riddle Property to be between approximately $27.8 million and
$34.6 million.
4. 	Kyle Catlett
Kyle Catlett is a certified general real property appraiser in the
State of Alabama. We recognized Mr. Catlett as an expert in real estate
appraisal in Alabama.
Mr. Catlett used the before and after valuation method and
determined that the highest and best use of the Riddle Property before
the 	placement 	of 	the 	conservation 	easement 	was 	as 	a 	limestone
aggregate quarry. 	He used the income method known as the owner-
operator method to determine the before value of the Riddle Property.
His DCF analysis used a 15.5% discount rate and modeled a 30-year
mine 	life 	using 	the 	production 	schedule 	for 	the 	mined 	limestone
resources outlined by Mr. Stine.
Mr. Catlett used the income method known as the royalty method
to purportedly confirm the fair market value he determined using the
owner-operator method. 	He determined the fair market value of the
Riddle Property was $28,030,000 using the owner-operator method.7
5. 	Barry Shea
Barry 	Shea 	has 	served 	as 	an 	instructor 	for 	the 	Appraisal
Foundation’s Uniform Standards of Professional Appraisal Practice
(USPAP) instructor certification course and has been an AQB Certified
7 Mr. Catlett had a computational error in his original owner-operator DCF
table that reflected a higher fair market value of $31,160,000, but he corrected the
figure on the record at trial to $28,030,000. He made a similar error in his royalty
method fair market value calculation, which he corrected from $31,140,000 to
$28,020,000.
12
[*12] USPAP Instructor since 2002. 	We recognized Mr. Shea as an
expert on USPAP.
His testimony focused on the use of a DCF analysis to value real
property. 	Mr. Shea’s report concluded that a DCF method can be used
in the appraisal of land when the highest and best use is the generation
of income over a period of time.
6. 	Joe Howle
Joe 	Howle 	has 	over 	38 	years 	of 	professional 	experience 	in
environmental compliance, including two years at Vulcan Materials Co.
as an environmental specialist, and over 29 years as the environmental
manager of its Southern & Gulf Coast Division. 	We recognized Mr.
Howle as an expert in permitting and environmental compliance for
aggregate mining in Alabama.
Mr. Howle’s testimony focused on the permitting process for a
mine in Alabama. 	Mr. Howle concluded in his report that it was
reasonably likely that all the necessary permits could be obtained for
limestone mining on the Riddle Property from the Alabama Department
of Environmental Management within four to six months after the
submission of applications for those permits.
7. 	Derek Loveday
Derek Loveday is a geologist who works for Stantec. 	He has 32
years of experience in the mining industry. We recognized Mr. Loveday
as an expert in geology and mineral resource evaluation for aggregate
property.
Mr. Loveday’s testimony focused on the quality of the limestone
resource on the Riddle Property. 	He concluded that there is sufficient
technical 	evidence 	to 	conclude 	that 	the 	Riddle 	Property 	contains
limestone meeting ALDOT specifications that can be sold as aggregate.
B. 	Respondent’s Experts
1. 	Michael Rogers
Michael Rogers is a certified general real property appraiser in
the State of Alabama. 	We recognized Mr. Rogers as an expert in real
estate valuation.
13
[*13] Mr. Rogers concluded that the highest and best use of the Riddle
Property before it was encumbered by the conservation easement was
limited 	residential, 	agriculture, 	silviculture, 	and 	recreation 	with
potential for future mining on the tract. 	He used the before and after
valuation method to determine a fair market value of the conservation
easement on the Riddle Property. 	He concluded that the fair market
value of the Riddle Property before the conservation easement was
$670,000, 	the 	fair market 	value 	of 	the Riddle 	Property 	after the
conservation easement was $190,000, and the fair market value of the
conservation easement was $480,000.
Mr. Rogers relied on the comparable property sales method for his
valuation conclusion. He explained that in the absence of reliable data,
a credible use of the income approach to value property is not possible.
2. 	Brian Groff
Brian Groff is a mine engineer with more than 25 years of
experience in mine operations and mine consulting. We recognized Mr.
Groff as an expert in mining engineering, mineral evaluation, and
mineral valuation.
Mr. 	Groff 	prepared 	a 	report 	evaluating 	the 	technical 	and
economic feasibility of the Riddle Property for its potential use as a
quarry. 	He concluded that Riddle did not have enough information on
the date of valuation to evaluate the feasibility of a hypothetical quarry
operation on the Riddle Property.
Mr. Groff also prepared a rebuttal report to the expert reports of
Messrs. Gold, Howle, and Stine. 	Mr. Groff identified issues with the
mine plan developed by Mr. Gold, noted omissions by Mr. Howle of other
permits a hypothetical mine would require, and concluded that Mr.
Stine’s DCF model resulted in a gross overstatement of the net present
value of a hypothetical quarry business on the Riddle Property.
3. 	Neal Rigby
Neal 	Rigby 	has 	more 	than 	50 	years 	of 	experience 	in 	the
international mining industry. 	He currently works as a corporate
mining consultant and principal mining engineer. 	We recognized Dr.
Rigby as an expert in mining engineering, mineral resource and reserve
evaluation, and mine feasibility analysis.
14
[*14] He prepared a report on the feasibility of a proposed quarry on
the Riddle Property. 	Dr. Rigby concluded that the technical and
economic feasibility of developing and operating a quarry on the Riddle
Property was highly questionable.
He also prepared a rebuttal report to the expert reports of Messrs.
Gold, Howle, and Stine. In his rebuttal report, he identified issues with
Mr. Gold’s analysis of the limestone deposit on the Riddle Property.
4. 	Shannon Rentz
Shannon Rentz is a professional geologist licensed in Texas. She
is a member of the Geological Society of America and the Rocky
Mountain Association of Geologists. 	Currently, she is employed as a
geologist by the U.S. Department of the Interior. 	We recognized Ms.
Rentz as an expert in geology, mineral evaluation, and mineral market
analysis.
In her report, Ms. Rentz concluded that there were several
components of a complete and comprehensive market study that were
not met by Mr. Stine’s report. She further concluded it was unlikely that
the sales estimates presented by Mr. Stine could be met.
OPINION
I. 	Burden of Proof
The Commissioner’s determinations in a Notice of Deficiency or
adjustments in an FPAA are generally presumed correct, and the
taxpayer bears the burden of proving them erroneous. 	Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933); Republic Plaza Props.
P’ship v. Commissioner, 107 T.C. 94, 104 (1996). 	Deductions are a
matter of legislative grace, and taxpayers generally bear the burden of
proving their entitlement to the deductions claimed. INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992).
The Commissioner does not bear the burden of production with
respect 	to 	penalties 	and 	additions 	to 	tax 	in 	partnership-level
proceedings. 	See § 7491; see also Dynamo Holdings Ltd. P’ship v.
Commissioner, 150 T.C. 224, 234 (2018).
Section 7491 provides that the burden of proof on a factual issue
may 	shift 	to 	the 	Commissioner 	if 	the 	taxpayer 	satisfies 	specified
conditions. 	Among these conditions are that the taxpayer must have
15
[*15] “introduce[d] 	credible 	evidence 	with 	respect 	to 	[that] 	factual
issue.” § 7491(a)(1). 	When each party has satisfied its burden of
production, then the party supported by the weight of the evidence will
prevail, and thus a shift in the burden of proof has real significance only
in the event of an evidentiary tie. 	See Knudsen v. Commissioner, 131
T.C. 185, 189 (2008), supplementing T.C. Memo. 2007-340. 	We have
discerned no evidentiary tie on any relevant factual question and are
able to decide the issues here on the preponderance of the evidence. See,
e.g., Bordelon v. Commissioner, T.C. Memo. 2020-26, at *11.
Petitioner 	argues 	it 	has 	met 	the 	requirements 	of 	section
7491(a)(1) and (2), and respondent should bear the burden of proof.
Petitioner argues that it presented credible evidence of compliance with
the requirements of the Code and the Treasury Regulations through
exhibits 	and 	witness 	testimony 	and 	that 	it 	complied 	with 	all
substantiation 	requirements, 	maintained 	all 	required 	records,
cooperated 	with 	the 	IRS 	audit, 	facilitated 	site 	visits, 	provided
documents, and participated in interviews. We have rejected arguments
similar to those petitioner offers. 	See Paul-Adams Quarry Tr., LLC v.
Commissioner, 	T.C. 	Memo. 	2025-112, 	at 	*34; 	Beaverdam 	Creek
Holdings, LLC v. Commissioner, T.C. Memo. 2025-53, at *22–36. Even
if we had perceived an evidentiary tie, petitioner has not met the
requirements of section 7491 to shift the burden of proof.
II. 	Amount of the Deduction
A. 	Deductibility
Section 	170(a)(1) 	allows 	a 	deduction 	for 	any 	charitable
contribution made during the tax year. 	Generally, no deduction is
allowed for a contribution of less than a donor’s entire interest in a
property. § 170(f)(3)(A). Section 170(f)(3)(B)(iii) makes an exception to
this general rule for a contribution of a partial interest in property that
constitutes 	a 	“qualified 	conservation 	contribution.” 	A 	“qualified
conservation contribution” is defined as a contribution made (1) of a
qualified 	real 	property 	interest, 	(2) 	to 	a 	qualified 	organization,
(3) exclusively for conservation purposes. § 170(h)(1).
B. 	General Valuation Principles
If 	the 	taxpayer makes 	a 	charitable 	contribution 	other than
money, the eligible deduction is generally equal to the fair market value
of the property at the time of the donation. See Savannah Shoals, LLC
v. Commissioner (Savannah Shoals II), 182 F.4th 1314, 1322 (11th Cir.
16
[*16] 2026), aff’g Savannah Shoals, LLC v. Commissioner (Savannah
Shoals I), T.C. Memo. 2024-35; Treas. Reg. § 1.170A-1(a), (c)(1). 	The
regulations define fair market value to be “the price at which the
property would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or sell and both having
reasonable knowledge of relevant facts.” 	Treas. Reg. § 1.170A-1(c)(2).
The value of property on a given date is a question of fact to be resolved
on the basis of the entire record. Kaplan v. Commissioner, 43 T.C. 663,
665 (1965).
To 	support 	their 	positions 	regarding 	valuation, 	the 	parties
retained experts. 	We assess an expert’s opinion in the light of the
expert’s qualifications and the evidence in the record. 	See Parker v.
Commissioner, 86 T.C. 547, 561 (1986). 	When experts offer competing
opinions, 	we 	weigh 	them 	by 	examining 	the 	factors 	the 	experts
considered in reaching their conclusions. See Casey v. Commissioner, 38
T.C. 357, 381 (1962). We are not bound by an expert’s opinion that we
find contrary to our judgment, and we can accept an expert’s opinion in
its entirety or accept aspects of the expert’s testimony that we find
reliable. Ranch Springs, LLC v. Commissioner, 164 T.C. 93, 128 (2025)
(first citing Helvering v. Nat’l Grocery Co., 304 U.S. 282, 295 (1938); and
then citing Boltar, L.L.C. v. Commissioner, 136 T.C. 326, 333–40 (2011));
Parker, 86 T.C. at 561. 	We may determine fair market value on the
basis of our own examination of the evidence in the record. 	Silverman
v. Commissioner, 538 F.2d 927, 933 (2d Cir. 1976), aff’g T.C. Memo.
1974-285.
An established market does not exist typically for conservation
easements. 	See Symington v. Commissioner, 87 T.C. 892, 895 (1986).
Courts usually value easements indirectly using a “before and after”
approach, 	seeking 	to 	determine 	the 	reduction 	in 	property 	value
attributable to the easement. 	See Treas. Reg. § 1.170A-14(h)(3)(i).
Under the before and after approach, the value of the easement is
deemed equal to the fair market value of the real estate before the
easement was granted minus the fair market value of the real estate as
encumbered 	by 	the 	easement. 	See 	TOT 	Prop. 	Holdings, 	LLC 	v.
Commissioner, 1 F.4th 1354, 1368–69 (11th Cir. 2021); Treas. Reg.
§ 1.170A-14(h)(3)(i). Experts for both parties used the before and after
valuation approach to value the easement.
In determining the fair market value of an easement we need to
take into account the highest and best use of the property on the
valuation date. 	Stanley Works & Subs. v. Commissioner, 87 T.C. 389,
17
[*17] 400 (1986); Treas. Reg. § 1.170A-14(h)(3)(i) and (ii). According to
the Eleventh Circuit, the Supreme Court “instructed that ‘[t]he highest
and most profitable use for which the property is adaptable and needed
or likely to be needed in the reasonably near future,’ while not itself ‘the
measure of value,’ was relevant to the ‘extent that the prospect for such
use affects the market value.’” 	Savannah Shoals II, 182 F.4th at 1328
(emphasis added) (quoting Olson v. United States, 292 U.S. 246, 255
(1934)); see also Symington, 87 T.C. at 897; Paul-Adams Quarry, T.C.
Memo. 2025-112, at *43 (discussing Olson). A use that is a higher value
than the current use “requires both ‘closeness in time’ and ‘reasonable
probability.’” Hilborn v. Commissioner, 85 T.C. 677, 689 (1985). Taking
into 	account 	the 	highest 	and 	best 	use 	does 	“not 	eliminate 	the
requirement that a hypothetical willing buyer would purchase the
subject property for the indicated value.” Boltar, 136 T.C. at 336.
C. 	Before Value of the Riddle Property
1. 	Valuation Approaches
Courts 	often 	consider 	one 	or 	more 	of 	three 	approaches 	to
determine the fair market value of real property: (1) the market
approach, also known as the sales comparison or comparable property
sales approach, (2) the income approach, and (3) a cost or asset-based
approach. 	See Bank One Corp. v. Commissioner, 120 T.C. 174, 306
(2003), aff’d in part, vacated in part, and remanded sub nom. JPMorgan
Chase & Co. v. Commissioner, 458 F.3d 564 (7th Cir. 2006).
For vacant, unimproved property, the comparable property sales
approach is “generally the most reliable method of valuation.” Estate of
Spruill v. Commissioner, 88 T.C. 1197, 1229 n.24 (1987) (quoting Estate
of Rabe v. Commissioner, T.C. Memo. 1975-26, 34 T.C.M. (CCH) 117,
119, aff’d, 566 F.2d 1183 (9th Cir. 1977) (unpublished table decision)).
The comparable property sales approach determines fair market value
by considering the sale prices of similar properties sold in arm’s-length
transactions close in time to the valuation date. 	Savannah Shoals I,
T.C. Memo. 2024-35, at *36. 	Because no two properties are identical,
the appraiser must adjust the sale prices of the comparable properties,
to account for differences between them, and the sales terms. Id.
The income method determines a property’s fair market value by
discounting to present value the expected future income from the
property. See, e.g., Chapman Glen Ltd. v. Commissioner, 140 T.C. 294,
327 (2013). Income-based methods are not favored when valuing vacant
18
[*18] land 	with 	no 	income-producing 	history 	because 	they 	are
inherently speculative and unreliable. Ranch Springs, 164 T.C. at 135
(citing 	Chapman 	Glen 	Ltd., 	140 	T.C. 	at 	327); 	see 	also 	Excelsior
Aggregates, 	LLC 	v. 	Commissioner, 	T.C. 	Memo. 	2024-60, 	at 	*33;
Savannah Shoals I, T.C. Memo. 2024-35, at *36.
The cost or asset-based approach is based on the principle of
substitution. 	It “derives the value of a property by estimating the
reproduction 	or 	replacement 	cost 	of 	the 	improvements, 	deducting
therefrom the estimated depreciation, and then adding the market value
of the land.” Talkington v. Commissioner, T.C. Memo. 1998-412, slip op.
at 22. Neither party argued that method was appropriate.
The 	parties’ 	valuation 	experts 	used 	different 	approaches 	to
determine the before value of the Riddle Property. Respondent’s expert
Mr. Rogers used the comparable property sales approach. 	Petitioner’s
expert Mr. Catlett used the income method known as the owner-
operator method to determine the fair market value and used the income
method known as the royalty method to purportedly confirm the fair
market value he determined using the owner-operator method. 	Mr.
Catlett’s 	valuation 	of 	the 	Riddle 	Property 	relied 	on 	the 	mineral
valuation developed by petitioner’s expert Mr. Stine, who also used the
income method to estimate the value of the minerals on the Riddle
Property. Both the comparable property sales approach and the income
method seek to determine the fair market value of a property upon the
basis of its highest and best use.
2. 	Highest and Best Use
A property’s highest and best use must be reasonably probable
and result in the property’s highest value. 	See Whitehouse Hotel Ltd.
P’ship v. Commissioner, 139 T.C. 304, 331 (2012), supplementing 131
T.C. 112 (2008), aff’d in part, vacated and remanded in part, 755 F.3d
236 (5th Cir. 2014). 	We have focused on whether a proposed use is
(1) legally permissible, (2) physically possible, (3) financially feasible,
and (4) maximally productive. Ranch Springs, 164 T.C. at 136; see also
Buckelew Farm, LLC v. Commissioner, T.C. Memo. 2024-52, at *52,
aff’d, No. 24-13268, 2025 WL 2502669 (11th Cir. Sep. 2, 2025). 	As the
Eleventh Circuit has clarified, however, “strict application” of these
factors is not required. See Savannah Shoals II, 182 F.4th at 1329. “[I]n
determining whether the evidence demonstrates a proposed use is
‘reasonable and probable’ or instead is ‘too risky to qualify,’” id. at 1328–
29 (quoting TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th at 1369),
19
[*19] the Eleventh Circuit has considered “whether it was ‘reasonably
probable’ that a zoning body would approve a proposed use; whether a
proposed use was ‘needed or likely to be needed in the reasonably near
future’ (a ‘market-demand’ inquiry); and whether the physical features
and location of a property made the proposed use likely,” id. at 1328
(quoting Palmer Ranch Holdings Ltd. v. Commissioner, 812 F.3d 982,
996–97, 997–99 	(11th 	Cir. 	2016), 	aff’g 	in 	part, 	rev’g 	in 	part 	and
remanding T.C. Memo. 2014-79).
Petitioner contends that the Riddle Property’s highest and best
use is as a limestone aggregate quarry, while respondent contends its
highest and best use is limited residential, agriculture, silviculture, and
recreation with potential for future mining on the tract. ECS drilled on
the Riddle Property for its report issued August 7, 2017, to purportedly
confirm the quality of the limestone, but as of December 8, 2017, the
Riddle Property had not been used for a mining purpose.
A property’s current use is presumed to be its highest and best
use absent proof to the contrary because property owners have an
economic incentive to put their land to its most productive use. 	Ranch
Springs, 164 T.C. at 136; see also United States v. Buhler, 305 F.2d 319,
328 (5th Cir. 1962) (“Ordinarily, the highest and best use for property
sought to be condemned is the use to which it is subjected at the time of
the taking. 	This is true because economic demands normally result in
an owner’s putting his land to the most advantageous use.”).8
Additionally, “mere speculation and conjecture” cannot inform
“the 	ascertainment 	of 	value,” 	and 	courts 	should 	“‘exclude[] 	from
consideration’ any ‘[e]lements affecting value that depend on events or
combinations of occurrences which, while within the realm of possibility,
are not fairly shown to be reasonably probable.’” 	Savannah Shoals II,
182 F.4th at 1328 (alterations in original) (quoting Olson, 292 U.S.
at 257); see also Corning Place Ohio, LLC v. Commissioner, 158 F.4th
715, 723 (6th Cir. 2025) (“[S]peculative and remote possibilities cannot
become a guide for the ascertainment of value.” (quoting United States
ex rel. Tenn. Valley Auth. v. 1.72 Acres of Land, 821 F.3d 742, 749 (6th
Cir. 2016))), aff’g T.C. Memo. 2024-72; see also Lontrac Enters., LLC v.
Commissioner, 	T.C. 	Memo. 	2026-108, 	at 	*24. 	“Because 	of 	these
qualifications, the highest and best use may not be the maximally
8 Decisions from the U.S. Court of Appeals for the Fifth Circuit issued before
October 1, 1981, are binding precedent in the Eleventh Circuit. See Bonner v. City of
Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
20
[*20] profitable 	imaginable 	use.” 	Jackson 	Crossroads 	LLC 	v.
Commissioner (Jackson Crossroads II), Nos. 25-10744, et al., 2026 WL
822261, at *2 (11th Cir. Mar. 25, 2026), aff’g Jackson Crossroads, LLC
v. Commissioner (Jackson Crossroads I), T.C. Memo. 2024-111.9
The 	highest 	and 	best 	use 	factor 	“is 	an 	element 	in 	the
determination of fair market value.” Boltar, 136 T.C. at 336. 	But it is
only one element. Highest and best use does not supersede or eliminate
the most important prerequisite in determining fair market value,
namely, that “a hypothetical willing buyer would purchase the subject
property for the indicated value.” 	Id.; see Corning Place, T.C. Memo.
2024-72, at *41; Treas. Reg. § 1.170A-1(c)(2).
Where the parties propose different uses, we consider whether
“‘there is too high a chance that the property will not achieve the
proposed use in the near future,’ in which case ‘the use is too risky to
qualify.’” 	TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th at 1369
(quoting 	Palmer 	Ranch 	Holdings 	Ltd. 	v. 	Commissioner, 	812 	F.3d
at 1000). 	We have applied this principle in the mining context on
several occasions:
Where the asserted highest and best use of property is the
extraction of minerals, the presence of the mineral in a
commercially exploitable amount and the existence of a
market “that would justify its extraction in the reasonably
foreseeable future” must be shown. 	United States v. 69.1
Acres of Land, [942 F.2d 290, 292 (4th Cir. 1991)]. “There
must be some objective support for the future demand,
including volume and duration. Mere physical adaptability
to a use does not establish a market.” 	United States v.
Whitehurst, 337 F.2d 765, 771–772 (4th Cir. 1964); see also
United States v. 494.10 Acres of Land, 592 F.2d 1130, 1132
(10th Cir. 1979) (stating that “if the ‘future’ is beyond or
very much beyond the ‘near future,’ the 	use becomes
speculative”).
J L Mins., LLC v. Commissioner, T.C. Memo. 2024-93, at *41–42
(quoting Esgar Corp. v. Commissioner, T.C. Memo. 2012-35, 2012 WL
9 Eleventh Circuit Rule 36-2 provides, in relevant part, that “[u]npublished
opinions are not considered binding precedent, but they may be cited as persuasive
authority.” We cite Jackson Crossroads II for that purpose.
21
[*21] 371809, at *8, aff’d, 744 F.3d 648 (10th Cir. 2014)); see also
Excelsior Aggregates, T.C. Memo. 2024-60, at *35.
In their highest and best use analyses, both Mr. Catlett and Mr.
Rogers considered whether potential uses of the Riddle Property were
(1) legally permissible, (2) physically possible, (3) financially feasible,
and (4) maximally productive. 	Mr. Rogers determined the highest and
best use of the Riddle Property was limited residential, agriculture,
silviculture, and recreation with potential for future mining on the tract.
Mr. Catlett determined the highest and best use of the Riddle Property
was as a limestone aggregate quarry.
Mr. Rogers determined that mining was a legally permissible use
with the proper permitting and that mining was a physically possible
use 	of 	the 	Riddle 	Property. 	Respondent 	contends, 	however, 	that
operating a limestone quarry on the Riddle Property was not financially
feasible. 	We agree with respondent. 	Petitioner failed to prove that
operating a quarry on the Riddle Property was financially feasible or
reasonably likely to occur in the near future.
a. 	Issues Underlying the Catlett Report
Petitioner relies on Mr. Catlett’s valuation report in asserting
that the Riddle Property’s development for use as a limestone quarry
was financially feasible. Mr. Catlett relied on the reports of petitioner’s
other experts Mr. Gold and Mr. Stine to make this determination.
Respondent’s experts pointed to flaws in Mr. Gold’s mine plan and Mr.
Stine’s market analysis that undermine the reliability of those reports.
Mr. Gold’s report relied on the ECS Report, and a geological map
prepared by the Geological Society of Alabama. 	The ECS Report
contained data from only two exploratory borings with rock coring on
the Riddle Property. 	Both of the core samples are outside Mr. Gold’s
proposed mining area, and there is no testing data from Mr. Gold’s
proposed mining area. 	Respondent’s expert Mr. Groff noted that
demonstrating geologic continuity would require a minimum of three
core samples, all drilled to the elevation of the mine pit bottom, to
correlate strata, identify deleterious layers, and define the orientation
of the limestone deposit.
Mr. Groff also noted that the size of the plant proposed in Mr.
Gold’s 	mine 	plan 	was 	“insufficient 	for 	a 	reasonably 	sized 	plant,
especially one proposed to produce 1.5 million tons per year” as Mr.
Stine’s DCF analysis forecasted. The plant area indicated in Mr. Gold’s
22
[*22] plan was between four and five acres. 	Mr. Groff identified six
surrounding limestone quarries, whose 2017 production numbers were
between 248,812 tons and 748,599 tons. The smallest area any of those
quarries had for a plant was 14 acres. 	Five of the six quarries he
identified had plant areas of at least 20 acres, which Mr. Groff suggested
as a target minimum plant area. 	Mr. Gold’s proposed plant area was
roughly 	one-third 	the 	size 	of 	the 	smallest 	plant 	area 	among 	the
surrounding quarries. Mr. Groff concluded that Mr. Gold’s plan did not
allow for enough physical space to place a crushing and screening plant
and stockpiles.
Mr. Stine’s valuation of the mineral resource on the Riddle
Property purported to establish the amount of demand for limestone
aggregate in the market that a mine on the Riddle Property could
capture. 	Both parties’ experts agreed that transportation costs play a
large part in the price of aggregates delivered, and that distance to sites
of demand affects a quarry’s competitiveness. 	To make his demand
estimate, Mr. Stine used demand data from the Dodge Construction
Network and assigned an estimated market capture percentage for
Morgan County and several of the surrounding counties on the basis of
the location of the Riddle Property and the road miles to those counties.
He estimated a market capture of 15% for Morgan County.
Respondent’s expert Ms. Rentz criticized Mr. Stine’s assignment
of market capture percentages because it was unclear how Mr. Stine
arrived at these market capture percentages. Ms. Rentz also criticized
Mr. Stine’s analysis because his county market capture percentages
were based on the Riddle Property’s distance to county borders rather
than distance to population centers in the counties.
Ms. Rentz further criticized his market projection because the
demand estimate provided by Mr. Stine was not reconciled with the
actual production numbers of the competing quarries. ALDOL provides
yearly production data for quarries within Alabama, which Mr. Stine
acknowledged in his report. Ms. Rentz observed that the total limestone
production quantity of the quarries was more than double the demand
estimate cited by Mr. Stine. 	She noted that these numbers indicate
there was not “a huge unmet demand” that the estimated production of
a hypothetical quarry on the Riddle Property could fill. 	Mr. Catlett’s
estimate for the total demand for aggregate in the market area in 2017
was between 6,336,000 tons and 8,173,000 tons, while Mr. Stine’s
estimate for total demand in the same year was 4,406,130 tons. 	The
23
[*23] wide gap between 	petitioner’s 	own experts’ reports 	does 	not
inspire confidence that their analyses stand on solid ground.
Respondent’s expert Mr. Rigby noted that the area within 25–50
miles of the property was “already served by multiple large, integrated
producers with established positions in the very same counties Mr. Stine
targets” and that “[m]any of these quarries are closer to key demand
centers 	such 	as 	Huntsville 	and 	Decatur, 	are 	integrated 	with
downstream asphalt and concrete plants, and can spread fixed costs and
logistics across multi-site networks, giving them structural delivered-
cost advantages.” 	Regarding the six quarries Mr. Groff identified
surrounding the Riddle Property, Mr. Groff explained that unlike those
quarries a hypothetical quarry on the Riddle Property had no rail or
barge access to distant markets, was not an established and capitalized
mining company, did not have additional businesses it would vertically
integrate with, such as a concrete or asphalt business, and was not
closer to population growth areas than the other quarries. The existence
of better located and experienced mining operations in the local market
raises serious doubts about whether a hypothetical mine on the Riddle
Property could claim market share from competition and earn a profit.
Petitioner argues that the entrance of five new quarries in the
relevant market after 2017 supports Mr. Stine’s and Mr. Catlett’s
contentions 	of 	growing 	demand 	for 	aggregate 	and 	undermines
respondent’s position that the market for aggregate was saturated. See
Williford v. Commissioner, T.C. Memo. 1992-450, 1992 WL 188895,
at *10 (“Subsequent events or facts may be used to corroborate an
appraisal that is based on facts known as of the valuation date.”).
Petitioner ignores the fact that the newly operating quarries were closer
than the Riddle Property to primary roads, secondary roads, and key
demand centers.
Considering the criticisms of respondent’s experts, we do not find
Mr. Stine’s market analysis to be reliable, which leads us to conclude
Mr. Catlett’s determination was flawed that the Riddle Property’s
highest and best use was as a limestone aggregate quarry. 	Petitioner
has not established the existence of a market for limestone produced by
the Riddle Property.
Even if we had found the reports of petitioner’s other experts to
be reliable, Mr. Catlett’s determination of financial feasibility fails on
his own stated grounds. 	Mr. Catlett made a “check of reasonableness”
as to the financial feasibility of a limestone aggregate quarry on the
24
[*24] Riddle 	Property 	by 	calculating 	the 	net 	present 	value 	of 	a
hypothetical 	quarry’s 	first 	six 	years 	of 	operation. 	He 	had 	a
computational error in his calculation that overstated the net present
value of cashflows for those years. 	When the computational error was
corrected, the net present value of cashflows for the quarry’s first six
years of operation was −$778,618. Mr. Catlett testified that a negative
cashflow would suggest that mining the Riddle Property was not
financially feasible.
In addition to the issues with petitioner’s projections and Mr.
Catlett’s determinations, we are not convinced that it was reasonably
probable to raise the additional capital required for the development of
the Riddle Property as a limestone quarry. 	The PPM warned that the
development 	option 	“would 	probably 	require 	significant 	additional
capital” and that only investors “who are not focused on maximizing the
potential cash return” should consider purchasing interests in RAG.
There is no credible evidence that the syndicators of the partnership
interests or the purchasers of the partnership interests contemplated
development of the Riddle Property as a mine as a legitimate option,
casting 	further 	doubt 	that 	the 	market 	had 	an 	appetite 	for 	such
investment. 	The lack of reasonable probability that a mine would be
funded on the Riddle Property does not meet the test that the highest
and best use is mining. See Hilborn, 85 T.C. at 689.
b. 	Mr. Rogers’s Highest and Best Use Analysis
Respondent’s expert Mr. Rogers conducted a market analysis of
Morgan County to “identify which submarkets of the Morgan County
economy might have use of undeveloped acreage” in the area of the
Riddle Property. 	Mr. Rogers determined that Morgan County has not
historically been a significant factor in Alabama limestone production.
On the basis of his analysis, Mr. Rogers concluded it was not reasonably
probable that the Riddle Property’s highest and best use was as a
limestone mine.
Petitioner argues that respondent’s experts failed to provide
quantitative analysis of the financial feasibility of a mine on the Riddle
Property. 	No such quantitative analysis is required; the qualitative
factors considered by Mr. Rogers and respondent’s other experts are
sufficient to undermine the viability of the proposed highest and best
use of mining. See Savannah Shoals II, 182 F.4th at 1331.
25
[*25] Mr. Rogers considered the condition of the Riddle Property before
the placement of the easement. 	He determined that, of the legally
permissible and physically possible uses, it was financially feasible for
the Riddle Property to continue to be used for recreation, agriculture,
and silviculture. 	He observed a scattering of homes throughout the
neighborhood of the Riddle Property, and determined there was some
potential for limited development of the Riddle Property.
c. 	Highest and Best Use Conclusion
We presume a property’s highest and best use to be its current
use. Ranch Springs, 164 T.C. at 136 (first citing Buhler, 305 F.2d at 328;
and then citing Mountanos v. Commissioner, T.C. Memo. 2013-138,
at *7, supplemented by T.C. Memo. 2014-38, aff’d, 651 F. App’x 592 (9th
Cir. 	2016)). 	The 	evidence 	does 	not 	show 	“closeness 	in 	time” 	or
“reasonable probability” that the Riddle Property would be used as a
limestone aggregate mine. 	Hilborn, 85 T.C. at 689. 	Mr. Rogers
investigated the area and considered legal, physical, and financial
factors to determine that the Riddle Property’s highest and best use was
limited 	residential, 	agriculture, 	silviculture, 	and 	recreation 	with
potential for future mining on the tract. We agree.
3. 	Comparable Property Sales Approach
Respondent’s 	expert 	Mr. 	Rogers 	used 	the 	sales 	comparison
approach, also known as the comparable property sales approach, to
value the Riddle Property. 	The comparable property sales approach
“values property by comparing it to similar properties sold in arm’s-
length transactions around the valuation date.” 	Savannah Shoals I,
T.C. Memo. 2024-35, at *36. “In the case of vacant, unimproved property
. . . the comparable sales approach is ‘generally the most reliable method
of valuation . . . .’” 	Oconee Landing Prop., LLC v. Commissioner, T.C.
Memo. 2024-25, at *67 (quoting Estate of Spruill, 88 T.C. at 1229 n.24),
supplemented by T.C. Memo. 2024-73.
Mr. Rogers sought recent sales of properties similar to the Riddle
Property. 	He drew data on sales of properties from the following
sources: the Morgan County Alabama Revenue Commissioner’s website;
the Chattooga County and Floyd County, Georgia, government websites;
the Georgia Superior Court Clerks’ Cooperative Authority; and the
Talladega County and Calhoun County, Alabama, government websites.
He also consulted data from other real estate appraisers and real estate
brokers in the region.
26
[*26] Mr. Rogers considered the conditions under which each property
was sold, the property rights conveyed, and the potential for excess
buyer 	expenditures. 	He 	analyzed 	the 	comparables 	and 	the
corresponding physical and locational attributes. 	He then noted the
dissimilarities of the properties with respect to the effect on the sale
prices. 	He determined that six sales of properties in Morgan County
were sufficiently similar to be used as properties comparable to the
Riddle Property in the before condition.
The six comparable properties Mr. Rogers selected ranged in sale
price from $1,839 per acre to $2,911 per acre, for an average sale price
of $2,506 per acre. 	Mr. Rogers conducted a qualitative analysis of the
comparables, and determined Comparable Sale One, which sold for
$2,911 per acre, 	was 	rated as 	qualitatively similar to 	the Riddle
Property, while Comparables Two through Six, which sold for $1,839 per
acre to $2,848 per acre, were rated as qualitatively inferior. On the basis
of his analysis, Mr. Rogers determined the before value of the Riddle
Property to be $2,898 per acre, for a value of $670,000.
Petitioner criticizes Comparable Sale Three because Mr. Rogers
indicated Comparable Sale Three was a sale of real property with fee
simple property rights. Petitioner argues that because Comparable Sale
Three was structured as a capital contribution to Edge Rock, LLC, and
a subsequent sale of membership interests in Edge Rock, LLC, those
membership interests carry entity level-attributes, governance rights,
and limited liability that are not part of a fee simple conveyance, and
the purchase price does not reflect a per-acre price for the underlying
land. In many valuation cases capital contributions to partnerships and
other passthrough entities may not be suitable for use as comparable
property transactions because they do not truly occur at arm’s length.
See Paul-Adams Quarry, T.C. Memo. 2025-112, at *77. Here, however,
the record reflects that the capital contribution to Edge Rock, LLC, was
one step in a transaction designed to transfer the underlying property
to 	new 	hands, 	and 	the 	sale 	price 	is 	therefore 	informative of 	the
property’s value. Id.
Petitioner criticizes Mr. Rogers’s other comparable property sales
on the grounds that he “ignored the Riddle Property’s minerals,” and
that some of the properties he selected lacked the potential for future
mining. We find Mr. Rogers’s valuation to be supported not only by the
comparable property transactions he selected, but also by the members
of Freeman Five’s sale of the partnership interests in Quorum Holdings.
The purchase of an interest in a partnership can be “reflective of the
27
[*27] price that the market would pay for [a property], especially when
the ownership interest was nearly 100% and the only asset held by the
[p]artnership was the [property] itself.” 	Buckelew Farm, T.C. Memo.
2024-52, at *56; see also Savannah Shoals II, 182 F.4th at 1332 n.15;
TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th at 1371 n.23;
Beaverdam Creek, T.C. Memo. 2025-53, at *61–62 (applying this concept
to assign significant valuation weight to a 97% sale of partnership
interests).
Only three months before the donations of the easement and fee
simple interest, Freeman Five agreed to contribute the 880.56 acres of
Tracts One, Two, and Three of the Freeman Five Parent Tract to
Quorum Holdings in exchange for a 100% interest in Quorum Holdings.
Tract Two is the Riddle Property, which consists of 231.22 acres. 	The
real estate sales validation form filed in connection with the transfer of
the 880.56 acres of Tracts One, Two, and Three lists the combined value
of those tracts as $2,236,175. 	Pursuant to the same agreement, the
members 	of 	Freeman 	Five, 	with 	Mr. 	Freeman 	signing 	as 	their
representative, sold 98% of their partnership interests in Quorum
Holdings to Longleaf for $2,236,175. Grossing up Longleaf’s ownership
percentage to 100%, the 880.56 acres of the three combined tracts were
thus valued at roughly $2,281,811, or $2,591 per acre. 	See Oconee
Landing, T.C. Memo. 2024-25, at *71–72 (citing TOT Prop. Holdings,
LLC v. Commissioner, 1 F.4th at 1368). 	Mr. Rogers noted that he
considered this sale as support for his unit value range conclusion,
though he did not use it as a direct comparable.
We have previously stated that “the degree to which the purchase
of an interest in a partnership whose sole asset is a piece of property
reflects the fair market value of the property varies by situation.” Lake
Jordan Holdings, LLC v. Commissioner, T.C. Memo. 2025-123, at *40
n.18. 	The record reflects that the sale of the partnership interests in
Quorum Holdings was an arm’s-length transaction. The record further
reflects that Mr. Freeman understood the real estate market. The sale
of the partnership interests in Quorum Holdings was not one “where the
value of the partnership interest is derived from a capital raise that
contemplates paying for extensive services in addition to funding the
acquisition of the interest in the entity holding the relevant property.”
Id.; see also Hancock Cnty. Land Acquisitions, LLC v. Commissioner,
T.C. Memo. 2026-28, at *36 n.9. 	Even considering that the Riddle
Property was only a portion of the land conveyed in the transaction, the
sale of the partnership interests is probative of the Riddle Property’s fair
market value.
28
[*28] While 	Mr. 	Rogers 	did not 	use 	the 	conveyance 	of 	the 	three
combined tracts as a direct comparable because the combined tracts
were so different in size from the Riddle Property, he considered the
transaction to support his unit value range. 	Meanwhile, Mr. Catlett
made no attempt to reconcile this conveyance with his valuation despite
being aware of it. His report simply states that he did not “determine[]
the primary reasons for the substantial difference between [the] prior
purchase price of the larger property as compared to my concluded fair
market value for the subject . . . . It is possible that the seller’s limited
knowledge of all relevant facts contributed to the sales price.” 	The
record does not reflect that Mr. Freeman had a limited knowledge of the
relevant facts. The Eleventh Circuit has stated that arm’s-length sales
such as this one are “‘overwhelmingly significant’ evidence” of the value
of an easement. 	Savannah Shoals II, 182 F.4th at 1332 n.15 (quoting
TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th at 1371).
The evidence supports Mr. Rogers’s determination that the Riddle
Property 	was 	worth 	$670,000. 	We 	therefore 	adopt 	Mr. 	Rogers’s
valuation of $670,000 as the before value of the Riddle Property.
4. 	Income Approach
Mr. Catlett dismissed the comparable property sales approach
because he claimed that the comparable property sales approach was
difficult to apply to properties with a highest and best use of mining. He
employed the income method to determine the before value of the Riddle
Property. 	The 	income 	method 	determines 	fair 	market 	value 	by
discounting to present value the expected future income from the
property. See, e.g., Chapman Glen Ltd., 140 T.C. at 327.
Two versions of the income approach, both employing a DCF
methodology, have been used in SCE cases involving land with mining
as the alleged highest and best use. 	The first is the “owner-operator
method.” 	Under this approach, the pre-easement value of the land is
determined by discounting to present value the cashflows an owner-
operator supposedly 	could derive 	by constructing 	and operating a
mining business on the property. 	See N. Donald LA Prop., LLC v.
Commissioner, T.C. Memo. 2026-19, at *54–55. 	The second is the
“royalty income method.” This method posits that the landowner would
lease the land to a mine operator, then determines the land’s pre-
easement value by calculating the discounted present value of the
royalty payments the landowner might receive from the operator. Id.
29
[*29] Mr. Catlett used the first of these methods—the owner-operator
method—to determine the value of the Riddle Property before the
conservation easement was $28,030,000, or $121,227 per acre. He used
the royalty method to purportedly confirm the fair market value he
determined using the owner-operator method.
Mr. Catlett determined the highest and best use of the Riddle
Property was as a limestone quarry. Petitioner failed to establish that
the use of the Riddle Property as a limestone quarry was financially
feasible or reasonably likely to occur in the near future. 	Mr. Catlett’s
before value of the Riddle Property of $28,030,000 would fail on this
ground alone. 	Previously, we have held that the use of a DCF method
is erroneous where it equates the value of raw land with the net present
value of a hypothetical limestone business conducted on the land. 	See
Piton Holdings, LLC v. Commissioner, No. 637-23, 167 T.C., slip op.
at 34 (July 15, 2026); Ranch Springs, 164 T.C. at 151–53; Beaverdam
Creek, T.C. Memo. 2025-53, at *36. Even if we were to conclude that the
highest and best use of the Riddle Property was as a limestone mine,
Mr. Catlett’s before value of $28,030,000 would fail because it makes the
same error.
Mr. Catlett’s analysis is not a novel approach. 	This Court has
addressed and rejected repeatedly the use of the income method to value
mineral properties with no income-producing history in conservation
easement cases. Piton Holdings, 167 T.C., slip op. at 34; Ranch Springs,
164 T.C. at 151; Harman Road Prop., LLC v. Commissioner, T.C. Memo.
2026-23, at *42; N. Donald LA Prop., T.C. Memo. 2026-19, at *59;
Jackson Stone S., LLC v. Commissioner, T.C. Memo. 2025-96, at *104–
05; Green Valley Invs., LLC v. Commissioner, T.C. Memo. 2025-15,
at *31; Jackson Crossroads I, T.C. Memo. 2024-111, at *41; J L Mins.,
T.C. Memo. 2024-93, at *64–65; Excelsior Aggregates, T.C. Memo. 2024-
60, 	at 	*43–44. 	Mr. 	Catlett 	performed 	several 	of 	these 	rejected
valuations. 	See Piton Holdings, 167 T.C., slip op. at 34; N. Donald LA
Prop., T.C. Memo. 2026-19, at *59.
We see no difference in Mr. Catlett’s use of the owner-operator
method here. Neither does Mr. Catlett. When asked at trial, Mr. Catlett
did not materially distinguish the application of the owner-operator
method in this case from his rejected valuation in North Donald.
Petitioner 	contends 	that 	Mr. 	Catlett’s 	methodology 	valued 	the
underlying land rather than a hypothetical business operating on the
Riddle Property. 	But it is clear from Mr. Catlett’s report that he
conducted an evaluation of the projected income from a hypothetical
30
[*30] mining business on the Riddle Property using speculative inputs
and then attributed that discounted value of the hypothetical mining
business to the value of the Riddle Property itself.
Income capitalization methods are most reliable when used to
determine the value of an existing business with a track record of
income, expenses, profits, and growth rates because “[a] historical track
record provides real-world inputs that supply a plausible basis for
projecting future revenue. See Whitehouse Hotel, 139 T.C. at 325 (noting
that the income approach ‘has been judged an unsatisfactory valuation
method for property that does not have a track record of earnings’
(quoting Whitehouse Hotel, 131 T.C. at 153)).” Excelsior Aggregates, T.C.
Memo. 2024-60, at *43–44; see also J L Mins., T.C. Memo. 2024-93,
at *61. There is no such historical record for the Riddle Property.
A valuation analysis based on a DCF can be highly speculative
because “[r]elatively minor changes in only a few of [an expert’s]
assumptions [can] have large bottom-line effects.” 	Ranch Springs, 164
T.C. at 157 (quoting Whitehouse Hotel, 139 T.C. at 323). 	Mr. Catlett’s
report’s reliance upon the reports of Mr. Gold and Mr. Stine undermined
its reliability as to both highest and best use and value. We have already
discussed the issues with the unrealistic demand analysis in Mr. Stine’s
report, as well as Mr. Catlett’s failure to reconcile the previous sale of
interests in the Riddle Property with his valuation. Mr. Catlett further
made unrealistic assumptions about the production of a hypothetical
mine on the Riddle Property.
Mr. Catlett assumed a hypothetical quarry on the Riddle Property
would sell more limestone each year that it continued to be in operation.
He projected that a quarry on the Riddle Property would sell 152,600
tons of limestone in 2019, that it would sell nearly 750,000 tons five
years later in 2024, and that sales would increase each year until the
quarry sold 1,486,241 tons in 2046. 	Mr. Groff included data in his
reports detailing the actual production of limestone by established
quarries that would compete with a quarry on the Riddle Property. The
data show that from 2010–17, none of these quarries reported year-over-
year increases in production.
Mr. Groff further noted in his rebuttal report that of the six
quarries surrounding the Riddle Property, the average quarry produced
between only 300,000 and 400,000 tons in 2017. He observed that, even
leaving all other variables the same, if the production of a hypothetical
quarry on the Riddle Property were capped at 460,000 tons per year,
31
[*31] then Mr. Stine’s valuation model, on which Mr. Catlett’s report
was 	based, 	would 	yield 	a 	negative 	net 	present 	value. 	These
considerations combined with the fact that the other quarries in the area
enjoyed locational and operational advantages lead us to conclude Mr.
Catlett’s report does not sufficiently consider the risks with operating a
mine; it is a “rosy projection[]” that contemplates only success. See J L
Mins., T.C. Memo. 2024-93, at *63–64.
Independent of the methodological errors in Mr. Catlett’s report,
the 	principle 	of 	substitution 	undermines 	petitioner’s 	valuation 	of
$28,030,000. 	The principle of substitution stands for the proposition
that “the value of a property can be estimated at the cost of acquiring an
equally desirable substitute.” N. Donald LA Prop., T.C. Memo. 2026-19,
at *50 (quoting Mill Rd. 36 Henry, LLC v. Commissioner, T.C. Memo.
2023-129, at *51, aff’d, No. 24-11334, 2026 WL 2443948 (11th Cir. Aug.
20, 2026)). Mr. Catlett did not observe any vacant land sales larger than
50 acres in Morgan County where the buyer paid more than $100,000
per acre in 2015, 2016, 2017, or 2018. 	Limestone was present on
numerous properties in Morgan County and the surrounding counties.
We heard testimony from David Duke, a local real estate broker, that he
identified for OSI numerous properties with limestone present, and that
10 or 11 of those limestone property sales closed.
Mr. Rains, the chief appraiser for Morgan County produced
records of land sales of more than 50 acres in Morgan County between
October 1, 2014, and September 30, 2019. Of the 28 sales of more than
50 acres of vacant land, the highest sale price was $21,934 per acre for
a parcel of land purchased by the city of Decatur as a site for a new high
school. 	The sale prices of the remaining 27 land sales ranged from
$1,458 to $11,089 per acre. 	Respondent’s expert Mr. Rogers detailed
comparable properties that ranged in value from $1,839 per acre to
$2,911 per acre. A willing buyer would not have paid roughly $121,000
per acre for nonunique land when the price per acre for substitute
properties was less than $3,000 per acre. See, e.g., Ranch Springs, 164
T.C. at 159; J L Mins., T.C. Memo. 2024-93, at *62; Buckelew Farm, T.C.
Memo. 2024-52, at *55; Mill Rd., T.C. Memo. 2023-129, at *51.
An additional transaction that Mr. Rogers considered as a check
of reasonableness on his own valuation is another data point as to the
absurdity of Mr. Catlett’s valuation. 	On August 1, 2024, Hollingshead
Materials, 	LLC, 	purchased 	a 	946.39-acre 	property 	(Hollingshead
Property) in Morgan County with the intention of mining it. 	We
consider this subsequent sale relevant to the extent that it makes Mr.
32
[*32] Rogers’s valuation more likely and Mr. Catlett’s valuation less
likely. 	See Paul-Adams Quarry, T.C. Memo. 2025-112, at *83 n.54; see
also Williford v. Commissioner, 1992 WL 188895, at *10.
Mr. Rogers noted that the Hollingshead Property sale was not
directly comparable to the before condition of the Riddle Property
because the market had improved substantially since the retrospective
date of valuation, and the Hollingshead Property was located on the
Tennessee 	River, 	which 	greatly increased the 	market 	of 	potential
customers because of the reduced cost of transportation of materials
from the site. He observed that this would provide a substantial benefit
over economic truck transportation limits. 	Mr. Rogers considered the
sale price of the Hollingshead Property to be a benchmark for an upper
limit of value. The Hollingshead Property sold for $8,250,000, or $8,717
per acre, well below Mr. Catlett’s valuation of the Riddle Property of
$121,227 per acre.
Mr. Catlett’s use of the income method to purportedly value the
Riddle Property was based on speculative inputs of dubious reliability.
Petitioner offered testimony from several experts about how the income
method can be applied to value properties when inputs are reliable, but
we do not need to further belabor the flaws of the income method as
applied here. 	A knowledgeable buyer would simply not pay the entire
projected value of a business for one of the assets needed to conduct the
business. See Ranch Springs, 164 T.C. at 153; N. Donald LA Prop., T.C.
Memo. 2026-19, at *55.
The income method petitioner relied on was not reliable in
providing an estimate of the Riddle Property’s value. For these reasons
the before value of the Riddle Property is $670,000, as determined by
Mr. Rogers.
D. 	After Value of the Property
The parties stipulated that the value of the Riddle Property after
it was encumbered by the conservation easement is $345,000.
E. 	Value of the Easement
We conclude that the fair market value of the Riddle Property at
the time of the contribution of the easement was $670,000. Subtracting
the after value of $345,000 from the before value, the value of the
conservation easement on the Riddle Property is $325,000.
33
[*33] III. 	Penalty
Respondent asserted various alternative penalties including a
negligence penalty, a substantial understatement of income tax penalty,
a substantial valuation misstatement penalty, and a gross valuation
misstatement 	penalty 	under 	section 	6662(c), 	(d), 	(e), 	and 	(h),
respectively.10 Only one accuracy-related penalty may be applied with
respect to a given portion of an underpayment, even if that portion is
subject to the penalty on more than one of the grounds set out in section
6662(b). Treas. Reg. § 1.6662-2(c).
The Code imposes a 20% penalty for an underpayment of tax
required to be shown on a return that is attributable to “[n]egligence or
disregard of rules or regulations,” “[a]ny substantial understatement of
income tax,” or “[a]ny substantial valuation misstatement.” 	§ 6662(a)
and (b)(1), (2), and (3). A valuation misstatement is “substantial” if the
value of the property claimed on a return is 150% or more of the correct
amount. § 6662(e)(1)(A). The penalty is increased to 40% in the case of
a “gross valuation misstatement.” § 6662(h). A valuation misstatement
is “gross” if the value of property claimed on the return exceeds 200% of
the correct amount. § 6662(h)(2)(A)(i).
Generally, an accuracy-related penalty is not imposed if the
taxpayer demonstrates “reasonable cause” and shows that he “acted in
good faith with respect to [the underpayment].” 	§ 6664(c)(1). 	The
reasonable cause defense may be available where a taxpayer makes a
“substantial” 	valuation 	overstatement 	with 	respect 	to 	charitable
contribution property. 	See § 6664(c)(3). 	The reasonable cause defense
is not available where the overstatement is “gross.” See § 6664(c)(3).
Riddle claimed a $44,995,000 noncash charitable contribution
deduction for its donation of the easement. 	We have determined that
the value of the easement on the valuation date was only $325,000. The
claimed value of $44,995,000 exceeds the correct value by far more than
200%. 	The valuation misstatement was therefore “gross.” 	Since the
overstatement 	was 	“gross,” 	the 	reasonable 	cause 	defense 	is 	not
available. See § 6664(c)(3); see also Chandler v. Commissioner, 142 T.C.
279, 293 (2014).
10 In an Order dated August 11, 2025, the Court granted respondent’s Motion
for Partial Summary Judgment that respondent met the written supervisory approval
requirement of section 6751(b) for the section 6662 penalty.
34
[*34] Petitioner contends that the adequate disclosure exception under
section 	6662(d)(2)(B) 	precludes 	the 	gross 	valuation 	misstatement
penalty.11 The statutory text of section 6662 is clear that the adequate
disclosure exception does not apply to the section 6662(e) substantial
valuation 	misstatement 	penalty 	nor 	to 	the 	section 	6662(h) 	gross
valuation misstatement penalty.12 	Piton Holdings, 167 T.C., slip op.
at 52.
IV. 	Conclusion
The value of the conservation easement on the Riddle Property is
$325,000 and a 40% gross valuation misstatement penalty applies.
We have considered the arguments made by the parties and, to
the extent they are not addressed herein, we find them to be moot,
irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered under Rule 155.
11 Petitioner also raised the argument that the Supreme Court’s decision in
Trump v. Slaughter, 146 S. Ct. 2283 (2026), undermines this Court’s earlier decision
in Riddle Aggregates, LLC v. Commissioner (Riddle I), No. 31104-21, 165 T.C. (Dec. 15,
2025), denying petitioner’s Motion for Partial Summary Judgment that the Seventh
Amendment to the U.S. Constitution guarantees a jury trial before respondent can
assess penalties. Petitioner argues that after Slaughter failure to adjudicate penalties
in accordance with the president’s political goals could be valid grounds for the removal
of a Tax Court judge. The Supreme Court did not address the removal of a Tax Court
Judge. Slaughter, 146 S. Ct. at 2306 (“Nor do we determine the fate of officials not
before us. . . . [T]he permissibility of tenure protections for the judges of non-Article III
courts, such as the Tax Court and the Court of Federal Claims, is not presented or
briefed in this case and poses a different set of questions.” (citation modified)).
Accordingly, Slaughter does not affect our analysis in Riddle I.
12 Petitioner raised the argument that Treasury Regulation § 1.6662-5(a) is
invalid. While the provision addresses the issue in dispute, respondent relies upon the
statute to support his position. We reached our conclusion by relying upon the
statutory text.

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