United States Tax Court

T.C. Memo. 2024-60

EXCELSIOR AGGREGATES, LLC, BIG ESCAMBIA VENTURES, 

LLC, TAX MATTERS PARTNER, ET AL.,1

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket Nos. 20608-18, 7097-19, Filed May 30, 2024.

 7703-19.

__________

Michael Todd Welty, Lyle B. Press, Macdonald A. Norman, Samantha 

M. Porter, Michael B. Coverstone, Daniel B. Wharton, David W. Foster, 

Merima Mahmutbegovic, Andrew W. Steigleder, Nathaniel S. Pollock,

and Daniel A. Rosen, for petitioner.

Edward A. Waters, Peter T. McCary, Jason P. Oppenheim, Stephen A. 

Haller, Christopher D. Bradley, Alexandra E. Nicholaides, Russell Scott 

Shieldes, and Christopher A. Pavilonis, for respondent in Docket Nos. 

20608-18 and 7703-19.

Peter T. McCary, Jason P. Oppenheim, Stephen A. Haller, Christopher 

D. Bradley, Russell Scott Shieldes, and Christopher A. Pavilonis, for respondent in Docket No. 7097-19.

1 The following cases are consolidated herewith: Barnes-Escambia Properties, 

LLC, Big Escambia Ventures, LLC, Tax Matters Partner, Docket No. 7097-19; and 

Alabama S&G, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, Docket 

No. 7703-19.

Served 05/30/24
2 

TABLE OF CONTENTS

TABLE OF CONTENTS.......................................................................... 2

MEMORANDUM FINDINGS OF FACT AND OPINION ..................... 3

FINDINGS OF FACT .............................................................................. 5

I. S&G Mining in Escambia County.................................................... 6

II. Assembly of the Big Escambia Tract............................................... 9

III. Enter Greencone............................................................................. 12

IV. Enter Conservation Saves.............................................................. 16

V. Preparing for and Executing the Syndications ............................. 17

VI. Granting the Easements ................................................................ 19

VII. Appraisals ....................................................................................... 20

VIII. Tax Returns and IRS Examination.............................................. 22

IX. Trial................................................................................................. 23

A. Respondent’s Experts.............................................................. 23

1. Abner Patton.................................................................... 23

2. Michael Rogers ................................................................ 25

B. Petitioner’s Experts................................................................. 26

1. Edmundo Laporte............................................................ 26

2. Steven Hazel.................................................................... 27

3. Robert Wombwell............................................................. 28

OPINION................................................................................................ 28

I. Burden of Proof............................................................................... 28

II. Valuation......................................................................................... 29

[*2]
3 

A. “Before” Values of the ASG and the EAG Parcels ................. 31

1. Actual Transactions Involving the Subject 

Properties......................................................................... 31

2. Other Valuation Methods................................................ 32

3. Highest and Best Use...................................................... 33

4. Sales Comparison Methodology ...................................... 38

5. Historical Valuation of S&G Properties ......................... 40

6. Petitioner’s Arguments.................................................... 43

B. Value of the BEP Parcel ......................................................... 48

MEMORANDUM FINDINGS OF FACT AND OPINION

LAUBER, Judge: These consolidated cases are a subset of 13 related cases involving charitable contribution deductions claimed for conservation easements and/or fee simple interests in Escambia County, 

Alabama.2 We will refer to the 13 cases as the Big Escambia Group, and 

we will refer to the 13 parcels that were the subject of the contributions 

as the Big Escambia Tract or Tract. The Tract was in rural Alabama. 

The partnerships that donated the property interests carved from the 

Tract claimed aggregate charitable contribution deductions in excess of 

$187 million.

The partnerships in these consolidated cases are Excelsior Aggregates, LLC (Excelsior or EAG), Alabama S&G, LLC (Alabama S&G or 

ASG), and Barnes-Escambia Properties, LLC (Barnes-Escambia or 

BEP). The Internal Revenue Service (IRS or respondent) disallowed 

charitable contribution deductions in excess of $30 million reported on 

their partnership returns for the tax year ending December 31, 2014. 

EAG and ASG donated conservation easements on their parcels and 

shortly thereafter donated the encumbered fee simple interests in those 

same parcels. BEP did not grant an easement but donated an unencumbered fee simple interest in the property it held. The IRS disallowed the 

deductions claimed, in whole or in part, as follows:

2 References to “Escambia County” are to Escambia County, Alabama, unless 

otherwise indicated.

[*3]
4 

Easement 

Deduction 

Claimed 

Fee Simple 

Deduction 

Claimed 

Total Charitable 

Contribution Claimed

Total Charitable 

Contribution Allowed

EAG $12,525,000 $4,175,000 $16,700,000 $693,000

ASG 11,215,000 3,735,000 14,950,000 810,000

BEP N/A 2,070,000 2,070,000 1,060,000

In all three cases the appraisals supporting the claimed deductions were prepared by Clayton Weibel. His appraisals of the two conservation easements were predicated on his assertion that the “highest 

and best use” (HBU) of each parcel was commercial sand and gravel 

(S&G) mining. Employing that assumption, he opined that the fair market value (FMV) of the EAG property, consisting of 301.20 acres, was 

$16.70 million, or $55,445 per acre, before granting the easement. He 

opined that the FMV of the ASG property, consisting of 384.83 acres, 

was $14.95 million, or $38,848 per acre, before granting the easement.3

We set these three cases for trial in Atlanta, Georgia, as “test 

cases” for the Big Escambia Group. Through a stipulation to be bound 

filed in each of the ten related cases, the parties have agreed that those 

cases will be resolved consistently with the outcomes of the three test 

cases. Mr. Weibel was unavailable to testify in December 2022. We 

accordingly held a partial trial with the intention of conducting a further 

trial if and when he became available to take the stand.4

In the meantime, we directed the parties to file briefs addressed 

solely to the valuation questions. In many cases of this type, the donor 

conveys an easement to a land trust but retains ownership of the underlying property. In that scenario, we typically must determine the value 

of the property before and after the easement is granted, then subtract 

the latter from the former to calculate the easement’s value. Treas. Reg. 

§ 1.170A-14(h)(3)(i); see, e.g., Browning v. Commissioner, 109 T.C. 303, 

3 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C., 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. We round all 

monetary amounts to the nearest dollar.

4 In a joint status report filed November 13, 2023, the parties informed the 

Court that, if Mr. Weibel were called as a witness, he “is currently expected to invoke 

his Fifth Amendment privilege in these consolidated cases with respect to all matters.” 

In a joint status report filed April 4, 2024, the parties represented that, “absent a grant 

of immunity, Mr. Weibel remains unavailable to testify.”

[*4]
5

[*5] 315, 320–24 (1997); Hughes v. Commissioner, T.C. Memo. 2009-94, 

97 T.C.M. (CCH) 1488, 1490.

A less nuanced analysis may be adopted here. BEP conveyed no 

easement but rather donated an unencumbered fee simple interest in 

the property it held. ASG and EAG, which did convey easements, contributed to the same donee, during the same year, fee simple interests 

in the easement-encumbered parcels. In each case, therefore, the donee 

received during the taxable year 100% of the real property interests 

within each parcel, which equates to the parcel’s “before” value. The 

“before” value of the parcels thus determines the total allowable charitable contribution deduction. We hold that the “before” values of the 

ASG, the EAG, and the BEP parcels (Subject Properties), and hence the 

charitable contribution deductions allowable to the three partnerships, 

are as follows:

Total Allowable Deduction

EAG $693,000 

ASG 810,000

BEP 1,975,000

FINDINGS OF FACT

The following facts are derived from the pleadings, 15 Stipulations of Facts with attached Exhibits, numerous trial Exhibits, and the 

testimony of fact and expert witnesses admitted into evidence at trial. 

The three partnerships—Excelsior, Alabama S&G, and BarnesEscambia—are Georgia limited liability companies (LLCs) classified as 

TEFRA partnerships for their short taxable periods ending December 

31, 2014.5 Big Escambia Ventures, LLC (BEV), the petitioner in each 

case, is the tax matters partner (TMP) of each partnership (and of the 

partnerships in the ten related cases).6 All four entities had their principal places of business in Georgia when the Petitions were timely filed.

Some of petitioner’s fact witnesses were important players in the 

“syndicated conservation easement space,” including the promoters who 

organized the transactions and helped market the deals to 

5 Before its repeal, 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 process for many partnerships, including those involved here.

6 Although this Opinion addresses three consolidated cases, we will refer to 

“petitioner” in the singular because BEV is the TMP of all three partnerships.
6

[*6] investors.7 Other witnesses had invested in easement deals or 

acted as professional advisers to the promoters. Many of these witnesses 

had a direct or indirect stake in the outcome of these cases. While generally showing good recall of many facts from the 2012–2014 period, they 

sometimes expressed inability to recall certain facts about matters that 

might be regarded as unhelpful to petitioner’s position. Because of these 

witnesses’ interest in the outcome and selective inability to recall pertinent facts, the Court has been required to make credibility determinations.

I. S&G Mining in Escambia County

Escambia County lies along the southern border of Alabama, immediately above the western end of the Florida panhandle. The Subject 

Properties are along or near Big Escambia Creek, a tributary of the 

Conecuh River, which flows southwest through the county and then into 

Florida. Nearby population centers are Atmore and Flomaton, each situated along the Florida border. Atmore is 20 miles to the southwest of 

the Subject Properties; Flomaton is roughly 25 miles due east of Atmore. 

Escambia County, Florida, at the western tip of the panhandle, lies directly below Escambia County. The map below shows the location of 

these cities.

7 “Promoter” is a loaded term in this area because of the penalty imposed by 

section 6700(a) for “promoting abusive tax shelters.” In this Opinion we use the term 

“promoter” in its ordinary sense, making no determination as to whether the sponsors 

of the transactions at issue were persons subject to the civil penalty under section 

6700(a), a question that is not before us.
7

[*7]

Escambia County is a relatively rural county with abundant timberland. It experienced a population decline during 2000–2010; as compared with other Alabama counties, it had relatively low per capita income and population growth during 2010–2014. As of 2014, employment 

in the construction industry in Escambia County and nearby areas had 

not fully recovered from the Great Recession, which was not kind to real 

estate values in the southeastern United States.

Because of its geological formations and ancient riverbeds, certain parts of the county have been the subject of S&G mining since at 

least the 1950s. The Alabama S&G parcel, at the northwest corner of 

the Big Escambia Tract, had been heavily mined, and much of the easily

accessible S&G had been removed. Evidence of this earlier mining activity appears in 70 lakes and ponds, the product of rainwater filling the 

excavated mining pits over many years. The Excelsior parcel, roughly 

four miles southeast of the Alabama S&G parcel, is heavily forested and

was mined to a lesser degree.
8

[*8] At trial we heard testimony from several witnesses who had considerable experience doing S&G mining in Escambia County and nearby 

areas. Michael Campbell grew up working on his grandfather’s S&G 

mine in Escambia County, Florida. He personally mined much of the 

Alabama S&G parcel during 1995–1999. He explained in detail the specific areas he had mined, many of which had been mined before he got 

there.

Mr. Campbell estimated that he had mined 80 of the most promising acres of the Alabama S&G parcel. He explained that he was basically “cleaning up what they did not . . . mine.” By this he meant that 

he was extracting S&G that earlier miners had left behind because their 

equipment or technology was less advanced.

Mr. Campbell explained that he generally “didn’t fool with” the 

portions of the Alabama S&G parcel that had been exploited by earlier 

miners. As he put it: “There was nothing there. . . . There wasn’t any 

rock, any sand in there [and] we couldn’t make money with it.” He did 

some exploratory drilling in the previously mined areas but concluded 

that “there’s nothing out there for me to get.” He abandoned his lease 

on the Alabama S&G parcel in 1999, believing that he “had mined out 

most of the sand and gravel that could be economically mined.”

Mr. Campbell subsequently commenced S&G mining on two parcels that he purchased in 2004 from Molpus Land (formerly Scott Paper 

Co.). These parcels, totaling 254 acres, were on Big Escambia Creek 

about 17 miles north of the Alabama S&G parcel. Mr. Campbell paid 

$806 per acre for the 108-acre parcel and $645 per acre for the 146-acre 

parcel. He began operations there in 2005 and commenced S&G production in 2007.

In 2007 Mr. Campbell purchased a 40-acre parcel that served to 

connect the two parcels described above. He used this third parcel to 

store “overburden,” that is, worthless mud and sand produced during 

the dredging process. He paid $2,000 per acre for this new parcel, a 

price he said was “more than it [was] worth.”

In 2013 and 2014 Mr. Campbell extended his S&G mining activities by purchasing two parcels from Rayonier, a large forest products 

company. These parcels (totaling roughly 561 acres) were situated on 

Big Escambia Creek, adjacent to (and north/northeast of) the parcels 

described in the two preceding paragraphs. Mr. Campbell paid $1,880 
9

[*9] per acre for the 240-acre parcel and $2,200 per acre for the 321-acre 

parcel.

Another experienced miner was Paul Peed, who joined with his 

brother in 2007 and 2008 to purchase an S&G mining operation near 

Atmore, roughly 20 miles southwest of the Subject Properties. Mr. Peed 

explained that he had relatively few competitors because it was hard to 

make money in this business: “Nobody wanted to be in the sand and 

gravel business. You’d go broke.” He noted that Vulcan Materials, a 

large national company, had an S&G mining operation about a mile 

away from his location. But “they closed that mine down. . . . They just 

put the lock on the gate one day and went away.”

In 2014 Cleveland Campbell (a relative of Michael Campbell) 

served as president of American Concrete Supply (ACS). ACS was a 

ready-mix concrete business operating in Escambia County and neighboring counties. He also served as president of South Alabama Materials (SAM), which produced S&G and supplied it to ACS.

Beginning in 2008 SAM mined S&G on two parcels in Escambia 

County and on two properties in neighboring Conecuh County. One of 

these parcels (Cedar Creek) was off Highway 31 before it reaches

Brewton, Alabama, about 15 miles east of the Subject Properties. SAM 

paid roughly $1,000 per acre for the Cedar Creek parcel, which it mined 

during 2009–2013. In 2020 SAM purchased a parcel adjacent to the Cedar Creek parcel, on which it planned to commence S&G mining. For 

that parcel it paid about $2,000 per acre.

During 2014 Mr. Peed’s company (P&R Mining), Cleveland 

Campbell’s company (SAM), and a third mining company (WPR Minerals, Inc. (WPR)) produced S&G in Escambia County. During 2014, P&R 

Mining produced a million tons of S&G, roughly 13% of the entire S&G 

production in Alabama that year. SAM in 2014 produced 159,976 tons 

of sand and 114,072 tons of gravel, or 274,048 tons in toto. WPR, a small 

operator, produced 550 net tons of S&G in 2014.

II. Assembly of the Big Escambia Tract

Frank Barnes started Pro Bass Magazine in 1971 and sold the 

business in 1979 for a sizeable profit. He then moved to Columbus, 

Georgia, and embarked on a long career as a real estate investor. He 

estimated that he had bought and sold “half a billion dollars of real estate” after moving to Georgia. He was an experienced and knowledgeable real estate investor.
10

[*10] Beginning in the 1990s and continuing into the early 2000s, Mr. 

Barnes began acquiring land in Escambia County. He recalled that he 

had purchased the first parcel, comprising roughly 600 acres, for $400 

per acre. Over the years he purchased numerous other parcels, in bits 

and pieces, and this assembly eventually became the 4,608-acre Big Escambia Tract.8 He explained that these properties “were for sale the day 

that I bought them. That’s what I do for a living.”

Although Mr. Barnes was chiefly interested in harvesting timber, 

he knew that the Big Escambia Tract had previously been mined and he 

believed that it held potential for extracting S&G. Sometime after 2005 

Barnes Real Estate Brokerage, an affiliated entity, prepared a 30-page 

brochure advertising a 240-acre parcel for sale as a “gravel mine.” This 

parcel was within the Tract on Big Escambia Creek, adjacent to (and 

northwest of) the EAG parcel.

The brochure informed potential buyers that 58 boreholes had 

been drilled on the 240-acre parcel.9 On the basis of the borehole results, 

a geologist reportedly estimated that roughly 7.26 million tons of S&G 

could be recovered from a 225-acre section of that parcel. The brochure 

stated (inaccurately) that the “[o]wners have a current mining permit 

issued by Alabama Department of Industrial Relations” and advised 

that “all that is necessary is to transfer permits” to the buyer, which the 

owners felt “reasonably confident” could be accomplished.10

Beginning in 2005 Mr. Barnes actively marketed this and other 

portions of the Big Escambia Tract for their S&G potential. As part of 

8 The parties in their filings and Stipulations often refer to the Tract as comprising 4,680 acres. But the record indicates that the 12 parcels upon which conservation easements were granted totaled 3,897.74 acres. Adding to this acreage the 

710.15-acre parcel held by BEP produces a total acreage of 4,607.89, which we round 

to 4,608.

9 Borehole drilling is the process of drilling a well as part of a geotechnical 

investigation or environmental site assessment. Specialized drilling rigs with powerful pneumatic pistons drive drill bits through soil and bedrock to create a narrow well 

up to 100 meters deep to gather samples of soil, sand, gravel, rock, and water at different depths. The samples are tested in a laboratory to determine their physical properties or to assess levels of chemical constituents or contaminants.

10 The evidence established that, as of October 17, 2013, Mr. Barnes and his 

entities lacked several permits from the State of Alabama and the Army Corps of Engineers that would have been needed to commence S&G mining on the ASG and the 

EAG parcels. The partnerships to which those parcels were contributed secured no 

permits of any kind. Mr. Barnes testified that he once had a mining permit but that 

it had expired.
11

[*11] his marketing strategy, he dug test holes and placed gravel he 

found in piles visible to passers-by along public roads. He credibly testified that the property “was well exposed to the market” during this 

entire period. He said that “at least a dozen different companies looked 

at the property when [he] marketed it.”

In 2008 Mr. Barnes sold a 1,974-acre portion of the Big Escambia 

Tract to a mining professional named Brooks Delaney. Mr. Delaney was 

a very sophisticated investor with financial backing from a private equity firm that specialized in minerals investment. This portion was situated along Big Escambia Creek, a few miles southeast of the Alabama 

S&G parcel. Mr. Delaney paid $8.49 million, or $4,301 per acre, for this 

parcel, which he purchased through RLF Baldwin III, LLC.

The 1,974-acre parcel contained more land than Mr. Delaney required for his S&G mining operation. He drew up plans to subdivide the 

property and sell off parts he did not need, for prices he hoped might 

range from $4,000 to $8,500 per acre. Although a few buyers nibbled, 

he was unable to sell a single acre.

Mr. Delaney conducted S&G mining operations on this section of 

the Big Escambia Tract for several years. But he encountered recurring 

problems with wood debris in the S&G layers.11 Manufacturers typically will not purchase S&G that is contaminated with wood impurities, 

which adversely affect the structural soundness of asphalt and concrete. 

Finding the wood debris difficult to remove using standard manufacturing processes, Mr. Delaney resorted to manual removal, which was inefficient and expensive. Mr. Peed visited the site in 2012 and recalled that 

“they were getting wood debris in their gravel and couldn’t figure out 

how to get it out.” He described this as “a terrible mess” and explained 

that he “had never seen nothing like it” and did not know why “it was in 

that product so bad.”

Mr. Delaney spent several million dollars trying to solve this 

problem, hiring outside experts and experimenting with different 

11 The wood debris resulted from tree branches falling into the ancient riverbeds many centuries ago. The wood gradually decomposed into chunks and particles, 

some the size of gravel and others the size of coarse or fine sand. A common method 

for recovering S&G is to wash the raw material through a series of sieves or screens 

with openings of various sizes: The top screen catches the large gravel, the next screen 

catches smaller gravel, and next screen catches coarse sand, etc. The problem is that 

each screen would catch not only the sand or gravel it was designed to catch, but also 

wood debris of comparable size.
12

[*12] equipment and techniques. He ultimately concluded that he could 

not profitably mine S&G from the 1,974-acre parcel, and the private equity firm that was backing the investment agreed with him. He attempted to sell the property but could find no buyers. In April 2012 he 

transferred the property back to Mr. Barnes by deed in lieu of foreclosure. At trial he noted that the S&G business in Alabama and Florida 

was in poor shape during 2012–2014 because “the construction market 

just took so long to rebound” after the 2008 recession.

The map below shows the location of the parcels that were purchased by Cleveland Campbell, Brooks Delaney, and Michael Campbell 

(other than the property he acquired for $2,200 per acre). The map indicates how their parcels were located vis-à-vis the ASG and the EAG 

parcels (referenced as 1 and 2, respectively). And the legend shows the 

per-acre prices they paid for their parcels.

III. Enter Greencone

After receiving Mr. Delaney’s acreage back on April 11, 2012, Mr. 

Barnes once again owned the entire Big Escambia Tract. He continued 
13

[*13] to market the Tract during 2012 and 2013. But he encountered 

no serious potential buyers until 2013, when he was approached by 

Greencone Investments (Greencone).

Greencone was formed in 2012 by Russell Bennett and Carlton 

Walstad. Both were sophisticated real estate investors. They originally 

envisioned Greencone as a vehicle for investing in timber properties. 

But Greencone quickly shifted its focus to conservation easements. During 2013 it sponsored two syndicated conservation easement transactions—Merriwether Aggregates and Rattlesnake Aggregates—both 

with S&G mining as the supposed “highest and best use” of the properties on which the easements were granted.

In mid-2013 a broker named Chris Whitley had the listing for the 

Big Escambia Tract. He and Mr. Barnes showed the property to Mr. 

Walstad. They discussed prior S&G mining on the Tract and the potential for future S&G extraction.

Messrs. Bennett and Walstad did a very modest amount of investigation into the S&G potential of the Big Escambia Tract. They did not 

commission any drilling to secure additional borehole samples. They did 

not talk to anyone who had previously mined S&G in the area. And they 

did not interview anyone who knew anything about S&G mining in Escambia County. In essence, their “due diligence” consisted of visiting 

the property once.

On October 17, 2013, Messrs. Bennett and Walstad sent Mr. 

Barnes a letter of intent offering to purchase the entire 4,608-acre Tract 

for $9.50 million, or $2,062 per acre. The purchase price was to be paid 

as follows: a $2.50 million cash downpayment to be paid by yearend 

2013 and a $7 million promissory note. The agreement provided that 

600 acres would be released to Greencone upon receipt of the cash downpayment. The balance of the acreage would be released only as payments were made on the note.

Two weeks later Messrs. Bennett and Walstad formed BEV as the 

vehicle for implementing conservation easement transactions using the 

Big Escambia Tract. On November 15, 2013, Mr. Barnes and his wife 

accepted Greenecone’s offer, agreeing to sell the Big Escambia Tract to 

BEV for $9.50 million. Mr. Barnes indicated that he was pleased with 

the sale price. He was under no economic pressure at that time and was 

under no compulsion to sell the property. He was a savvy investor who 
14

[*14] was fully aware of (and had touted) the property’s S&G potential. 

It is undisputed that the transaction was an arm’s-length sale.

At this point, Greencone did not have the $2.50 million needed to 

close on the Big Escambia Tract. To raise the required funds Messrs. 

Bennett and Walstad intended to sponsor a syndicated conservation 

easement transaction involving the acreage that would be released to 

BEV upon remission of the cash downpayment. The vehicle for that deal 

was going to be Big Escambia Sand & Gravel LLC (Big Escambia S&G).

Greencone circulated promotional materials, offering investors 

96% of the units in Big Escambia S&G for $6.30 million. It stated that 

members who purchased units could vote to pursue one of three options: 

granting a conservation easement, developing an S&G business, or holding the land for appreciation. But the latter two options were not discussed in any detail; instead, the promotional materials focused exclusively on the alleged tax benefits of the proposed transaction. The offering materials included a “conservation easement benefit summary,” 

stating that an investor would receive a Federal income tax deduction 

of $3.17 for every dollar invested “if the conservation easement proposal 

is elected.” The Big Escambia S&G transaction never closed because 

Greencone was unable to attract enough investors to complete the offering.

Around this time, Messrs. Bennett and Walstad hired Joe (Jody)

Butler to appraise the 600-acre parcel. The record includes a January 

14, 2014, draft appraisal that bears Mr. Butler’s signature. The draft 

report, which recites S&G mining as the HBU, concludes a value of $1.93 

million for the parcel, or roughly $3,217 per acre. Mr. Butler based this 

valuation on sales of four comparable parcels, two in Escambia County 

and two in nearby Dooley County. All of these parcels were vacant land.

Mr. Butler was instructed to stop his appraisal and never completed his report. There seem to have been three reasons for this. First, 

his “before” value conclusion—$3,217 per acre—was nowhere near the 

values that Greencone needed to generate tax deductions of the magnitude investors desired. Second, it was clear that an appraisal could not 

get to the desired valuation using comparable land sales; a “discounted 

cash flow” (DCF) method was the only possible route. The email traffic 

suggests that Mr. Butler may have started down a DCF path, but that 

was not his area of expertise. Third, the Greencone team that had hired 

Mr. Butler was moving to a new alliance with Frank Schuler and 
15

[*15] Matthew Ornstein, who had their own appraisers (including Mr. 

Weibel) with whom they were comfortable.

In early 2014 Greencone was still trying to come up with the 

money needed to close on the Big Escambia Tract. Mr. Barnes had already extended the closing date several times, and it was now set for 

February 28, 2014. To secure the funds needed to close by that date, 

Greencone sought assistance from Messrs. Schuler and Ornstein, who 

soon became its business partners.

Messrs. Schuler and Ornstein were real estate professionals 

known for their experience in syndicated conservation easements. In 

2014 they formed Conservation Saves, LLC (CS), which promoted the 

sale of membership interests in partnerships that granted conservation 

easements. When Messrs. Ornstein and Schuler joined forces with 

Greencone, they formed a partnership in which they held an indirect 

60% interest and Messrs. Bennett and Walstad (through Greencone) 

held a 40% interest. In essence, the partnership constituted a merger of 

Greencone’s easement business into CS.

The four promoters executed a memorandum of understanding 

(MOU) reciting their ownership interests in this new partnership. The 

MOU expressed their understanding that CS would acquire a property—viz., the Big Escambia Tract—that would appraise at a value between $132 million and $183 million before any conservation easement

was granted. When the MOU was executed, no one had performed an 

appraisal valuing the Big Escambia Tract at anything close to this value 

range.

The MOU recited the promoters’ expectation that CS would sell 

interests to investors for $30 to $40 million, promising them a charitable 

contribution tax deduction of $4.389 for every $1 invested. Investor proceeds of $30 million would correspond to a $132 million appraisal 

($4.389 × $30 million = $131,670,000). Investor proceeds of $40 million 

would roughly correspond to the higher appraisal estimate ($4.389 × $40 

million = $175,560,000).

When asked at trial how he could have posited in advance a 

deduction-to-investment ratio of $4.389 to $1, before any appraisals had 

been performed, Mr. Schuler said that appraisals were basically irrelevant to the tax write-off they were offering. The promised ratio of 4.389

to 1, he explained, was driven by “the market,” that is, by the magnitude 
16

[*16] of the tax deductions being offered by other promoters of conservation easements.

On February 26, 2014, Messrs. Bennett and Walstad executed an 

operating agreement for BEV that laid out the four promoters’ ownership interests. Those interests were held by various LLCs at different 

times. In economic terms, however, Messrs. Schuler and Ornstein 

owned 60% of BEV, and Messrs. Bennett and Walstad owned 40% of 

BEV. At all relevant times the four promoters were BEV’s ultimate 

managers.

On February 28, 2014—the closing date for sale of the Big Escambia Tract—Mr. Barnes and his wife, as joint tenants, formed BEP and 

contributed the Tract to it by warranty deed. That same day, the Barneses sold to BEV a 99% interest in BEP for $9.50 million. The terms of 

the latter transaction were amended on August 22, 2014, to state that 

the Barneses, for that price, had sold to BEV a 96% interest in BEP. 

This amendment was stated to be “effective as of February 28, 2014.”

IV. Enter Conservation Saves

Operating through CS, Messrs. Ornstein and Schuler planned to 

subdivide the Big Escambia Tract into 13 parcels, on 12 of which easements would be granted. Those 12 parcels were given alphabetical monikers—Alabama S&G, BE Creek, Cedar Land, Deep Creek, Excelsior, 

etc. The plan was to syndicate the parcels one by one, starting with A; 

once deal A was fully subscribed, the promoters would syndicate deal B, 

and so on. Parcels A through L were all syndicated during the latter 

half of 2014.

The principals of CS testified that the Big Escambia Tract was 

subdivided in this way to facilitate marketing to investors. Their plan 

was to offer units to “sophisticated investors” under security rules that 

capped the number of investors for any given deal at 99. By making 12 

separate offerings rather than one, CS could attract close to 1,200 investors rather than 99. This would reduce the minimum investment to a 

more modest sum, making the deals more “affordable.”

We find that subdividing the Big Escambia Tract in this way had 

another explanation, or at least another advantage. Each of the 12 parcels was going to be appraised on the theory that its HBU was S&G 

mining. To generate valuations high enough to support the promised 

tax deductions, the appraisals would have to project extremely large volumes of S&G production from each parcel annually. Collectively, the 
17

[*17] projected annual S&G production from the Tract as a whole (per 

the appraisals) could conceivably exceed the total annual S&G production from the State of Alabama. Given the law of supply and demand, 

that level of production would raise questions about the economic feasibility of S&G mining as the HBU of the entire Tract. The promoters 

thus found it prudent to subdivide the Tract into 12 smaller parcels, 

each of which could be appraised on the unspoken assumption that none 

of the others would be used for S&G mining.

In June 2014 Messrs. Walstad and Bennett hired Marvin Blethen 

to prepare a report analyzing the feasibility of an S&G mining operation 

on the ASG parcel and a separate report analyzing the feasibility of an 

S&G mining operation on the EAG parcel. Mr. Blethen’s reports, which 

utilized the DCF method, were attached to and cited in Mr. Weibel’s appraisals of the two parcels. Petitioner did not call Mr. Blethen to testify 

at trial.

In an email dated July 25, 2014, Mr. Blethen cautioned Mr. Bennett about the need to consider the impact of competing S&G operations 

when performing a DCF analysis. He emphasized that his DCF calculations for the ASG and the EAG parcels “are not mutually exclusive.” 

He indicated that, if the plan was to commence S&G operations on both 

parcels simultaneously, “[y]ou can combine [the results] only if you reduce your tonnage for each by one-third and run the DCF on each and 

[then] combine.”

V. Preparing for and Executing the Syndications

As of August 2014, BEP owned the entire Big Escambia Tract, 

and BEV owned 96% of BEP. Between August and November 2014, BEP 

subdivided 3,898 acres of the Tract into 12 parcels and contributed title 

to each parcel to a distinct property company or “PropCo.” Each PropCo, 

initially owned by BEP, would ultimately be owned by an investment 

company or “InvestCo,” and units in the InvestCos would be marketed 

to investors. Each PropCo would grant a conservation easement on its 

parcel, and the investors would receive, through the InvestCos, pro rata 

shares of the tax deductions claimed by the PropCos for the easements.

For each InvestCo, CS prepared informational packages for distribution to prospective investors. These packages were distributed between July 22 and December 8, 2014. Each informational package informed its recipient, in bold text: “For every $1.00 contributed to InvestCo, the new member would receive a charitable 
18

[*18] contribution deduction of approximately $4.39 ($4.38596 to 

be exact) that should save the new member approximately $2.00 

in taxes.”

The offering materials stated that members who purchased units 

in an InvestCo could vote to pursue one of four options: granting a conservation easement, developing an S&G business, leasing the property 

to a third party for mining, or holding the land for appreciation. But the 

latter three options were not discussed in any detail. Rather, the promotional materials focused exclusively on the $4.39-to-$1 tax write-off 

that would allegedly result from granting the easement.

Each information package contained a “Conservation Easement 

Example” showing that a $100,000 investment would provide a new 

member with “Estimated Total Tax Savings” of $200,000. An Excel 

spreadsheet captioned “AGI Analysis” allowed prospective investors to 

input their respective tax rates “to see the net tax effect of the conservation easement.” No similar tools were provided to enable investors to 

gauge the financial benefits of the other three “options.”

The offering materials relating to ASG stated that “the appraised 

value of the Property [will be] in the approximate amount of 

$14,950,000.” That value was based on a “preliminary appraisal” by Mr. 

Weibel, consisting of a two-page report dated July 11, 2014. Mr. Weibel 

came up with the same “before value” for ASG in his final appraisal 

dated November 10, 2014. See infra p. 20. The “preliminary appraisal” 

for EAG, at $16.7 million, was likewise identical to the value appearing 

in Mr. Weibel’s final appraisal.

Alabama S&G was the first PropCo on the syndication list. On 

August 12, 2014, BEP distributed 96% of its interest in ASG to BEV, 

with the remaining 4% interest being distributed to Mr. and Mrs. 

Barnes. BEV then transferred 95% of its interest in ASG to the ASG 

InvestCo. The offering period for purchasing membership units in the 

ASG InvestCo closed on August 24, 2014, and the offering was fully subscribed.

BEV received sale proceeds of $3,233,865 from the ASG offering. 

Investors thereby acquired a 95% ownership interest in the ASG InvestCo. BEV’s cost basis in the ASG parcel was $842,463, its allocated 

share of the $9.5 million paid for the Big Escambia Tract. The difference 

between the sale proceeds and BEV’s cost basis, or $2,391,402, includes 

a large premium paid to the promoters for the transaction.
19

[*19] Excelsior was the fifth PropCo on the syndication list. On September 19, 2014, BEP distributed 96% of its interest in EAG to BEV, 

with the remaining 4% interest being distributed to Mr. and Mrs. 

Barnes. BEV then transferred 95% of its interest in EAG to the EAG 

InvestCo. The offering period for purchasing membership units in the 

EAG InvestCo closed on December 8, 2014, and the offering was fully 

subscribed.

BEV received sale proceeds of $3.1 million from the EAG offering. 

Investors thereby acquired a 95% ownership interest in the EAG InvestCo. BEV’s cost basis in the EAG parcel was $626,992, its allocated 

share of the $9.5 million paid for the Big Escambia Tract. The difference 

between the sale proceeds and BEV’s cost basis, or $2,473,008, includes 

a large premium paid to the promoters for the transaction.

All in all, BEV received proceeds of $36,164,421 from selling to 

investors membership units in the 12 InvestCos. When the dust settled, 

BEP was left with 710 acres, consisting of ten largely noncontiguous 

parcels of varying sizes whose physical characteristics were deemed unsuitable for conservation. This residual portion of the Big Escambia 

Tract was not the subject of an easement transaction but was donated 

in fee simple to the land trust that received the easement contributions.

VI. Granting the Easements

Every investor in each of the 12 InvestCos voted for (or was 

deemed to have voted for) the conservation easement option. There is 

no evidence that any investor had any interest in actually pursuing the 

“S&G mining” option, which would have required massive additional infusions of capital (or extensive borrowing) and would have deferred any 

return on their investment for years. Petitioner supplied no evidence 

that any investor in any similar transaction, from 2008 onwards, had 

ever voted to pursue an option other than the conservation easement 

option. The Court finds as a fact that the development options described 

in the promotional materials were window dressing designed to obscure 

the tax-shelter nature of the transactions.

On November 24, 2014, ASG granted a conservation easement 

over its 384.83-acre parcel to the National Wild Turkey Federation Research Foundation (Foundation), a “qualified organization” within the 

meaning of section 170(h)(3). The deed of easement was recorded on 

December 3, 2014. On December 15, 2014, EAG granted a conservation 

easement over its 301.20-acre parcel to the Foundation, and that deed 
20

[*20] of easement was recorded the same day. On various dates during 

late 2014, the other ten PropCos granted to the Foundation, and timely 

recorded, conservation easements over their parcels.

On December 22, 2014, BEP conveyed to the American Upland 

Land Trust (Trust)—a subsidiary and disregarded entity of the Foundation—an unencumbered fee simple interest in the residual 710 acres 

deemed unsuitable for conservation. On the same day, ASG and EAG 

conveyed to the Trust encumbered fee simple interests in their respective 384.83-acre and 301.20-acre parcels. The other ten PropCos did the 

same. Accordingly, at yearend 2014, the Foundation and its affiliate 

together owned 100% of the Big Escambia Tract, with 3,898 of those 

acres encumbered by easements.

VII. Appraisals

CS hired Mr. Weibel, with whom it had worked previously, to 

value the easements. In preparing his appraisals he assumed that S&G 

mining was the HBU of the ASG parcel, the EAG parcel, and the other 

ten parcels on which easements had been granted. For each parcel he 

prepared a DCF analysis estimating future income from a hypothetical 

S&G production business, employing various assumptions about recoverable volumes of S&G, future pricing of S&G, capital expenses, ordinary business expenses, discount rates, and so on.

On the basis of the DCF analysis, Mr. Weibel concluded that the 

FMV of the ASG parcel before granting the easement was $14.95 million 

(or $38,848 per acre) and that the FMV of the EAG parcel before granting the easement was $16.70 million (or $55,445 per acre). He determined that these parcels were worth $3,735,000 and $4,175,000, respectively, after granting the easements. Subtracting the “after” values from 

the “before” values, he determined that the FMVs of the easements were 

$11,215,000 and $12,525,000, respectively. Using sales of allegedly comparable land, he determined that the FMV of the residual 710 acres held 

by BEP was $2.07 million.

The following table summarizes the total charitable contribution 

deductions that were supposedly available to the 13 partnerships, according to Mr. Weibel’s appraisals:
21

PropCo Acreage Before 

Value

Before 

Value 

per Acre

Easement 

Deduction

Fee Simple 

Deduction 

Total 

Deduction 

Alabama 

S&G 384.83 $14,950,000 $38,848 $11,215,000 $3,735,000 $14,950,000

BE Creek 405.62 14,950,000 36,857 11,215,000 3,735,000 14,950,000

Cedar Land 359.68 14,950,000 41,565 11,215,000 3,735,000 14,950,000

Deep Creek 334.56 15,200,000 45,433 11,400,000 3,800,000 15,200,000

Excelsior 301.20 16,700,000 55,445 12,525,000 4,175,000 16,700,000

Flomaton 

Pits 310.01 16,300,000 52,579 12,225,000 4,075,000 16,300,000

Great 

Plains 321.64 15,900,000 49,434 11,925,000 3,975,000 15,900,000

Hill Top 

S&G 331.58 15,800,000 47,651 11,850,000 3,950,000 15,800,000

Industrial 

S&G 353.68 15,900,000 44,956 11,925,000 3,975,000 15,900,000

JC Land 299.17 15,900,000 53,147 11,925,000 3,975,000 15,900,000

Knat Creek 236.31 14,850,000 62,841 11,137,000 3,713,000 14,850,000

Long 

Branch 259.46 13,900,000 53,573 10,425,000 3,475,000 13,900,000

BEP 710.08 2,070,000 2,915 — 2,070,000 2,070,000

TOTALS 4,607.82 $187,370,000 — $138,982,000 $48,388,000 $187,370,000

When joining forces in early 2014, Messrs. Bennett, Walstad, 

Schuler, and Ornstein executed an MOU reciting their understanding 

that CS would acquire a property—viz., the Big Escambia Tract—that 

would appraise at a value between $132 million and $183 million. Just 

a few months previously, Messrs. Bennett and Walstad had contracted 

to purchase the entire Tract for $9.5 million, and the transaction closed 

at that price in February 2014. Petitioner has supplied no evidence that 

any acreage within the Tract appreciated significantly between November 2013 and December 2014, much less that it had appreciated by $177 

million, or 1,872%. Yet remarkably, Mr. Weibel’s appraisals for the combined acreage came in at $187 million—$4 million higher than the top 

of the range upon which the promoters had agreed up front.

[*21]
22

[*22] VIII. Tax Returns and IRS Examination

EAG filed Form 1065, U.S. Return of Partnership Income, for its 

short taxable year ending December 31, 2014. On that return it claimed 

a charitable contribution deduction of $12,525,000 for donating the easement to the Foundation and a charitable contribution deduction of 

$4,175,000 for donating the encumbered fee simple interest to the Trust. 

The total deduction claimed for the EAG parcel, $16.70 million, was 

equal to its alleged “before” value as determined by Mr. Weibel.

ASG filed Form 1065 for its short taxable year ending December 

31, 2014. On that return it claimed a charitable contribution deduction 

of $11,215,000 for donating the easement to the Foundation and a charitable contribution deduction of $3,735,000 for donating the encumbered 

fee simple interest to the Trust. The total deduction claimed for the ASG 

parcel, $14,950,000, was equal to its alleged “before” value as determined by Mr. Weibel.12

BEP filed Form 1065 for its short taxable year ending December 

31, 2014. On that return it claimed a charitable contribution deduction 

of $2.07 million for donating to the Trust an unencumbered fee simple 

interest in the residual 710 acres. The other ten PropCos filed Forms 

1065 claiming charitable contribution deductions parallel to those 

claimed by ASG and EAG.

The IRS commenced examinations of the returns filed by all 13 

partnerships that make up the Big Escambia Group. At the conclusion 

of the audits, the IRS issued timely Notices of Final Partnership Administrative Adjustment (FPAAs) to BEV, the TMP for each partnership. 

The adjustments determined in the three consolidated cases were as follows:

• The FPAA issued to Excelsior was dated July 27, 2018. It disallowed in toto the $12,525,000 deduction claimed for the easement, 

concluding that EAG had failed to establish “that all the requirements of [section] 170 have been satisfied.” Assuming arguendo 

that those requirements had been satisfied, the FPAA determined 

that the easement’s value did not exceed $271,000. With respect 

to the donated fee simple interest, for which Excelsior had reported a deduction of $4,175,000, the IRS allowed a deduction of 

12 ASG on its return claimed an additional charitable contribution deduction of 

$54,074 for “cash endowment” fees. The IRS did not disallow that portion of the deduction.
23

only $422,000. This followed from its determination that the “before” value of the EAG parcel—that is, its value before the easement was granted—was at most $693,000, or $2,301 per acre. 

The IRS thus determined that the aggregate charitable contribution deduction allowable for donating to the Foundation all rights 

to the parcel—the easement plus the residual fee simple interest—could not exceed $693,000 ($271,000 + $422,000). Finally, 

the IRS determined a 40% penalty for gross valuation misstatement under section 6662(h) or (in the alternative) a 20% penalty 

under other provisions of sections 6662 and 6662A.

• The FPAA issued to Alabama S&G was dated February 14, 2019. 

It disallowed in toto the $11,215,000 deduction claimed for the 

easement, concluding that ASG had failed to establish “that all 

the requirements of [section] 170 have been satisfied.” With respect to the donated fee simple interest, for which ASG had reported a deduction of $3,735,000, the IRS allowed a deduction of 

only $810,000, or $2,105 per acre. Finally, the IRS determined a 

40% penalty for gross valuation misstatement under section 

6662(h) or (in the alternative) a 20% penalty under other provisions of sections 6662 and 6662A.

• The FPAA issued to Barnes-Escambia was dated February 6, 

2019. It determined that the FMV of an unencumbered fee simple 

interest in the residual 710 acres, for which BEP had reported a 

deduction of $2.07 million, was only $1.06 million, or $1,493 per 

acre. The IRS allowed a charitable contribution deduction in that 

amount. The FPAA also determined a 20% accuracy-related penalty under section 6662(a).

IX. Trial

BEV timely petitioned this Court for review of the three FPAAs. 

We tried the consolidated cases in Atlanta, reserving the possibility of a 

future hearing to take testimony from Mr. Weibel. During the trial we 

heard testimony from several expert witnesses.

A. Respondent’s Experts

1. Abner Patton

Abner Patton, respondent’s mining expert, is a licensed professional geologist in Alabama. He has more than 40 years of experience

in the fields of geology and hydrology. He has worked on numerous

[*23]
24

[*24] projects evaluating subsurface mineral assets, including S&G reserves. We recognized him as an expert in the evaluation and valuation 

of mineral resources. We found him to be very knowledgeable about the 

S&G mining business and found his testimony credible.

Mr. Patton conducted an extensive investigation into the availability of S&G reserves on the ASG and the EAG parcels. His work included physical inspection of the properties, studying historical aerial 

imagery (which showed the location of prior mining sites), reviewing 

documents created by the Geological Survey of Alabama, conducting a 

drilling program on the ASG and the EAG parcels (with boreholes to a 

depth of 50 feet), inspecting the borehole samples (and the results of 

previous borehole drilling), and reviewing the laboratory sieve analysis 

of the tested samples. Because the ASG and the EAG parcels were restricted by conservation easements when he did his work, he was permitted to drill boreholes only near existing roadways. However, the locations he chose for the borehole drilling were logically chosen to shed 

light on the S&G reserves of the parcels as a whole.

Mr. Patton concluded that at least 276 acres (or 72%) of the ASG 

parcel had been previously mined for S&G. He based this conclusion on 

aerial photographs, interviews with miners who had worked there previously, and the presence of irregular surface features associated with 

prior S&G mining—numerous ponds, undulations, trenches, and piles 

of sand, gravel, and overburden. His drilling program and laboratory 

analysis identified no S&G reserves on the ASG parcel of sufficient quality, quantity, and distribution to be considered commercially marketable 

resources.

Mr. Patton’s research revealed that the EAG parcel had been 

mined as early as 1957 but to a lesser extent than the ASG parcel. He 

concluded that the EAG parcel had some remaining S&G deposits but 

that 60 years of mining had significantly depleted the reserves that 

could be recovered commercially. Two boreholes revealed a massive 

amount of overburden—e.g., mud, clay, and tree debris—above the 

gravel layer. He concluded that removing, transporting, and storing this 

overburden would be an extremely costly undertaking. A third borehole 

sample suggested that 37,000 tons of gravel might be recovered from a 

5-acre portion of the EAG parcel. But Mr. Patton found that this material did not meet the Alabama Department of Transportation gradation 

specifications necessary to qualify for use in its projects, thus limiting 

the potential marketability of this gravel.
25

[*25] Mr. Patton acknowledged that the EAG parcel had “limited” S&G 

resources, but he concluded that these resources were not “of sufficient 

quality, quantity, thickness, and distribution to be considered as marketable reserves.” Specifically, he determined that the parcel had remaining reserves of no more than 111,749 tons of marketable S&G. Of 

that total, 74,538 tons, or 66.7%, consisted of sand, a much less valuable 

resource.

2. Michael Rogers

Michael Rogers, respondent’s appraisal expert, is a certified real 

property appraiser licensed in Alabama. He has appraised hundreds of 

properties during his career, including income-producing properties, 

raw land, and conservation easements. We recognized him as an expert 

in real estate appraisal. We found him to be a credible witness whose 

appraisal methodology was sound.

To determine the “before” values of the ASG and the EAG parcels, 

Mr. Rogers employed a sales comparison approach, finding 

income-based methods inapt because insufficient data existed to permit 

a reliable estimate of future cashflows. He evaluated the physically possible, legally permissible, financially feasible, and maximally productive 

uses of both parcels. He concluded that the HBU of each parcel, before 

granting any easement, was silviculture, recreation, and limited residential use, with potential mining of remaining S&G reserves for local 

consumption (e.g., road repair and landscaping).

Mr. Rogers identified five properties (ranging in size from 101.27 

to 557 acres) as comparable to, and as having the same HBU as, the ASG 

and the EAG parcels (which comprised 348.83 acres and 301.2 acres, 

respectively). Four of these properties were in Alabama (Atmore, 

Flomaton, Bradley, and Brewton) reasonably close to the Big Escambia 

Tract. Each property generally resembled the ASG and the EAG parcels 

in terms of its soil characteristics, topography, and zoning.

The five comparable properties were sold between September 

2011 and November 2014 at prices ranging from $1,436 to $2,498 per 

acre. After adjusting these sale prices for plot size, road access, frontage, 

and differences in potentially recoverable timber and subsurface minerals, he concluded a “before” value for the ASG parcel of $615,000, or 

$1,598 per acre, as of November 24, 2014, the date the easement was 

granted. Making a different adjustment relating to the estimated timber value on the EAG parcel, he determined its “before” value to be 
26

[*26] $550,000, or $1,826 per acre, as of December 15, 2014, the date 

that easement was granted.

The BEP parcel, comprising 710.15 acres, differed from the other 

parcels because it consisted of ten largely noncontiguous sub-parcels 

varying in size, location, and physical characteristics. Mr. Rogers noted 

that one of these sub-parcels (#1) included an 8,000-square-foot warehouse and attached dwelling. He selected as comparable five sales of 

properties ranging in size from 550 to 1,196 acres. These properties 

were sold between November 2010 and November 2015 at prices ranging 

from $800 to $3,617 per acre. After making various adjustments and 

separately valuing the improvements to sub-parcel #1, Mr. Rogers determined the FMV of the BEP parcel to be $1.6 million—roughly $1,800 

per acre for the land, plus $330,000 for the improvements.

B. Petitioner’s Experts

Petitioner did not attempt to support the “before” values claimed 

for the ASG and the EAG parcels using a sales comparison approach. 

And they did not cross-examine Mr. Rogers regarding his selection of 

comparable sales. Rather, petitioner urged that the “before” values of 

the ASG and the EAG parcels should be determined by hypothesizing 

the creation of a commercial S&G business on each parcel, estimating 

the future cashflows from that business, and discounting those cashflows to present value. This methodology is commonly referred to as a 

“discounted cash flow” or DCF approach.

1. Edmundo Laporte

Edmundo Laporte is a licensed engineer in Alabama with 30 

years of experience in the mining industry. We recognized him as an 

expert in the evaluation and valuation of minerals. Because he has no 

expertise as an appraiser of real property, we struck from his reports 

several passages in which he offered opinions concerning the FMV of the 

ASG and the EAG parcels.

Mr. Laporte prepared a “feasibility study” addressing the possibility of creating S&G mining businesses on the ASG and the EAG parcels. From his evaluation of borehole testing analysis, he assumed that, 

after “reach[ing] peak production capacity in 2018 (Year 3),” each parcel 
27

[*27] would produce 400,000 tons of S&G annually.13 He estimated the 

volumes of each grade of S&G that might be produced and made assumptions about the future prices at which each grade of product would 

sell.

On the expense side, Mr. Laporte assumed that the investor partnerships would defray the initial capital costs of creating each business—roadbuilding, surveying, permitting, site clearance, installation 

of utilities, etc. He assumed that these initial capital costs, consisting 

of two dozen line items, would total about $6.4 million for the two partnerships. Mr. Laporte assumed that the partnerships would hire an established mine operator, on a cost-plus basis, to perform the actual S&G 

extraction. This required that he estimate hundreds of such costs—from 

wages and health benefits to capital recovery to repairs and maintenance—and the profit demanded by the operator. He assumed that a 

hypothetical contractor would perform the S&G extraction work in exchange for a profit equal to 15% of its total costs.

2. Steven Hazel

Steven Hazel is a certified public accountant and appraiser. He 

offered opinions as to the FMV of the ASG and the EAG parcels immediately before the easements were granted. Because Mr. Hazel was not 

licensed to appraise real property in Alabama, we recognized him as a 

general expert in valuation.

Mr. Hazel posited that the HBU of each parcel was S&G mining. 

He allegedly considered a “sales comparison” approach to value the parcels, but he testified that he “could not find any, what we considered

comparable properties to use as a proxy.” Instead, he assumed that each 

parcel would be developed into an S&G mining business and estimated 

the future cashflows from that business.

13 Mr. Laporte did not conduct any borehole testing of his own. Rather, he 

based his analysis largely on borehole tests the promoters had commissioned several 

years previously. No expert witness testified concerning the manner in which those 

earlier borehole results were obtained. There is no evidence that those earlier boreholes were drilled in locations that would yield representative results regarding the 

S&G content of the parcels as a whole. In a Motion in Limine filed November 25, 2022, 

petitioner sought admission into evidence—for the truth of the matters asserted 

therein—reports prepared at the promoters’ request in 2014 by mining consultants,

some of whom discussed pre-2015 borehole tests. By Order dated December 21, 2022, 

we denied that Motion because the reports were hearsay statements of professionals 

whom petitioner declined to call as expert witnesses in these cases.
28

[*28] Mr. Hazel adopted Mr. Laporte’s estimates regarding the recoverable volumes of S&G and the future revenues and operating expenses 

of the hypothetical mining operations. Assuming that S&G mining 

would continue on each parcel for 33–34 years, he hypothesized that 

each business would generate future net revenues of roughly $60 million. He applied a 13.5% “pass-through entity premium” and reduced

the estimated future cashflows to present value using an average discount rate of 10.5%. He opined that the “before” values of the ASG and 

the EAG parcels, corresponding to the discounted present value of their 

S&G reserves, were $9.4 million (or $24,426 per acre) and $10.9 million 

(or $36,189 per acre), respectively.

3. Robert Wombwell

Robert Wombwell is a senior managing director at Valbridge 

Property Advisors. He is a member of the Appraisal Institute and is 

licensed to perform real estate appraisals in Alabama. We recognized 

him as an expert in real estate appraisal.

To value the 710 residual acres donated by BEP, Mr. Wombwell

prepared 11 separate appraisals, concluding that sub-parcel #1 should 

be valued as two separate tracts: a 6.78-acre unimproved tract and a 

4.79-acre tract including the 8,000-square-foot warehouse with attached 

dwelling. For each appraisal he used the “sales comparison” approach. 

All of the sales he selected as comparable involved property in Alabama.

Mr. Wombwell determined the total FMV of the 710 acres to be 

$1,975,000–$375,000 higher than the FMV determined by Mr. Rogers. 

The bulk of the difference between their valuations appears traceable to 

Mr. Wombwell’s employment of a separate HBU for each sub-parcel, 

which led him to select higher value comparable sales.

OPINION

I. Burden of Proof

The IRS’s determinations in a notice of deficiency or an FPAA are 

generally presumed correct, though the taxpayer can rebut this presumption. See 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).
29

[*29] 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 “introduce[d] credible evidence with respect [that] factual issue,” § 7491(a)(1), 

and must have “complied with the requirements under this title to substantiate any item,” § 7491(a)(2)(A).

We need not decide who bears the burden of proof because the 

parties have provided sufficient evidence to enable us to decide the disputed valuation questions by a preponderance of the evidence. See Estate of Bongard v. Commissioner, 124 T.C. 95, 111 (2005); Trout Ranch, 

LLC v. Commissioner, T.C. Memo. 2010-283, 100 T.C.M. (CCH) 581, 583, 

aff’d, 493 F. App’x 944 (10th Cir. 2012). We have discerned no “evidentiary tie” on any relevant factual question. See Knudsen v. Commissioner, 131 T.C. 185, 188 (2008) (citing Blodgett v. Commissioner, 394 

F.3d 1030, 1039 (8th Cir. 2005), aff’g T.C. Memo. 2003-212), supplementing T.C. Memo. 2007-340.

II. Valuation

Section 170(a)(1) allows a deduction for any charitable contribution made within the taxable year. If the taxpayer makes a gift of property other than money, the amount of the contribution is generally equal 

to the FMV of the property at the time of the gift. See Treas. Reg. 

§ 1.170A-1(c)(1).14 The regulations define FMV as “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.” Id. subpara. (2). Valuation is 

not a precise science, and the value of property on a given date is a question of fact to be resolved on the basis of the entire record. See Kaplan 

v. Commissioner, 43 T.C. 663, 665 (1965).

The FMV of real property should reflect its HBU on the valuation 

date. See Mitchell v. United States, 267 U.S. 341, 344–45 (1925); Stanley 

Works & Subs. v. Commissioner, 87 T.C. 389, 400 (1986); Treas. Reg. 

§ 1.170A-14(h)(3)(i) and (ii). A property’s HBU is the most profitable use 

for which it is adaptable and needed, or likely to be needed in the reasonably near future. Olson v. United States, 292 U.S. 246, 255 (1934); 

14 Deductions generally are not allowed for gifts of property consisting of less 

than the donor’s entire interest, but there is an exception for a “qualified conservation 

contribution.” See § 170(f)(3)(B). For purposes of this Opinion, respondent does not 

dispute that the gifts at issue were “qualified conservation contributions.” The sole 

issue currently before the Court concerns the proper valuation of the contributions.
30

[*30] Symington v. Commissioner, 87 T.C. 892, 897 (1986). If different 

from the current use, a proposed HBU thus requires both “closeness in 

time” and “reasonable probability.” Hilborn v. Commissioner, 85 T.C. 

677, 689 (1985). We exclude from consideration any proposed uses that 

“depend upon events or combinations of occurrences which, while within 

the realm of possibility, are not fairly shown to be reasonably probable.” 

Olson, 292 U.S. at 257.

To support their positions regarding valuation the parties retained experts who testified at trial. We assess an expert’s opinion in 

the light of his or her 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 opinion that we find contrary to 

our judgment. Parker, 86 T.C. at 561. We may accept an expert’s opinion in toto or accept aspects of his or her testimony that we find reliable. 

See Helvering v. Nat’l Grocery Co., 304 U.S. 282, 295 (1938); Boltar, 

L.L.C. v. Commissioner, 136 T.C. 326, 333–40 (2011) (rejecting expert 

opinion that disregards relevant facts). And we may determine FMV 

from our own examination of the record evidence. See Silverman v. Commissioner, 538 F.2d 927, 933 (2d Cir. 1976), aff’g T.C. Memo. 1974-285.

“Market prices” typically do not exist for conservation easements. 

See Symington, 87 T.C. at 895. For that reason, 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); cf. Browning, 109 T.C. at 320–24; 

Hughes, 97 T.C.M. (CCH) at 1490. Under that approach, the value of 

the easement is deemed equal to the FMV of the real estate before the 

easement was granted (“before” value), minus the FMV of the real estate 

as encumbered by the easement (“after” value).

The “before and after” method assumes that the donor, after contributing the easement, retains the property that the easement encumbers. That was not the pattern in the cases before us: ASG and EAG 

contributed to the same donee, during the same year, both a conservation easement and the encumbered fee simple interest in that same parcel. And BEP contributed a fee simple interest in its 710-acre parcel, 

unencumbered by any easement.
31

[*31] In all three cases, therefore, the donee received during the taxable 

year 100% of the real property interests within each parcel, which 

equates to the parcel’s “before” value. The “before” value thus determines the total allowable charitable contribution deduction in each case. 

We thus proceed to determine the “before” values of the three parcels.

A. “Before” Values of the ASG and the EAG Parcels

1. Actual Transactions Involving the Subject Properties

The best evidence of a property’s FMV is the price at which it 

changed hands in an arm’s-length transaction reasonably close in time 

to the valuation date. Estate of Newberger v. Commissioner, T.C. Memo. 

2015-246, 110 T.C.M. (CCH) 615, 616–17 (observing that no evidence is 

more probative of a donated property’s FMV than its direct sale price); 

see Ambassador Apartments, Inc. v. Commissioner, 50 T.C. 236, 242–43 

(1968), aff’d per curiam, 406 F.2d 288 (2d Cir. 1969); Wortmann v. Commissioner, T.C. Memo. 2005-227, 90 T.C.M. (CCH) 336, 339–40 (finding 

that the most persuasive evidence of the property’s FMV was the actual 

sale of the property 17 months before the contribution). The record here 

includes such evidence.

In October 2013 Messrs. Bennett and Walstad sent Mr. Barnes a 

letter of intent offering to purchase the 4,608-acre Big Escambia Tract 

for $9.5 million, or $2,062 per acre. On November 15, 2013, Mr. Barnes 

and his wife accepted that offer, agreeing to sell the Tract for $9.5 million to an entity designated by Messrs. Bennett and Walstad. The transaction closed on February 28, 2014, with BEV as the designated acquiring entity. But because of an August 2014 amendment, BEV ultimately 

acquired only a 96% interest in the Tract for the $9.5 million contract 

price. See supra p. 16. This indicates a value of $9,895,833 ($9.5 million 

÷ 0.96) for the Tract as a whole, or $2,148 per acre ($9,895,833 ÷ 4,608).

Mr. Barnes stated that he was pleased with the $9.5 million sale 

price. He was under no economic pressure at that time and under no 

compulsion to sell the property. He was a savvy investor who was fully 

aware of (and had touted) the S&G potential of the property. And 

Messrs. Bennett and Walstad were purchasing the Tract chiefly for what 

they believed to be its S&G potential. In short, Mr. Barnes was a willing 

seller, and Messrs. Bennett and Walstad were willing buyers. It is undisputed that the transaction by which BEV acquired a 96% interest in 

the Big Escambia Tract was an arm’s-length sale between parties with 

full knowledge of relevant facts.
32

[*32] This transaction occurred reasonably close in time to the valuation dates. The Barneses accepted the $9.5 million offer in November 

2013; the transaction closed at that price in February 2014; and the contract amendment retroactively raising the per-acre price to $2,148 occurred in August 2014. Petitioner has adduced no evidence suggesting 

that the Big Escambia Tract appreciated meaningfully in value between 

those dates and the dates on which the easements were granted (in November and December 2014).

Petitioners have likewise adduced no evidence suggesting that 

acreage in the ASG and the EAG parcels was more valuable than acreage in the Big Escambia Tract generally. Indeed, the average per-acre 

value of the ASG and the EAG parcels as determined by Mr. Weibel 

($46,135) was lower than the average per-acre value he determined for 

the 12 parcels on which easements were granted ($47,540). See supra 

pp. 20–21. We accordingly find that the price to which the Barneses 

ultimately agreed—$2,148 per acre for the entire Big Escambia 

Tract—is probative as to the per-acre value of the ASG and the EAG 

parcels. We find that this is the best available evidence as to the “before” 

value of those parcels on the valuation dates.15

2. Other Valuation Methods

In the absence of actual transactions involving the subject property, courts typically consider one or more of three approaches to determine the property’s FMV: (1) the market approach, (2) the income approach, and (3) an 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). We consider these other methods as providing a 

check on (or confirmation of) the $2,148 per-acre value indicated by the 

price Greencone paid to acquire the entire Big Escambia Tract. 

15 Petitioners contend that the promoters’ subdivision of the Tract into 12 parcels and contribution of those parcels to the PropCos was a material change that allegedly generated a huge increase in the property’s FMV. This is supposedly so because,

even though Messrs. Barnes, Bennett, and Walstad knew the Tract held S&G assets, 

they “did not know [its] volume, quality, or potential value.” We are not persuaded. 

The subdivision of the Tract did not increase the value of the real estate (as could be 

true for a residential subdivision), but was done solely to facilitate marketing the conservation easement transaction to investors. See supra pp. 16–17. And the “volume, 

quality, [and] potential value” shown in Mr. Weibel’s appraisals—which appear to have 

been reverse-engineered to generate the values desired by the promoters—can scarcely 

be used to controvert the evidence supplied by real-world market transactions.
33

[*33] Determining which method to apply presents a question of law. 

See Chapman Glen Ltd. v. Commissioner, 140 T.C. 294, 325–26 (2013).

In the case of vacant, unimproved property, the market approach—often called the “comparable sales” or “sales comparison” 

method—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 sales method determines FMV by considering the sale 

price realized for similar properties sold in arm’s-length transactions 

near in time to the valuation date. See ibid.; Wolfsen Land & Cattle Co. 

v. Commissioner, 72 T.C. 1, 19 (1979). Because no two properties are 

ever identical, the appraiser must make adjustments to account for differences between the properties (e.g., parcel size and location) and terms 

of the comparable sales (e.g., proximity to valuation date and conditions 

of sale). See Wolfsen Land & Cattle Co., 72 T.C. at 19. The solidity of 

an appraiser’s valuation “depends to a great extent upon the comparables selected and the reasonableness of the adjustments made.” Id.

at 19–20.

The income method determines FMV by discounting to present 

value the expected future cashflows from the property. See, e.g., Chapman Glen Ltd., 140 T.C. at 327; Marine v. Commissioner, 92 T.C. 958, 

983 (1989), aff’d, 921 F.2d 280 (9th Cir. 1991) (unpublished table decision). The theory behind this approach is that an investor would be willing to pay no more than the present value of a property’s anticipated 

future net income. See Trout Ranch, 100 T.C.M. (CCH) at 583. Income-based methods are generally disfavored when valuing vacant land 

that has no income-producing history. See, e.g., Chapman Glen Ltd., 

140 T.C. at 327; Whitehouse Hotel Ltd. P’ship v. Commissioner, 139 T.C. 

304, 324–25 (2012), supplementing 131 T.C. 112 (2008), aff’d in part, 

vacated in part, and remanded, 755 F.3d 236 (5th Cir. 2014). That is 

because the absence of a financial track record makes an income-based 

method inherently speculative and unreliable.

3. Highest and Best Use

The choice of valuation method is influenced in part by the HBU 

of the subject property. We have defined HBU as “[t]he reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that 

results in the highest value.” Whitehouse Hotel, 139 T.C. at 331 (quoting 
34

[*34] Appraisal Institute, The Appraisal of Real Estate 277 (13th ed. 

2008)).

Petitioner’s expert, Mr. Hazel, following the lead of Mr. Weibel, 

determined that the HBU of both parcels was S&G mining. Specifically, 

he posited a separate S&G mining business on each of the ASG and the 

EAG parcels, each continuing for 33 to 34 years, each producing 400,000 

tons of S&G annually after three years, and each generating total net 

revenues of roughly $60 million. Respondent’s expert, Mr. Rogers, concluded that commercial S&G mining operations were not economically 

feasible or plausible on either parcel, especially on the scale contemplated by Mr. Hazel. Mr. Rogers determined that the HBU of the parcels 

before granting the easements was silviculture, recreation, and limited 

recreational use, with potential mining of remaining S&G reserves for 

local consumption (e.g., road repair and landscaping). On this point we 

agree with respondent.

In reaching his HBU determination Mr. Rogers reasonably relied 

on Mr. Patton’s borehole testing and analysis, which revealed multiple 

areas of concern about the feasibility of a commercial S&G mining business on these two parcels. At least 276 acres (or 72%) of the ASG parcel 

had been previously mined on a continuous basis over many decades. 

Those earlier miners would logically have focused on the most promising 

areas for S&G production and mined out most S&G that could be profitably extracted. Common sense thus supports the conclusion that Mr. 

Patton reached on the basis of his exploratory drilling program and laboratory analysis—that the ASG parcel contained no S&G reserves of 

sufficient quality, quantity, and distribution to be considered commercially marketable resources.

The EAG parcel had likewise been heavily mined for 60 years, 

though less heavily than the ASG parcel. Mr. Patton determined that 

“sand and gravel resources of limited economic value are present on the 

Property.” But he found the commercially marketable S&G reserves to 

be severely limited. Two boreholes that he drilled revealed a massive 

amount of overburden—mud, clay, and tree debris—above the gravel 

layer. He reasonably concluded that the costs of removing, transporting, 

and storing this overburden would be prohibitive in relation to the value 

of the S&G that could be recovered. According to Mr. Patton’s testing 

and analysis, the EAG parcel had remaining marketable S&G reserves 

of no more than 111,749 tons—a far cry from the 12 million tons (400,000 

tons annually for 30 years) implausibly assumed by Mr. Hazel.
35

[*35] Mr. Rogers analyzed the S&G industry in southern Alabama and 

the land use patterns in the surrounding area. His discussions with 

local miners revealed that they regarded S&G mining as a high-risk endeavor with high entry costs. For those reasons, S&G rights were sometimes traded for prices as low as $10 per acre for unmined parcels. Mr. 

Rogers acknowledged that the ASG and the EAG parcels contained “limited sand and gravel reserves” that buyers would generally view as 

“a plus for future internal road repairs.” But he reasonably concluded 

that “there is insufficient [S&G] material for the property to be of any 

interest to a mining operator.”

Mr. Rogers’s conclusion is consistent with the statements and actions taken by experienced S&G miners in the area. Mr. Peed, who purchased an S&G mining operation 20 miles southwest of the Subject 

Properties, noted in 2007 and 2008 that “nobody wanted to be in the 

sand and gravel business” because “[y]ou’d go broke.” He testified that 

Vulcan Materials, a large national company, had closed its nearby S&G 

mine—presumably concluding that it was not economically feasible to 

continue operations. Another experienced miner was Michael Campbell, 

who testified that he had mined 80 of the most promising acres of the 

ASG parcel between 1995–1999. After determining that he “had mined 

out most of the sand and gravel that could be economically mined,” he 

abandoned his lease in 1999—concluding that he “couldn’t make money 

with it.” He characterized the S&G market in southern Alabama as 

“guerilla warfare.”

Where the asserted HBU of property is the extraction of minerals, 

the proponent must show the presence of minerals in commercially exploitable volumes and the existence of a market “that would justify [mineral] extraction in the reasonably foreseeable future.” United States v. 

69.1 Acres of Land, 942 F.2d 290, 292 (4th Cir. 1991); Cloverport Sand 

& Gravel Co. v. United States, 6 Cl. Ct. 178, 198–99 (1984). “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, 771–72 (4th Cir. 1964)

(footnote omitted); see also United States v. 494.10 Acres of Land, 592 

F.2d 1130, 1132 (10th Cir. 1979) (“[I]f the ‘future’ is beyond or very much 

beyond the ‘near future,’ the use becomes speculative.”).

In asserting that creation of a commercial S&G mining business 

was the HBU of each parcel, petitioner relies on Mr. Laporte’s “feasibility study” and Mr. Hazel’s DCF analysis. We found neither persuasive. 

Their reports make unreasonable assumptions about the recoverable 
36

[*36] volume of minerals, supply, demand, pricing, and the costs of extraction.

First, Mr. Laporte’s assumption that each parcel contained 12 

million tons of commercially recoverable S&G—400,000 tons of production annually for 30 years—struck us as highly exaggerated. According 

to Mr. Patton’s testing and analysis, the EAG parcel had remaining S&G 

reserves of fewer than 112,000 commercially recoverable tons—less 

than 1% of Mr. Laporte’s estimate. And the S&G reserves on the ASG 

parcel, which had been very thoroughly mined already, were certainly 

less extensive.16

Second, assuming arguendo that Mr. Laporte’s reserve estimates 

were plausible, petitioner failed to show that the market could absorb 

anything close to this additional supply. In 2014 P&R Mining and SAM 

held dominant market shares in Escambia County. Together they produced roughly 1.3 million tons of S&G annually, representing more than 

90% of the county’s S&G production. To absorb the additional 800,000 

tons supposed by Mr. Laporte, the annual demand from the local market 

would have to increase by about 60%. Petitioners offered no credible 

evidence that such additional demand would materialize “in the reasonably foreseeable future.” See 69.1 Acres of Land, 942 F.2d at 292.17

The area surrounding the ASG and the EAG parcels is primarily 

rural. Escambia County had a small population and was experiencing 

minimal growth. As of 2014 demand for S&G in Alabama and the Florida panhandle had not recovered from the Great Recession. In six of the 

seven relevant counties, fewer residential building permits were issued 

16 The tonnages posited by Mr. Laporte were inflated by (among other things) 

his treating vast amounts of sand as commercially recoverable minerals. Because of 

its abundance, sand is much less valuable than gravel; price lists of regional operators 

showed sand selling for as little as 10% of the price of gravel. As evidenced by the huge 

piles of sand on the ASG parcel, much sand produced by the dredging process cannot 

be sold and constitutes waste.

17 The supply/demand imbalance becomes even more acute when one considers 

that ASG and EAG were just two of the 12 PropCos carved from the Big Escambia 

Tract, each with S&G mining as its supposed HBU. According to Mr. Weibel’s appraisals, each parcel was capable of producing up to 400,000 tons of S&G annually. But the 

entire S&G production from the State of Alabama in 2014 was only about 8 million 

tons. Petitioners’ original mining expert, Mr. Blethen, cautioned Mr. Bennett that his 

DCF calculations for the ASG and the EAG parcels “were not mutually exclusive” and 

that the analysis must consider the impact of competing mines, e.g., by reducing expected tonnages and staggering the start dates for each mine consistent with market 

demand.
37

[*37] in 2014 than in 2008. Other indicators of demand, including employment in the construction industry, were likewise below their prerecession levels.

Even if local demand for S&G were to increase substantially, we 

are not persuaded that the two new businesses posited by Mr. Laporte 

would be the likely beneficiaries. The parties agree that the profitability 

of S&G extraction depends heavily on proximity to customers because of 

the high costs of transporting S&G to the point of use. Demand is also 

proportionate to the population base and the growth rate, which in turn 

depends on vibrant construction activity. S&G mines close to major 

markets, in short, are more advantageous because they have more customers and lower transportation costs.

P&R Mining and SAM were established local companies with established client bases, and their mines were close to major markets. The 

ASG and the EAG parcels were much less advantageously situated, and 

the businesses that would own the hypothetical mines did not yet exist. 

If demand for S&G were to grow, that demand would likely be met by 

increased production from the two established operators, both of which 

had additional production capacity, rather than by new entrants with 

no track record and higher transportation costs.

Third, the price points that Mr. Laporte estimated for the output 

of the hypothetical S&G mines exceeded the prices charged by existing 

competitors. Mr. Laporte’s assumed pricing for gravel was roughly 40% 

higher than the prices charged by SAM, which sold its gravel products 

in Escambia County for $10 to $11 per ton in 2014. Mr. Laporte’s assumed pricing for sand, which was much less valuable than gravel, was 

as much as 200% higher than existing competitors’ pricing. This confirms our conclusion that, if local demand for S&G were to increase, it 

would be satisfied by lower priced products from existing producers, not 

by S&G extracted from the ASG and the EAG parcels.

Fourth, respondent points to numerous deficiencies in Mr. 

Laporte’s estimates regarding the costs entailed by the hypothetical 

mining operations. It is sufficient to mention just a few of these defects. 

Mr. Laporte provided no credible support for his assumption that a 

third-party mine operator would agree to perform S&G extraction on a 

cost-plus basis for more than 30 years for a profit limited to 15% of total 

costs. Mr. Laporte likewise did not come to grips with Mr. Patton’s borehole analysis that showed a massive amount of “overburden” above the 
38

[*38] gravel layer on the EAG parcel—worthless material that would be 

extremely costly to remove, transport, and store.

Most problematically, Mr. Laporte seriously underestimated the 

capital costs for the hypothetical S&G businesses, especially for mining 

equipment. At the prices quoted in his report, the equipment used by 

the hypothetical mining operator would be near the end of its useful life. 

But his calculations budgeted no additional capital costs for equipment 

after year two, even though he projected that the mining activities would 

continue for over 30 years.

For all these reasons, we reject Mr. Hazel’s conclusion that commercial S&G production was the HBU of the ASG and the EAG parcels. 

Cf. Savannah Shoals, LLC v. Commissioner, T.C. Memo. 2024-35, 

at *39–41 (finding the taxpayer’s proposed HBU of an aggregate mine 

was not financially feasible considering the market demand and existing 

supply). Rather, the evidence supports Mr. Rogers’s determination that 

the HBU of each parcel, before granting the easements, was silviculture, 

recreation, and limited residential use, with potential mining of remaining S&G reserves for local consumption.

4. Sales Comparison Methodology

The ASG and the EAG parcels at yearend 2014 were vacant, unimproved properties. For such properties, the sales comparison methodology is “generally the most reliable method of valuation.” Estate of 

Spruill, 88 T.C. at 1229 n.24. Given his HBU determination for these 

parcels, Mr. Rogers accordingly searched for sales of similarly configured parcels whose primary use would be silviculture, recreation, and 

residential use, but with some S&G reserves that could be mined for 

local consumption.

Mr. Rogers selected five sales as comparable, four involving properties within Escambia County. Two of the properties bordered parcels 

within the Big Escambia Tract. The sales occurred between September 

2011 and November 2014 and involved properties ranging in size from 

101.27 acres to 557 acres. These properties resembled the Subject Properties in their physical characteristics (e.g., size, topography, and S&G 

resources), zoning, and conditions of sale.

• Comparable #1 was a 154-acre parcel in Escambia County that 

sold for $1,623 per acre in September 2011. The parcel had S&G 

potential similar to that of the ASG and the EAG parcels.
39

• Comparable #2 was a 557-acre parcel in Escambia County that 

sold for $1,436 per acre in September 2011. The parcel was 

directly adjacent to the ASG parcel on its northwest side.

• Comparable #3 was a 380.47-acre parcel in Escambia County, 

Florida, that sold for $2,498 per acre in April 2014. The parcel 

was in an area experiencing speculative housing demand, so it 

had the potential for conversion to residential use.

• Comparable #4 was a 101.27-acre parcel in Escambia County that 

sold for $2,000 per acre in October 2014.

• Comparable #5 was a 141-acre parcel in Escambia County that 

sold for $1,900 per acre in November 2014. It was directly northwest of the EAG parcel, and it abutted the Cedar Land and the 

Deep Creek parcels within the Big Escambia Tract.

For all five transactions Mr. Rogers analyzed various characteristics of the property sold, including parcel size, shape, location, potential subsurface value contribution, natural amenities, access to paved 

roadways and utilities, and differences in topography and soil composition. He made adjustments for differences in parcel size, differences in 

the timing of the sales, and other relevant factors. On the basis of a 

qualitative analysis, he classified each property as inferior, similar, or 

superior to the Subject Properties.

Mr. Rogers ranked three of the comparable properties as overall 

“superior” to the ASG and the EAG parcels. On the basis of these facts 

and the sales data, he determined the EAG parcel to have a “before” 

value in the range of $1,600 to $2,000 per acre as of December 15, 2014, 

the date the EAG easement was granted. Making a slightly different 

adjustment for potential timber contributions with respect to the ASG 

parcel, he determined that it had a “before” value in the range of $1,500 

to $1,700 per acre as of November 24, 2014, the date the ASG easement 

was granted. He ultimately reconciled the “before” values of the ASG 

and the EAG parcels to $1,598 per acre and $1,826 per acre, respectively.

 Petitioner did not cross-examine Mr. Rogers on his selection of 

comparable sales. Nor did it offer any competing “comparable sales” of 

its own. Instead, both of petitioner’s experts took the position that the 

sales comparison approach “is not applicable” in these cases because of 

a supposed “lack of data.”

[*39]
40

[*40] In urging a “lack of data,” petitioner appears to contend that the 

only “comparable sales” would be sales of properties on which S&G mining businesses were currently operating or about to launch. This assumes that the HBU of the two parcels was S&G mining—a proposition 

we have rejected. More fundamentally, this argument ignores the facts 

on the ground. The ASG and the EAG parcels at yearend 2014 were not 

properties on which S&G mining businesses were currently operating or 

about to launch. Rather, both consisted of vacant, unimproved land. 

What the ASG and the EAG parcels were comparable to—as Mr. Rogers 

correctly determined—were other unimproved parcels with similar 

characteristics, including limited S&G potential. In short, once the 

HBU of the two parcels is properly identified, numerous “comparable 

sales” existed, as Mr. Rogers’s report convincingly shows.

The high end of the FMV ranges that Mr. Rogers determined for 

the ASG and the EAG parcels under the “comparable sales” method was 

$2,000 per acre. This value is consistent with what we believe to be the 

best evidence of the parcels’ “before” value, namely, the $9.5 million 

price Greencone paid for the entire Big Escambia Tract. That transaction was originally priced at $2,062 per acre, revised in August 2014 to 

$2,148 per acre.

5. Historical Valuation of S&G Properties

Petitioners vigorously contend that the ASG and the ESG parcels 

should be valued on the premise that they held significant potential for 

S&G mining. Assuming arguendo that S&G mining might be considered 

their HBU, our valuation conclusion would be roughly the same. The 

appropriate “comparable sales” would then be sales of other vacant parcels of land that were acquired for the purpose of conducting S&G mining operations. See TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th 

1354, 1371 (11th Cir. 2021).

The record is replete with reliable historical evidence of the prices 

that knowledgeable buyers paid to purchase acreage with potential for 

commercial S&G mining. Petitioner does not contend (and could not 

plausibly contend) that the ASG and the EAG parcels had any unique 

features that made them especially valuable. To the contrary, both 

properties had already been “mined out” to a significant degree. Mr. 

Hazel’s assertion that he “could not find any comparable properties to 

use as a proxy” suggests that he did not look very hard.
41

[*41] During 2013 and 2014 Michael Campbell purchased two vacant

parcels that he intended to use (and did use) for S&G mining. Both parcels were on Big Escambia Creek, just north of the Subject Properties. 

These parcels, consisting respectively of 240 acres and 321 acres, were 

roughly the same size as the ASG and the EAG parcels. Mr. Campbell 

paid $1,880 per acre and $2,200 per acre, respectively, for the two parcels.

SAM, the company headed by Cleveland Campbell, has been mining S&G on multiple properties in Escambia County and neighboring 

Conecuh County since 2008. SAM purchased Cedar Creek, a property 

about 15 miles east of the Subject Properties, which it mined for S&G 

during 2009–2013. It paid $1,000 per acre for that parcel. Prices for 

land with S&G potential evidently increased only moderately during the 

next decade. In 2020 SAM purchased, for $2,000 per acre, an adjacent 

parcel on which it planned to commence S&G mining.

Going further back in time, we find similar per-acre pricing, making a reasonable allowance for inflation. In 2004 Michael Campbell purchased 254 acres on Big Escambia Creek, about 17 miles north of the 

ASG parcel. The purchase price for the 108-acre parcel was $806 per 

acre, and the purchase price for the 146-acre parcel was $645 per acre. 

He commenced S&G mining on those parcels in 2007. In that year, needing land on which to store “overburden,” he bought a 40-acre parcel that 

lay between the original two parcels. He paid $2,000 per acre for the 

third parcel, a price that he found was “too high.” The latter transaction 

occurred seven years before the valuation dates for the Subject Properties; on the other hand, the S&G market was stronger in 2007 than in 

2014, having not yet felt the negative impact of the Great Recession. See 

supra pp. 36–37.

This historical evidence suggests that knowledgeable buyers regarded promising S&G properties in Escambia County as being worth 

between $1,500 and $2,200 per acre. The only market transaction that 

might be thought to support a higher value was Mr. Delaney’s purchase 

in 2008 of a 1,974-acre portion of the Big Escambia Tract (located a few 

miles southeast of the ASG parcel). Mr. Delaney, an experienced mining 

professional backed by a private equity firm, paid $4,301 per acre for 

that parcel. That price, as Mr. Delaney testified, turned out to be ill

advised.

For several years Mr. Delaney conducted S&G mining on his portion of the Tract. But he encountered an insurmountable problem with 
42

[*42] wood debris in the gravel layers. After spending millions of dollars 

trying to solve this problem, he concluded that he could not profitably 

mine S&G from the property. In April 2012 he transferred the property 

back to Mr. Barnes by deed in lieu of foreclosure.

Mr. Barnes was well informed about Mr. Delaney’s struggles and 

of his conclusion that S&G mining on the 1,974-acre parcel—representing 43% of the Big Escambia Tract—was not financially feasible. Armed 

with this knowledge, Mr. Barnes entertained no hope of selling the Tract 

for anything close to $4,301 per acre. After commencing negotiations 

with Greencone in 2013, he agreed to sell the Tract for a per-acre price 

less than half the price Mr. Delaney had paid in 2008.

For these reasons, we give the 2008 purchase by Mr. Delaney relatively little weight in determining the “before” value of the ASG and 

the EAG parcels. Overall, the historical evidence suggests that if S&G 

mining were thought to be the parcels’ HBU, their “before” values would 

not be significantly higher than the values determined by Mr. Rogers 

($1,500 to $2,000 per acre). All of these values are roughly in line with 

what we have found to be the best evidence of the parcels’ FMV: the price 

Greencone paid to acquire the Big Escambia Tract, including the ASG 

and the EAG parcels, roughly a year before the valuation date. That 

price was $2,148 per acre.18

In the FPAAs the IRS determined that the “before” value of the 

ASG parcel was $810,000, or $2,105 per acre, and that the “before” value 

of the EAG parcel was $693,000, or $2,301 per acre. The average of 

those values, $2,203 per acre, is higher than the per-acre price that 

Greencone paid for the Big Escambia Tract. Acknowledging that valuation is not an exact science, we find that the per-acre values determined 

in the FPAA are supported by the record evidence. We therefore hold 

that the charitable contribution deductions to which Alabama S&G and 

18 Petitioner contends that Mr. Barnes received two offers to purchase the Big 

Escambia Tract for $4,774 per acre, more than double the price that Greencone eventually offered. But one putative buyer could not come up with financing; the other 

wanted Mr. Barnes to seller-finance the transaction, which he was unwilling to do. We 

find that Mr. Barnes regarded both offers as unrealistic; otherwise, he would presumably have pursued one of them and rejected Greencone’s lower bid. In any event, unaccepted offers are generally accorded little probative weight in determining FMV. See 

Jayson v. United States, 294 F.2d 808 (5th Cir. 1961); Estate of Lloyd v. Commissioner, 

T.C. Memo. 1996-30, 71 T.C.M. (CCH) 1903, 1915 (citing Sharp v. United States, 191 

U.S. 341 (1903)).
43

[*43] Excelsior are entitled are limited to $810,000 and $693,000, respectively.19

6. Petitioner’s Arguments

Dismissing the sales comparison approach, Mr. Hazel employed 

the income approach—often called the “income capitalization” 

method—to determine the “before” values of the ASG and the EAG parcels. He posited that the HBU of each parcel was an S&G mining operation, as supposed by Mr. Laporte, that would derive annual revenues 

of roughly $60 million over its 30+ year lifespan. He subtracted the estimated costs of starting up and operating the hypothetical S&G mines 

and discounted the projected net revenues to present value using an average discount rate of 10.5%. After applying a 13.5% “pass-through entity premium,” Mr. Hazel opined that the “before” value of the ASG parcel was $9.4 million (or $24,426 per acre) and that the “before” value of 

the EAG parcel was $10.9 million (or $36,189 per acre).

We reject this approach for several reasons, including our determination that S&G mining was not the HBU of the two parcels. The 

income capitalization method is most reliable when used to determine 

the value of an existing business with a track record of income, expenses, 

profits, and growth rates. A historical track record provides real-world 

inputs that supply a plausible basis for projecting future revenue. See 

19 A final piece of historical evidence is supplied by the sale proceeds that BEV 

received from the investors who purchased interests in the ASG and the EAG InvestCos. See supra pp. 18–19. We have previously ruled that an investor’s purchase 

of an interest in a partnership whose only significant asset is real estate can be viewed 

as a “proxy for ownership” of that real estate. See Plateau Holdings, LLC v. Commissioner, T.C. Memo. 2020-93, 119 T.C.M. (CCH) 1619, 1626; see also TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th at 1368; Oconee Landing Prop., LLC v. Commissioner, T.C. Memo. 2024-25, at *71–72. BEV received sale proceeds of roughly $3.20

million and $3.10 million, respectively, from selling 95% interests in ASG and EAG to 

investors. See supra pp. 18–19. If those proceeds were regarded as being paid solely 

for the real estate held by the partnerships, the proceeds would suggest per-acre prices 

for the ASG and the EAG parcels of about $8,800 and $10,800, respectively. The 

amounts paid by the investors, however, included very large premiums for the promoters who organized the conservation easement transactions, as well as reimbursing the 

promoters for the costs they incurred for appraisal fees, legal fees, marketing expenses, 

and other transaction costs. See supra pp. 18–19. Those added charges have nothing 

to do with the value of the underlying real estate. Indeed, because the investors were 

interested only in tax deductions, they were likely oblivious to the true value of the 

real estate. Taken together, these factors considerably reduce the evidentiary value of 

these transactions. Because the record supplies an ample supply of more reliable historical evidence, we give no weight to the InvestCo offerings.
44

[*44] 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)).

Referring to the sales comparison method as the “common-sense 

approach” for valuing vacant land, Mr. Rogers explained that an incomed-based approach would require the appraiser “to deal with so 

many variables.” The appraiser would then need to imagine how the 

vacant land might be developed into an operating S&G mining business—an inquiry involving hundreds of variables such as capital costs, 

operating expenses, quality and quantity of S&G produced, future pricing of such products, repair and maintenance expenses, marketing expenses, legal and administrative costs, and discount rate. Mr. Rogers 

underscored the lack of “supported, verifiable answers” to any of these 

questions. Lacking reliable data, the appraiser would have to rely on a 

lengthy series of assumptions, estimates, and guesstimates. Performed 

under these constraints, the DCF method becomes highly speculative, 

making it inferior to the sales comparison method, which draws its conclusions from the market.

We agree with Mr. Rogers’s assessment that the income approach 

was too speculative to yield an accurate valuation of the ASG and the 

EAG parcels. The courts have often noted “the folly of trying to estimate 

the value of undeveloped property by looking to its anticipated earnings.” Pittsburgh Terminal Corp v. Commissioner, 60 T.C. 80, 89 (1973), 

aff’d, 500 F.2d 1400 (3d Cir. 1974) (unpublished table decision); see Ambassador Apartments, 50 T.C. at 243–44 (rejecting real estate valuation 

premised on the income approach in favor of market value established 

by recent sales). Absent a financial track record, every input into the 

DCF analysis necessarily involves speculation. That problem would be 

at its apogee here—attempting to predict the future revenues and expenses of a nonexistent business for a 30-year period.

When the income approach is used, the Court must examine the 

plausibility of the critical assumptions made by the appraiser. See Kiva 

Dunes Conservation, LLC v. Commissioner, T.C. Memo. 2009-145, 97 

T.C.M. (CCH) 1818, 1820. Each assumption, whether large or small, 

carries with it “some risk of error.” Whitehouse Hotel, 139 T.C. at 323. 

As interdependent assumptions multiply, the risk of error can increase 

exponentially. We have therefore rejected an expert’s use of the income 

method when “[o]ur own calculations . . . show that relatively minor 
45

[*45] changes in only a few of his assumptions would have large bottomline effects.” Ibid.

Mr. Hazel based his DCF analysis largely on the estimates carried over from Mr. Laporte’s “feasibility study.” As noted supra

pp. 36–38, Mr. Laporte made unsupported assumptions concerning the 

recoverable volume of minerals, supply, demand, pricing, and the costs 

of extraction. He failed to account for the fact that existing S&G operations in the region had substantial price advantages because of their location, existing clients, and established market presence. He failed to 

address the existing and prospective supply of S&G and its impact on 

demand. These facts alone warrant rejecting as noncredible the profitability conclusions on which Mr. Hazel’s DCF analysis is based.

That said, we note some additional, more technical, flaws in Mr. 

Laporte’s analysis below:

• Mr. Laporte estimated mineral resources of 28 million to 33 million tons of “sand/gravel” on the ASG and the EAG parcels. But 

gravel is up to ten times more valuable than sand, and his reports 

make no effort to separate sand soils from gravel soils. He likewise fails to account for less valuable soils (e.g., clay and peat 

soils) in any meaningful way.

• Mr. Laporte assumed that the ASG and the EAG parcels would 

sell roughly 50% gravel products and 50% sand products each 

year. But he and Mr. Patton agreed that the volumes of gravel 

across the entire acreages were minor in comparison to sand. Our 

review of the evidence indicates that the S&G reserves of the EAG 

parcel may have consisted (at best) of 26% gravel content. Assuming that gravel would account for 50% of each parcel’s annual 

sales volume thus seems unreasonable. Moreover, because most 

of the useful gravel was buried beneath large volumes of useless 

sand and “overburden,” the costs of extracting the gravel would 

be especially high.

• Mr. Laporte described dozens of products that could be produced 

from the S&G soils, but the more valuable products would generally consist of medium-sized gravel. He made no effort to show 

that medium-sized gravel was prevalent on the ASG or the EAG 

parcel.

• Mr. Laporte assumed that a hypothetical contractor would assume full financial responsibility for the mining operations, 
46

including the initial costs of purchasing more than $7.50 million 

of equipment, handling the day-to-day management of the mines 

for 30+ years, and defraying the inevitable costs of repairing and 

replacing the mining equipment. According to Mr. Laporte, a contractor would agree to assume all of these responsibilities in exchange for a mere 15% markup on the costs it incurred. Mr. 

Laporte supplied no credible market data to support that assumption, and we found it implausible. It is hard to believe that a

profit-seeking contractor would assume all of these costs and 

risks, for a 30-year period, without being entitled to any share of 

the profits.

• Mr. Laporte assumed that the local market for the hypothetical 

S&G mines would lie within a 60-mile radius of the properties. 

However, given the extremely high costs of trucking S&G, we 

credited the testimony of other mining experts that the radius 

would be closer to 30 miles. Mr. Laporte himself acknowledged 

that “[m]ost construction aggregate is consumed within 40–50 

miles from a mining location,” noting that the general cutoff is “50 

miles or less.” By his own admission, therefore, Mr. Laporte exaggerated the market for the hypothetical mining businesses.

While adopting most of his assumptions from Mr. Laporte’s “feasibility study,” Mr. Hazel added to the mix a 13.5% “pass-through entity 

premium.” In other words, he increased his valuation of the ASG and 

the EAG parcels because they were owned by investor partnerships that 

were passthrough entities rather than corporations. Mr. Hazel’s 

“pass-through entity premium” was unsupported by any market analysis specific to southern Alabama. The S&G miners who testified at trial 

had never encountered such a premium when purchasing S&G properties, and they failed to see an economic benefit from purchasing land 

through a partnership as opposed to purchasing it outright. We see no 

reason a buyer who desired only land would pay a premium to acquire 

an LLC holding that same land.

Making the DCF approach even more tenuous here is the nature 

of the entities that would conduct the putative S&G businesses. For all 

intents and purposes, ASG and EAG were shell companies—passthrough LLCs owned by investors seeking tax deductions. 

The LLCs had no employees, management, or mining experience, and 

they had no meaningful capital apart from the land. Mr. Laporte’s assumption that these investors would pony up $6.4 million to defray the 

initial capital costs of the mining businesses seemed far-fetched. Mr. 

[*46]
47

[*47] Hazel’s discount rates did not account for any of this. Instead, he 

derived his discount rates from major producers of S&G—not shell companies with no management, equipment, or mining permits.

As the courts have often noted, income-based methods generally 

are “not favored if comparable-sales data are available.” Whitehouse Hotel, 139 T.C. at 324. When the courts have used an income approach to 

value land with an HBU of mineral extraction, it was because extenuating circumstances made the comparable sales method inappropriate. 

For example, in United States v. 179.26 Acres of Land, 644 F.2d 367, 368

(10th Cir. 1981), on which petitioner heavily relies, the parties had stipulated that no comparable land sales existed. Because “[n]o such evidence was available,” the income approach was the only method that 

could be used to value the property. See id. at 371.

Petitioner likewise errs in relying on 69.1 Acres of Land, 942 F.2d 

290. The court there accepted the taxpayer’s submission that the HBU 

of raw land was S&G mining, see id. at 293–94, but the comparable sales 

method, not the income method, was used to determine the property’s 

value, see id. at 294. The U.S. Court of Appeals for the Fourth Circuit 

noted its skepticism about using an income-based method to value raw 

land, stating: “[Income-based] valuations almost always achieve chimerical magnitude, because, in the mythical business world of income capitalization, nothing ever goes wrong. There is always demand; prices always go up; no competing material displaces the market.” Id. at 293

(footnote omitted).

Michael Campbell, Cleveland Campbell, and Brooks Delaney all 

purchased S&G property in Escambia County relatively near the Big 

Escambia Tract. They testified that it was not uncommon to see land 

with S&G potential on the market. But Mr. Hazel failed to research (or 

at least failed to cite) any of this market evidence, asserting that he 

“could not find any . . . comparable properties to use as a proxy.” We 

find the conclusion inescapable that Mr. Hazel dismissed the comparable sales method, not because no comparable sales data existed, but because the data were irreconcilable with the values he determined for the 

EAG parcel ($36,189 per acre) and the ASG parcel ($24,426 per acre).

Although the HBU concept “is an element in the determination of 

fair market value, . . . it 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. The record shows that S&G 

properties relatively close to the Subject Properties were bought and 
48

[*48] sold over a ten-year period at prices that generally ranged between 

$1,000 and $2,200 per acre. Greencone itself purchased the entire Big 

Escambia Tract for $2,148 per acre. As far as the record of these cases 

reveals, the highest price ever paid for S&G property in Escambia 

County was the $4,301 per-acre price paid by Mr. Delaney in 2008, and 

it was an outlier. Given this evidence, it is wholly implausible that a 

hypothetical willing buyer with knowledge of the relevant facts would 

purchase the EAG and the ASG parcels for $36,189 and $24,426 per 

acre, the prices determined by Mr. Hazel.

B. Value of the BEP Parcel

Both parties’ experts used the comparable sales method to determine the FMV of the BEP property, which consisted of ten largely noncontiguous sub-parcels. In the FPAA the IRS determined a value of 

$1,060,000 for this acreage. Respondent’s expert, Mr. Rogers, determined a value of $1.6 million. Petitioner’s expert, Mr. Wombwell, determined a value of $1,975,000.

All of Mr. Wombwell’s comparable sales were from Alabama. Respondent did not cross-examine him regarding these transactions and 

does not dispute their comparability. Only one of Mr. Rogers’s comparable sales was in Alabama, and it involved a 555-acre parcel with acreage that was 100% contiguous.

The experts’ value conclusions are not far apart, and the difference results principally from how they defined the BEP property. Mr. 

Rogers prepared one appraisal and valued the property as one parcel for 

purposes of finding sales of comparable land, assuming a single HBU for 

all 710 acres. In contrast, Mr. Wombwell prepared a separate appraisal 

for each sub-parcel, each with its own HBU and comparable sales.

We find Mr. Wombwell’s valuation method to be the more reasonable approach. The BEP property consisted of ten sub-parcels, ranging 

considerably in size (from 10.5 to 161.61 acres). The sub-parcels were 

scattered over a fairly large area, were mostly noncontiguous, and had 

different physical attributes. Several sub-parcels had access to major 

roadways, creek frontage, or both; others were completely landlocked or 

consisted mostly of wetlands. One sub-parcel, identified by Mr. Rogers 

as #1, included almost 3 acres of significant improvements, including an 

8,000-square-foot combined warehouse and residence.

In short, the BEP property did not present a classic “assemblage” 

situation, which might dictate treating all components as a single 
49

[*49] property for valuation purposes. See, e.g., Am. Title Ins. Co. v. 

E. W. Fin., 16 F.3d 449, 461 (1st Cir. 1994); Estate of Elkins v. Commissioner, 140 T.C. 86, 132 (2013) (noting recognition in the caselaw that 

“certain properties possess an enhanced ‘assemblage’ value”), aff’d in 

part, rev’d in part, 767 F.3d 443 (5th Cir. 2014). In circumstances resembling those here, we have held that noncontiguous acreage is more 

appropriately valued as separate lots rather than as one parcel. See 

Cave Buttes, L.L.C. v. Commissioner, 147 T.C. 338, 368–69 (2016); see 

also Hughes, 97 T.C.M. (CCH) at 1495 & n.26 (holding that noncontiguous parcels, separated by a quarter of a mile, should be valued separately); Carver v. Commissioner, T.C. Memo. 1992-94, 63 T.C.M. (CCH) 

2092, 2095 (noting that, although “the theory of assemblage is often an 

important factor in determining value,” it did not apply in a situation 

where the parcels had differing development potential).20

Mr. Wombwell’s analysis also seems reasonable in positing HBUs 

of “light industrial” or “commercial/warehouse” for several sub-parcels, 

including the two derived from his division of #1. These HBUs naturally 

led him to select comparable properties of higher value. This accounts 

for most of the difference between his value conclusions and those of Mr. 

Rogers, whose comparable properties typically had HBUs of silviculture 

and recreation.

In sum, we find that Mr. Wombwell conducted his comparable 

sales analysis in a manner appropriately tailored to the noncontiguous 

nature of the BEP parcel. His separate appraisals allowed him to select 

transactions involving properties whose location, size, topography, usage, and physical characteristics more precisely resembled those of the 

ten constituent sub-parcels. We accordingly find that the FMV of the 

fee simple interest in the BEP property was $1,975,000, as determined 

by Mr. Wombwell.

We have considered all of the parties’ contentions that address 

the valuation questions decided in this Opinion. To the extent those 

20 Respondent urges that Mr. Wombwell’s approach was improper under Uniform Standards of Professional Appraisal Practice Rule 1.4(e), which states: “When 

analyzing the assemblage of various estates or component parts of a property, an appraiser must analyze the effect on value, if any, of the assemblage.” As noted in the 

text, the ten sub-parcels were randomly located and had little in common except for 

the fact that they were “left over” from the 12 conservation easement transactions. 

Because the “assemblage” had no discernable effect on value, Mr. Wombwell was not 

obligated to value the parcels as a single property.
50

[*50] arguments are not discussed herein, we find them unnecessary to 

reach, without merit, or irrelevant.

To reflect the foregoing,

Appropriate orders and decisions will be entered upon the conclusion of further proceedings in these cases.