Court Opinion

ID: 9895340
Source: CourtListenerOpinion
Date Created: 2023-11-06 20:02:22.443859+00
Date Added: 2024-06-11T09:12:11.868124
License: Public Domain

United States Tax Court

                            T.C. Memo. 2023-133

         NATHANIEL A. CARTER AND STELLA C. CARTER,
                         Petitioners

                                       v.

             COMMISSIONER OF INTERNAL REVENUE,
                         Respondent

                            RALPH G. EVANS,
                               Petitioner

                                       v.

             COMMISSIONER OF INTERNAL REVENUE,
                        Respondent 1

                                 —————

Docket Nos. 23621-15, 23647-15.                     Filed November 6, 2023.

                                 —————

              PS, a partnership, owned property known as DH.
       LE, a conservation biologist for N, a “qualified
       organization” within the meaning of I.R.C. § 170(h)(3),
       visited DH several times in October 2011 to document the
       property’s condition. On December 9, 2011, LE provided to
       N’s board the documentation he had compiled. On that
       date, N’s board approved acceptance of PS’s gift of a
       conservation easement on DH. PS conveyed the easement
       to N on December 27, 2011. In the easement deed, PS
       reserved the right to build up to 11 homes, 9 docks, and
       associated roads and driveways on DH at locations to be
       chosen by mutual agreement of PS and N. The deed
       prohibits N from approving PS’s exercise of any reserved

       1 This Opinion supplements our prior opinion Carter v. Commissioner, T.C.

Memo. 2020-21, rev’d and remanded per curiam, Nos. 20-12200, 20-12201, 2022 WL
4232170 (11th Cir. Sept. 14, 2022).

                              Served 11/06/23
                                   2

[*2]   right that would have a material adverse effect on the
       easement’s conservation purposes. In spring 2012, LE
       returned to DH and compiled additional documentation.
       Most of the documentation in the final package, however,
       was compiled from his visits in October 2011. Ps claimed
       charitable contribution deductions in respect of PS’s
       contribution on the premise that the easement was worth
       $14,175,000. At trial, Ps presented the testimony of
       appraisers who valued the easement at $10,300,000,
       having determined that the easement reduced DH’s value
       by 30%.

             Held: To satisfy the requirement of Treas. Reg.
       § 1.170A-14(g)(5)(i)(D), a written statement attesting to
       the accuracy of the documentation provided to the donee
       must be signed by the donor and a representative of the
       donee before the date of the gift.

              Held,     further,     because     Treas.     Reg.
       § 1.170A-14(g)(5)(i)(D) requires the donor and donee to
       jointly certify the accuracy of clearly referenced
       documentation, a unilateral representation by a donor to a
       donee in an easement deed does not satisfy the
       requirement.

             Held, further, if a taxpayer’s failures to strictly
       comply with a rule do not prevent achievement of the rule’s
       purposes, the rule in question is directory rather than
       mandatory and the taxpayer’s partial compliance can be
       accepted as substantial compliance.

               Held, further, because the documentation available
       to N as of December 27, 2011, was sufficient to enable N to
       fulfill its responsibility of preventing PS from exercising
       reserved rights in DH in a manner that would undermine
       the easement’s conservation purposes, PS substantially
       complied with the documentation requirements of Treas.
       Reg. § 1.170A-14(g)(5)(i).

              Held, further, because PS’s exercise of its reserved
       rights in DH are subject to N’s approval, and N is
       prohibited by the easement deed from approving an
       exercise of reserved rights that would have a material
                                    3

[*3]   adverse effect on the easement’s conservation purposes,
       PS’s reserved rights do not violate the requirement of
       I.R.C. § 170(h)(5)(A) that a contribution’s conservation
       purpose be protected in perpetuity; the exercise of reserved
       rights that would have, at most, an immaterial effect on
       conservation purposes would not be inconsistent with those
       purposes. See Treas. Reg. § 1.170A-14(g)(1).

             Held, further, the testimony of Ps’ expert appraisers
       did not reliably establish the easement’s value because
       they were unable to explain their determination that the
       easement reduced DH’s value by 30%.

              Held, further, the easement that PS conveyed to N
       was worth $1,000,000 when contributed, as determined by
       R’s expert appraiser.

              Held, further, because PS reported the easement as
       having a value of more than 200% of its actual value, that
       reporting effected a gross valuation misstatement, within
       the meaning of I.R.C. § 6662(e)(1)(A) and (h)(2)(A) and,
       consequently, Ps are subject to 40% gross valuation
       misstatement penalties on the portions of their
       underpayments attributable to the excess of $14,175,000
       over $1,000,000.

                                    —————

Vivian D. Hoard, for petitioners.

Shannon E. Craft, Christopher D. Bradley, and Tamara R. McCray, for
respondent.

                 SUPPLEMENTAL MEMORANDUM
                 FINDINGS OF FACT AND OPINION

       HALPERN, Judge: These cases are before the Court on remand
from the U.S. Court of Appeals for the Eleventh Circuit. Carter v.
Commissioner, Nos. 20-12200, 20-12201, 2022 WL 4232170 (11th Cir.
Sept. 14, 2022), rev’g and remanding per curiam T.C. Memo. 2020-21.
Our initial opinion in the cases concluded that petitioners were not
entitled to charitable contribution deductions as a result of the
                                            4

[*4] conveyance by Dover Hall Plantation, LLC (usually, the
partnership) to the North American Land Trust (NALT) of an easement
on property known as Dover Hall. In particular, following an analysis
initially adopted by the Court in Pine Mountain Preserve, LLLP v.
Commissioner, 151 T.C. 247 (2018), aff’d in part, vacated in part, rev’d
in part, 978 F.3d 1200 (11th Cir. 2020), we concluded that the easement
was not a “qualified real property interest” within the meaning of section
170(h)(2) 2 because the restrictions it imposed on the partnership’s use
of the property were not “granted in perpetuity.” We also concluded that
petitioners were not subject to gross valuation misstatement penalties
under section 6662(a), (b)(3), (e), and (h) for the years in issue because
respondent had not met his burden of demonstrating compliance with
the supervisory approval requirement of section 6751(b).               We
interpreted precedents of this Court to have established that the written
supervisory approval required by section 6751(b)(1) had to have been
given “before the first communication to the taxpayer that demonstrates
that an initial determination [to assess penalties] has been made.”
Carter, T.C. Memo. 2020-21, at *27. We found that the revenue agent
who made the initial determination had communicated that
determination to petitioners before his supervisor had approved it.

      In Kroner v. Commissioner, 48 F.4th 1272 (11th Cir. 2022), rev’g
in part T.C. Memo. 2020-73, the Eleventh Circuit rejected this Court’s
interpretation of section 6751(b)(1). On the basis of the statute’s plain
terms, the court concluded that approval of an initial determination to
assess penalties is timely as long as it comes before assessment.

      Petitioners and respondent appealed the decisions we entered on
the basis of our prior opinion. Venue for their appeals was the Eleventh
Circuit—the same court that had addressed Pine Mountain. On appeal,
the parties agreed that the partnership’s satisfaction of section 170(h)(2)
was “controlled” by that court’s decision in Pine Mountain, which
required reversal of this Court on the issue. Carter v. Commissioner,
2020 WL 4232170, at *1.

      The Eleventh Circuit viewed the timeliness of supervisory
approval of the gross valuation misstatement penalties respondent

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

Code, Title 26 U.S.C., in effect for the years in issue, regulation references are to the
Code of Federal Regulations, Title 26 (Treas. Reg.), in effect for the years in issue, and
Rule references are to the Tax Court Rules of Practice and Procedure.
                                         5

[*5] determined as having been resolved by Kroner. The appellate court
therefore reversed our decisions in regard to section 6751(b)(1).

       In light of the Eleventh Circuit’s opinion, we must accept for
purposes of these cases that the easement conveyed by the partnership
to NALT was a qualified real property interest within the meaning of
section 170(h)(2). In our prior proceedings, however, respondent had
raised other issues regarding the qualification of the contribution for a
deduction under section 170. Given our conclusion in regard to section
170(h)(2), we had found it unnecessary to resolve those other issues. On
appeal, petitioners asked the Eleventh Circuit to resolve the remaining
issues concerning the partnership’s entitlement to a deduction. The
court declined to do so. As it had in Pine Mountain, the Eleventh Circuit
viewed remand on those issues as appropriate to give this Court the
opportunity to do the required statutory “heavy lifting.” Carter v.
Commissioner, 2022 WL 4232170, at *1.

                             FINDINGS OF FACT

Dover Hall

       In 2005, Dover Hall Planation, LLC (then owned entirely by
Mr. Carter) purchased the Dover Hall property, a 5,245.06-acre tract of
land in Glynn County, Georgia. The Dover Hall property is bounded on
three of its four sides by waterways, including Green Creek. In April
2009, petitioner Ralph Evans purchased a 50% interest in the
partnership for $29,428,027. In a stipulation executed in April 2017, the
parties agreed that “[t]he 5,145.06 acre tract of land known as Dover
Hall is the only asset owned by Dover Hall Plantation, LLC.” 3

Initial Documentation; Approval of Gift by NALT Board

      Stephen Lee Echols, a conservation biologist for NALT, visited
the Dover Hall property in October 2011 “to make sure it qualified for
the conservation purposes and to document the conditions of the
property.” Petitioners’ counsel asked Mr. Echols to “explain for the
Court” what he did “in this case to accomplish” the requirement in the
regulations to document the property’s condition. Mr. Echols responded:

       In the year of 2011, I visited the property on October 1,
       October 19, and then for a half-day on October 20. I took

        3 In May 2006, Dover Hall Plantation, LLC contributed 100 acres of the Dover

Hall property to a community foundation.
                                        6

[*6]   photos. I took notes. I documented the condition of the
       property, the important conservation features of the
       property, and I provided documentary photographs and
       description that support the conservation values that I
       researched.

On December 9, 2011, Mr. Echols presented to NALT’s board the
materials he had assembled. At a meeting on that day, NALT’s board
approved acceptance of the easement.

Grant of Easement; Easement Deed

       On December 27, 2011, the partnership conveyed to NALT an
easement over 500 acres at the western edge of the Dover Hall property.
The deed of easement restricts the use of the covered property and,
among other things, generally prohibits the construction or occupancy
of any dwellings. The deed lists as the easement’s conservation purposes
(1) the preservation of a relatively natural habitat of fish, wildlife, or
plants or similar ecosystem, and (2) preservation of the covered property
as an open space that will provide a significant public benefit by
(a) providing scenic enjoyment to the general public and (b) advancing a
clearly delineated government conservation policy.

       Section 2.3 of the easement deed requires the partnership to
prepare, within 24 months of the easement’s recording, “a plan for
management and growth of forest in the Conservation Area[4] (the
‘Forest Management Plan’).” The partnership had to provide the Forest
Management Plan to NALT and obtain its written approval of the plan.

       In Article 3 of the easement deed, the partnership reserved
specified rights. For example, section 3.1 of the deed allows the
partnership to construct one single-family dwelling and accessory
structures within each of 11 “Building Areas” of up to two acres. Section
3.1.1 provides: “The location and dimensions of each of the Building
Areas shall be subjected to the review and approval of Holder [that is,
NALT]. The location of the Building Area must not, in Holder’s
judgment, directly or indirectly result in any material adverse effect on
any of the Conservation Purposes.”

       4 The easement deed defines the term “Conservation Area” to mean a specified

500-acre portion of the Dover Hall property.
                                       7

[*7] Section 3.2 allows the partnership to construct roads or driveways
to provide access to the Building Areas. Section 3.1.2 provides:

       The location and dimensions of the roads and driveways
       described in Section 3.2 shall be subjected to the review
       and approval of Holder. The location of the roads and
       driveways must not, in Holder’s judgment, directly or
       indirectly result in any material adverse effect on any of
       the Conservation Purposes or the restoration and
       management plan prepared in accordance with this
       Section.

Section 3.9 provides:

       Owner may construct nine (9) docks, and walkways and
       pathways to such docks, for personal, common or shared
       use. . . . The location and design of each such dock,
       walkway and pathway shall be as approved by Holder prior
       to construction. Each dock must be constructed and placed
       in a manner and location as will have no material adverse
       [e]ffect upon the Conservation Values[5] or the
       Conservation Purposes, including sensitive elements of the
       ecosystem such as rare species nesting and foraging
       habitat, rare plant populations or exemplary natural
       communities.

Section 3.21 allows the partnership to “cut and remove trees in
accordance with the Forest Management Plan approved by Holder in
accordance with Section 2.3.”

       Section 3.25.2 provides that NALT

       must be satisfied, as evidenced by its prior written
       approval of [the partnership’s] exercise of a Reserved
       Right, that any use or activity done in the exercise of the
       Reserved Right will meet the requirements and conditions
       for such Reserved Rights and will have no material adverse
       effect on the Conservation Purposes or on the significant

        5 The easement deed uses the term “Conservation Values” to refer to “the

features of the Conservation Area having ecological and scenic significance.”
                                        8

[*8]   environmental features of the Conservation Area described
       in the Baseline Documentation.[6]

       Section 6.18 of the deed sets forth warranties by the partnership
(as Owner) to NALT (the Holder). Section 6.18.1 states: “Owner has
received and fully reviewed the Baseline Documentation in its entirety.”
Section 6.18.2 states that the Baseline Documentation includes a
“Naturalist’s Report on the Conservation Area,” an “Environmental
Conditions Map of the Conservation Area,” “Photographs of current site
conditions on the Conservation Area,” a “Narrative description of the
significant ecological and other conservation values and characteristics
of the Conservation Area,” and a “Topographic Map of the Conservation
Area.”

       In section 6.18.3, the Owner represents to the Holder: “The
Baseline Documentation is an accurate representation of the condition
of the Conservation Area, subject to supplementation and amendment
by mutual agreement of the Owner and Holder.”

      The easement deed was signed by petitioner Nathaniel Carter, as
general manager of the partnership, and by Andrew L. Johnson, NALT’s
president.

Mr. Echols’s “Spring Review” and Final Documentation

      Mr. Echols compiled further documentation of the condition of the
Dover Hall property in spring 2012. As he explained:

       It was customary at the time of this easement for us to take
       the bulk of the information during the year of recording
       and then do a follow-up spring survey, because we’re often
       visiting the property late in the year, and we want to
       provide a full ecological picture of the property. So the
       baseline documentation included information from 2011
       and 2012, but most of it was taken in 2011.

      The record includes a document titled “Baseline Documentation.”
That document includes sections titled “Existing Conditions Report,”

       6 The easement deed uses the term “Baseline Documentation” to refer to “the

reports, plans, photographs, documentation, and exhibits assembled by, and retained
in the offices of, [NALT] . . . pursuant to 26 CFR §170A-14(g)(5), which describes
[specified] Conservation Values of the Conservation Area.”
                                           9

[*9] “Photographic Documentation,” and “Supportive Mapping.” The
Existing Conditions Report provides an 8-page textual description of the
Dover Hall property. The “Photographic Documentation” section
includes 23 “photoprints.” The “Supportive Mapping” section includes
6 pages of maps.         Exhibit 51-J also includes an “Owner
Acknowledgement,” in which representatives of the partnership and
NALT attest that the documentation accurately represents “the physical
condition of the Conservation Area.” 7 The Owner Acknowledgement
identifies December 30, 2011, as the “Date Recorded.” 8 It provides no
other dates. In particular, it does not identify the date on which it was
signed.

      According to Mr. Echols, “information” about the Dover Hall
property “was available to [NALT’s] board and to the client [presumably,
the partnership] prior to recording,” but the final documentation “wasn’t
assembled until after the spring review of the property.” “[T]he full
baseline in its entirety,” he said, “was not assembled until the spring.”

       When asked by petitioners’ counsel whether he had “assemble[d]
the information required by the regulations prior to 2011,” Mr. Echols
responded: “Yes I did.” The information he assembled in 2011
“include[d] photos, a description of the property, and . . . necessary
maps.”

Tax Reporting of Easement Contribution

       On its 2011 tax return, the partnership claimed a charitable
contribution deduction of $14,175,000 for the donation of the easement
to NALT. 9 On his 2011 Federal income tax return, Mr. Evans, a resident
of Georgia when he filed his Petition, claimed a charitable contribution
deduction equal to his 50% share of the deduction reported by the
partnership. The Carters, also Georgia residents when they filed their

        7 The Owner Acknowledgement was signed on NALT’s behalf by Steven W.

Carter, its Stewardship Coordinator. Mr. Echols explained that “it’s customary for
[him] not to sign” acknowledgments.
        8 Mr. Echols confirmed that “Date Recorded” refers to the date on which the

easement deed was recorded.
        9 The amount of the contribution reported by the partnership is supported by

an appraisal prepared by Claud Clark III. Respondent agrees that Mr. Clark’s
appraisal was a “qualified appraisal” within the meaning of section 170(f)(11)(E)(i). In
arriving at his estimate of the fair market value of the easement conveyed by the
partnership to NALT, Mr. Clark determined that the Dover Hall property was worth
$48,217,017 before the easement grant.
                                   10

[*10] Petition, reported Mr. Carter’s 50% share of the partnership’s
deduction on line 17 of Schedule A, Itemized Deductions, of their 2011
return, but their deduction was limited by section 170(b)(1)(A). The
Carters reported carryover deductions from 2011 on their 2012 and 2013
returns.

Notices of Deficiency

       In notices of deficiency issued on August 18, 2015, respondent
disallowed in full the charitable contribution deduction Mr. Evans
claimed for 2011 and the charitable contribution deductions the Carters
claimed for 2011, 2012, and 2013 as a result of the partnership’s grant
of the easement to NALT. The notices of deficiency also determined
gross valuation misstatement penalties and other accuracy-related
penalties for the taxable years in issue.

Expert Testimony Regarding Impact of Reserved Rights

       Petitioners presented testimony from three expert witnesses
concerning the impact on the partnership’s exercise of its reserved
rights: Christopher Wilson, an expert in conservation biology; Stuart
Sligh, a wildlife biologist and environmental consultant; and Mr. Echols,
the conservation biologist from NALT.

      Christopher Wilson

      In his written report, Mr. Wilson stated:

      Clearly there will be a direct impact to habitats on the
      conservation area where permanent structures and new
      roads are built. However, the total footprint of structures
      permitted by the easement appears to be quite low with
      respect to the size of the conservation area as a whole.
      What is perhaps the most important provision in the
      reserved rights is the requirement for NALT approval
      regarding the location and dimensions of the building
      envelopes, structures, roads, and docks. This allows NALT
      biologists the opportunity to gather additional information
      regarding the locations of sensitive habitats and rare
      species on the property, and avoid impacts sensitive areas
      [sic] in order to maximize the outcome for natural habitat
      conservation. For example, if during the drafting of the
      easement the building areas would have been excluded
      from the conservation area, then NALT would have had
                                   11

[*11] much less time to study the property, and no opportunity
      to incorporate new knowledge regarding rare species and
      habitats locations into the layout of building envelopes and
      structures.

      Given that: 1) the intent of the document is to protect
      natural habitat and wildlife species, particularly those
      considered rare or imperiled, or otherwise of conservation
      concern, as stated in the conservation purposes and
      whereas clauses; 2) the total area impacted by new
      permanent structures permitted in the reserved rights is
      so low relative to the size of the conservation area as a
      whole; and 3) that [sic] NALT has approval over the
      location and dimensions of [the] building envelopes,
      structures, and roads, it is my opinion that the easement
      provides for the protection of the conservation values in
      perpetuity.

       Mr. Wilson acknowledged that his report does not express an
opinion as to whether the uses of the Dover Hall property retained by
the partnership impaired the easement’s conservation purposes. When
asked by the Court for his opinion on that point, Mr. Wilson responded:
“The reserved rights would have some impact on the . . . conservation
values or purposes.” But Mr. Wilson also agreed with the Court that it
would be appropriate to draw from his report the conclusion that the
easement’s conservation values “are protected in perpetuity by the
easement, not withstanding [sic] the interests retained by the donor,
because the values would not be significantly diminished by the retained
interests.” When, however, the Court asked whether it would be a
“correct assessment of [his] opinion” that “the retention of the right to
develop eleven lots and the docks and put in the various roads will not
significantly diminish the . . . conservation value,” Mr. Wilson responded
that he was not sure. He then stated his belief that “the conservation
priority bird species that [he] mentioned in [his] report would still be
there and still have plenty of valuable habitat, even if the reserved
rights were exercised.” The species would have “slightly less” habitat
but still enough.      Mr. Wilson agreed with the Court that the
partnership’s exercise of its reserved rights would “diminish [the
conservation value] but not significantly.”

      Mr. Wilson confirmed that the extent to which the building of
homesites and associated roads would impair the easement’s
conservation values would depend on where they were placed. He said
                                    12

[*12] the docks could have “a minor impact,” depending on their
location. He added that the docks’ level of impact “may be so low that
it’s inconsequential to the use of that habitat by th[e] priority bird
species.”

       Mr. Wilson opined that the effect of article 3 of the easement deed
on conservation values was not entirely negative. Instead, he said the
rights reserved in article 3 had a mixed effect, in addition to allowing
the building of homes, docks, and roads, the deed also “allows for
forestry management.” The forestry management allowed “actually
helps maintain and improve habitat for some of those species, and if that
wasn’t there . . . the value of that land would significantly be diminished,
if there was not ongoing maintenance.”

      Stuart Sligh

       Mr. Sligh testified that he expected NALT, in exercising its
“oversight to locate the homesites,” would “try to site a two-acre
homesite with a few significant trees.” Mr. Sligh also opined that the
addition of nine docks on the shoreline of Green Creek would “slightly
decrease” the conservation benefits of the shoreline. He based that view
on the effect of the docks on the fish habitat, not on the visual aspects of
the shoreline. He also said that, while no docks would be better than
nine, “a few private, single-family docks really has very little negative
impact, in my opinion.”

       In his written report, Mr. Sligh used the term “edge effect” to refer
to “the boundary where two habitat types meet and wildlife diversity
increases.” He wrote:

      These edges usually support a diversity of plant species
      which could include soft-mast species such as berries and
      fruits that would not normally survive in a forested
      environment, particularly if burned on a regular rotation.
      Managing edges can increase wildlife diversity, and in
      many cases, wildlife managers prescribe specific edge
      management plans for landowners to increase wildlife
      populations and diversity. It is my opinion that an
      allowance of 11 small home sites with limited clearing
      within the CE [conservation easement] area could
      potentially increase the edge effect of the overall habitat
      without negatively impacting the forest community or
      wildlife species diversity.
                                   13

[*13] Mr. Sligh concluded that, in his opinion, “the owner’s retained
rights on the 500-acre CE area will not diminish the overall
Conservation Values.”

      Lee Echols

       Mr. Echols’s written report states that, “by allowing only a
handful of homes on an environmentally sensitive 500-acre tract that
borders Green Creek,” the easement helps to accomplish goals laid out
in a county development plan. Echoing Mr. Sligh, Mr. Echols wrote that
the retained building rights “would only be allowed in planted pine
stands.” In his trial testimony, Mr. Echols explained that “the pine
plantation is the least natural part of the property, and thus the most
appropriate place to locate those homesites.”

      Mr. Echols’ written report states his opinion that

      the allowance of only 9 carefully selected and constructed
      dock sites along approximately 4 miles of tidal creek would
      have [a] negligible effect on the scenic values of the
      property.     As compared to conventional waterfront
      developments, the number of allowable docks is residual
      and of no consequence to either scenic or relatively natural
      habitat purposes.

The report concludes as follows:

      In this report, I have attempted to substantiate the many
      significant conservation attributes of Dover Hall, as well as
      provide evidence that the allowable reserved rights do not
      adversely affect the perpetuity of the Conservation Area.
      The residual allowable home sites and associated
      structures are both minimal compared to the overall
      acreage of the property, and very minimal when compared
      to other developed coastal properties. Additionally, these
      reserved rights are highly constrained in their location and
      design via the carefully crafted conservation easement
      language. This property confers significant public benefit
      in the form of protected high quality natural habitats,
      intact working forest lands, scenic views, and support of
      prominent governmental conservation policies.

      In his oral testimony, Mr. Echols opined that the 11 homesites
would impair the easement’s conservation value “to a negligible degree.”
                                   14

[*14] He also said that homesites can be “positive” because they “limit[]
encroachment from people creating ATV trails, from illegal hunting.”
Property owners can “get involved in restoration activities on the
property out of their own interest” and “sometimes will find rare species”
that NALT did not identify.

       Mr. Echols expected that NALT would “strive” to meet the goal
that “no portion of any house would be visible from” Green Creek. He
viewed that goal to be “practical” “because the natural vegetation along
the creek forms a barrier.”

       Mr. Echols admitted that the docks would impair the scenic view
conservation value, but the effect, he said, would again be “negligible.”
He suggested that nine docks along a four-mile tidal creek would not
stop people from enjoying it. If the docks had existed before the grant of
the easement, he said, NALT “wouldn’t have any problem claiming
scenic.”

Expert Testimony on Valuation

      Van Sant and Wingard

      Petitioners offered testimony of Martin Van Sant and Thomas
Wingard (Van Sant and Wingard). Although respondent accepted Van
Sant and Wingard as experts in the valuation of real property, he
challenges the admissibility of their report for the reasons explained in
Part V.A.1 below.

             Responsibility for Conclusions and Analysis

        The written report of Van Sant and Wingard that petitioners
submitted as the appraisers’ direct testimony does not identify specific
opinions with either of its coauthors, but the report includes a
certification by each of them that “[t]he reported analyses, opinions and
conclusions . . . are my personal, impartial and unbiased professional
analyses, opinions and conclusions.”

       During Mr. Wingard’s voir dire testimony at trial (without
Mr. Van Sant present), he stated that both he and Mr. Van Sant were
“involved in all the processes” of preparing the report. Therefore, “every
section of the report was done in concert with the other.” “In essence,”
Mr. Wingard said, he and Mr. Van Sant “have coauthored th[e] report.”
Mr. Van Sant agreed that, while one or the other may have typed
different sections, they each took “ownership” of the whole report.
                                       15

[*15] Mr. Wingard acknowledged disagreements between them in the
report’s preparation but testified that they had worked out those
disagreements and arrived at mutually agreeable conclusions.

              Van Sant and Wingard’s Preeasement Value

       Van Sant and Wingard valued the easement by comparing the
value of the Dover Hall property before the grant of the easement to its
value thereafter. To determine the preeasement value, they employed
the “sales comparison approach,” using sales of six properties they
viewed as generally comparable. They adjusted the sales price in each
of the comparable sales on the basis of their judgments on the effects of
differing circumstances, including the physical characteristics of the
properties in issue, the nature of the sale, and prevailing market
conditions at the time of the sale compared to those of December 30,
2011. 10 In the case of three properties that they admitted had no “water
influence,” their adjustments took that factor into account.

        Van Sant and Wingard describe their “Comparable Land Sale
No. 1” as a “forced sale under forbearance by . . . [the seller’s] creditor.”
They explain that they considered the sale a forced sale because of the
seller’s financial condition “and the pressure from” the seller’s creditor.
The adjustments they made to the sales price of Comparable Land Sale
No. 1 thus included a positive 50% adjustment to account for the
conditions of sale (i.e., in the absence of other adjustments, their
adjusted sales price for that property would have been 1.5 times the
actual price at which the property sold).

       After making adjustments for the differing circumstances, the
sales prices per acre in the comparable sales ranged from $5,550 to
$13,608. In arriving at a value per acre for the Dover Hall property, Van
Sant and Wingard gave disproportionate weight to two of the six sales
that involved coastal Georgia properties. The adjusted sales prices of
those two properties ($5,550 and $11,404 per acre) had an arithmetic
mean of $8,477. By contrast, the arithmetic mean of the adjusted sales
prices in all six sales was $10,595 per acre. On the basis of those data,
Van Sant and Wingard concluded: “A reasonable and justifiable
correlation among the six sales may suggest $9,000/acre, slightly above
the arithmetic mean displayed by the two Coastal Georgia sales.”

       10 Van Sant and Wingard valued the easement as of December 30, 2011, which

was the date on which the easement, granted three days earlier, was filed and
recorded.
                                    16

[*16] Applying that per-acre value to the acreage of the Dover Hall
property (5,145.06), Van Sant and Wingard arrived at a total
preeasement value of $46,305,540 (5,145.06 × $9,000), which they
rounded to $46,300,000.

             Van Sant and Wingard’s Posteasement Value

       Van Sant and Wingard were unable to find sales of properties
comparable to the Dover Hall property after the grant of the easement
(that is, sales of similar properties subject to similar easements). “After
an extensive search,” they wrote, data regarding sales of comparable
properties were “not . . . available.” Therefore, they simply adjusted
their preeasement value by the easement’s estimated impact. In
arriving at an estimate of the percentage reduction in the value of the
property resulting from the easement, they considered the easement’s
effects on various attributes. They determined that the easement
reduced the number of residential units that could be developed on the
property by 9.52%. They also noted that the easement covered 9.72% of
the total acres of the Dover Hall property. Relying on Mr. Sligh’s report,
they determined that the easement would reduce the number of docks
that could be built on adjacent waterways by 20.25%. “Based on the
percentages of those elements of comparison affected by the
encumbrance,” they wrote, “it was determined a reasonable effect of the
easement . . . may approach 30.0%.” They concluded: “This adjustment
does not in anyway [sic] suggest mathematical exactness, but does
appears [sic] reasonable in light of the quality of this area of the total
property affected by the easement restrictions.”

       At trial, Mr. Van Sant and Mr. Wingard each suggested that they
had arrived at their 30% adjustment by summing the percentage
reductions in various attributes and rounding the result. Mr. Van Sant
referred to the percentage of total acreage covered by the easement, the
reduction in allowable residential units, and the percentage reduction
in water footage (16%), noting that their sum was “close to 30 percent”
(9.72%, 9.52%, and 16% sum to 35.25%). By contrast, Mr. Wingard used
the percentage reduction in docks instead of the reduction in water
frontage. He noted that 9.52%, 9.72%, and 20.25% sum to “about 39
percent” and described the 30% adjustment he and Mr. Van Sant made
as “a little bit less than that.”

      Neither Mr. Van Sant nor Mr. Wingard explained why they
simply summed the percentage reductions in various attributes, without
taking into account the proportion of the value of those attributes to the
                                          17

[*17] total value of the Dover Hall property. When the Court asked
Mr. Wingard “what on earth would make you combine” the percentages,
his only answer was: “[W]e thought that was a reasonable summation.”

       In an apparent test of the reasonableness of their 30%
adjustment, Van Sant and Wingard considered the sales of properties
subject to easements in their entirety. To determine the impact of those
easements on the values of the properties, they had to estimate what
each property would have been worth if it had not been encumbered. On
the basis of those estimates, they determined that the easements
reduced the values of the properties by an average of 83.28%. In light
of that number, they reasoned, “the determination of a 30% adjustment
for the subject property’s loss of certain rights on 500.00 acres appears
reasonable and justifiable.”

       Thus, Van Sant and Wingard purported to recompute the
adjusted sales price of each of their six comparable properties by adding
an additional adjustment of negative 30%. As recomputed, the adjusted
sales prices ranged from $4,056 per acre to $9,720 per acre. 11 That range
produced an arithmetic mean of $7,343 per acre. 12 On the basis of those
data, Van Sant and Wingard concluded: “A reasonable and correlated
value for the subject after the placement of a conservation easement on
500.00 acres is $7,000 per acres [sic].”

        11 Van Sant and Wingard’s computation for purposes of their “after” analysis

of the adjusted price for their Comparable Land Sale No. 1, which provided the low end
of the range of comparable property values, reflects an arithmetic error. In their
“before” analysis, they made a net adjustment of positive 30% for the physical
characteristics of the property sold in Comparable Land Sale No. 1. Their “after”
analysis made the same adjustments as the “before” analysis with the addition of a
negative 30% adjustment to account for the effects of the easement. Thus, the net
adjustment for the physical characteristics for Comparable Land Sale No. 1 in the
“after” analysis should have been zero. Instead, Van Sant and Wingard made a
negative 5% net adjustment due to an error in adding up the separate adjustments.
Had they made no net adjustment to Comparable Land Sale No. 1 for purposes of the
“after” analysis (with the negative 30% adjustment for the easement offsetting the 30%
positive adjustment for the other factors considered), the adjusted sales price for
Comparable Land Sale No. 1 in Van Sant and Wingard’s “after” analysis would have
been $4,269 per acre (equal to the $5,550 sales price used in the “before” analysis
divided by 1.3).
         12 Correcting for the arithmetic error in the computation of the adjusted sales

price for Van Sant and Wingard’s Comparable Land Sale No. 1 would have produced
an arithmetic mean of $7,417. Because the adjusted sales price for Comparable Land
Sale No. 1 was the low end of the range of values, the error in computation had no
effect on the median.
                                    18

[*18] Thus, in their “after” analysis, Van Sant and Wingard gave equal
weight to all six comparable properties, while their “before” analysis
gave disproportionate weight to the two comparable properties on the
Georgia coast. Their report fails to explain that inconsistency.

      Using a value of $7,000 per acre, Van Sant and Wingard
determined that, after the easement grant, the Dover Hall property was
worth $36,015,420 ($7,000 × 5,145.06 acres), which they rounded to
$36,000,000. Comparing that amount to their preeasement value of
$46,300,000, they concluded that the easement was worth $10,300,000
on December 30, 2011 ($46,300,000 − $36,000,000).

      Zac Ryan

      Respondent offered testimony of Zac Ryan, whom petitioners
accepted as an expert appraiser of real property.

             Mr. Ryan’s Preeasement Value

       Like Van Sant and Wingard, Mr. Ryan valued the Dover Hall
property as a whole before and after the grant of the easement. Also
like Van Sant and Wingard, Mr. Ryan determined Dover Hall’s
preeasement value by reference to sales of generally comparable
properties. He considered four of them, which he classified as either
superior or inferior to the Dover Hall property (taking into account,
among other things, the water features of each property). Each of his
four comparable properties had merchantable timber. For three of
them, he adjusted the sales price per acre at which the property sold by
subtracting an estimate of timber value. (For the other comparable
property, he was unable to obtain an estimate of timber value and left
the sales price unadjusted.) The adjusted sales prices of the properties
he considered inferior to the Dover Hall property ranged from $936 to
$1,201 per acre. The one property he considered superior to Dover Hall
had a sales price of $3,116 per acre. He therefore concluded that the
value of the Dover Hall property “should fall . . . [above] $1,201 per acre
(the highest inferior indicator) but below $3,116 per acre (the lone
superior indicator).” Because of the “overall amenity and aesthetic
features” of the Dover Hall property, Mr. Ryan chose a per-acre value of
$3,000, toward the upper end of the range. He thus valued the Dover
Hall property before the granting of the easement at $15,435,000
($3,000 per acre × 5,145 acres).

     In characterizing the “conditions of sale” for each of his four
comparable properties, Mr. Ryan described the transaction as “arm’s
                                   19

[*19] length” but noted that two of the four transactions were sales out
of foreclosure. At trial, Mr. Ryan testified that he knew that the seller
in a third sale had been in bankruptcy. The sellers in the fourth of
Mr. Ryan’s comparable sales were limited liability companies that had
some affiliation with a family that owned another property through an
entity that was in receivership. At trial, Mr. Ryan admitted that he
should have made clear that the sellers in all four of the transactions
were in adverse financial circumstances. Mr. Ryan said that, as part of
his research, he spoke with the parties involved in the transactions and
confirmed “that the properties had received their full exposure to the
market and had achieved prices that were consistent with everything
they could have achieved under prevailing market conditions at that
point in time.”

       Mr. Ryan admitted that, on a tour of the Dover Hall property
conducted by a caretaker (and attended by petitioners’ and respondent’s
counsel), “we didn’t really venture into the easement area too terribly
far, because . . . [the caretaker] couldn’t tell us where the easement was
exactly.” Mr. Ryan admitted that he did not remember seeing Green
Creek on that visit. But he came back to the property and observed
Green Creek from a highway that crosses it.

             Mr. Ryan’s Posteasement Value

       Mr. Ryan was unable to find appropriate comparable properties
to value Dover Hall as a whole after the easement. The only reference
properties he found were subject to easements in their entirety.
Therefore, he used those properties to value the 500 acres of Dover Hall
subject to the easement and used his $3,000-per-acre value from his
before analysis to value the remainder of the Dover Hall property after
the granting of the easement.

       Mr. Ryan identified five comparable properties to value the 500
acres of Dover Hall subject to the easement, four of which included
merchantable timber. After adjustment for the timber value as
appropriate, the sales prices for the five comparable properties ranged
from $491 to $1,587 per acre. Again, Mr. Ryan classified each
comparable property as either superior or inferior to the Dover Hall
property, taking into account the property’s water features and other
factors. The adjusted sales prices for the inferior properties ranged from
$491 to $671 per acre. The adjusted sales prices of the superior
properties ranged from $1,517 to $1,587 per acre. Therefore, Mr. Ryan
concluded that “the value of the land in the conservation easement area
                                         20

[*20] should fall above $671 per acre (the highest inferior indication)
but below $1,517 (the lowest superior indication).” In determining a
value within that range, he acknowledged the right of the partnership
to build 11 homes but found that factor offset by what he described as
“extremely limited market demand for those rights as of the effective
date of value.” Mr. Ryan therefore chose a value in the middle of the
range suggested by the sales of his comparable properties: $1,000 per
acre. He thus valued the 500 acres of the Dover Hall property subject to
the easement at $500,000 (500 × $1,000) and valued the property as a
whole after the grant of the easement at $14,435,000 ($500,000 + (5,145
acres – 500 acres) × $3,000 per acre). Comparing his before and after
values, Mr. Ryan determined that the easement was worth $1,000,000
on December 30, 2011 ($15,435,000 − $14,435,000, or 500 acres
multiplied by the $2,000 reduction in value per acre resulting from the
easement).

                                    OPINION

I.     The Applicable Law in General

       Section 170(a)(1) allows a deduction for “any charitable
contribution . . . payment of which is made within the taxable year.”
Section 170(c) defines the term “charitable contribution” to mean “a
contribution or gift to or for the use of” a specified organization.

       As a general rule, a taxpayer is not allowed a deduction for a
contribution of part of the taxpayer’s interest in a property. See
§ 170(f)(3). That general rule does not apply, however, to “a qualified
conservation contribution.” § 170(f)(3)(B)(iii).

       Section 170(h)(1) defines “qualified conservation contribution” to
mean “a contribution—(A) of a qualified real property interest, (B) to a
qualified organization, (C) exclusively for conservation purposes.” 13 The
term “qualified real property interest” includes “a restriction (granted in
perpetuity) on the use which may be made of . . . real property.”
§ 170(h)(2)(C). As pertinent here, section 170(h)(4)(A) defines the term
“conservation purpose” to mean (i) the preservation of land for
recreational or educational uses by the general public, (ii) “the
protection of a relatively natural habitat of fish, wildlife, or plants, or
similar ecosystem,” (iii) “the preservation of open space” that “will yield

        13 Respondent does not dispute NALT’s status as a “qualified organization,” as

defined by section 170(h)(3).
                                  21

[*21] a significant public benefit,” or (iv) “the preservation of an
historically important land area or a certified historic structure.”
Section 170(h)(5)(A) provides: “A contribution shall not be treated as
exclusively for conservation purposes unless the conservation purpose is
protected in perpetuity.”

      Treasury Regulation § 1.170A-14(g)(5)(i) provides:

      In the case of a donation made after February 13, 1986, of
      any qualified real property interest when the donor
      reserves rights the exercise of which may impair the
      conservation interests associated with the property, for a
      deduction to be allowable under this section the donor must
      make available to the donee, prior to the time the donation
      is made, documentation sufficient to establish the
      condition of the property at the time of the gift. Such
      documentation is designed to protect the conservation
      interests associated with the property, which although
      protected in perpetuity by the easement, could be adversely
      affected by the exercise of the reserved rights. Such
      documentation may include:
                    (A) The appropriate survey maps from the
             United States Geological Survey, showing the
             property line and other contiguous or nearby
             protected areas;
                    (B) A map of the area drawn to scale showing
             all existing man-made improvements or incursions
             (such as roads, buildings, fences, or gravel pits),
             vegetation and identification of flora and fauna
             (including, for example, rare specifies locations,
             animal breeding and roosting areas, and migration
             routes), land use history (including present uses and
             recent past disturbances), and distinct natural
             features (such as large trees and aquatic areas);
                    (C) An aerial photograph of the property at an
             appropriate scale taken as close as possible to the
             date the donation is made; and
                    (D) On-site photographs taken at appropriate
             locations on the property. If the terms of the
             donation contain restrictions with regard to a
             particular natural resource to be protected, such as
             water quality or air quality, the condition of the
             resource at or near the time of the gift must be
                                         22

[*22]          established. The documentation, including the
               maps and photographs, must be accompanied by a
               statement signed by the donor and a representative
               of the donee clearly referencing the documentation
               and in substance saying “This natural resources
               inventory is an accurate representation of [the
               protected property] at the time of the transfer.”.

II.     Identification of Remaining Issues

        In an Order issued in January 2023, following the Eleventh
Circuit’s remand of these cases, we directed the parties to “file reports
stating their views as to the actions this Court should take on remand.”
In the Status Report he submitted in response to that Order, respondent
renewed two arguments he had made on brief that, if accepted, would
require disallowance of the partnership’s deduction. First, respondent
argues, “petitioners failed to make available to the donee, prior to the
grant of the easement, documentation sufficient to establish the
condition of the property as required by Treas. Reg. § 1.170A-14(g)(5)(i).”
Respondent refers to testimony by “petitioners’ own witness” to the
effect that “the baseline documentation was not assembled until months
after donation of the easement, making compliance with the
requirement impossible.”

       Respondent invokes “[a] second, independent problem with
petitioners’ conservation easement” that, in his view, “also requires
disallowance of the deduction.” “[T]he deed of easement’s reserved
rights,” respondent argues, “allow inconsistent uses which impair the
conservation interests that the easement seeks to protect.” Respondent
alleges that the allowance of inconsistent uses violates Treasury
Regulation § 1.170A-14(e)(2). 14      Again, respondent claims that
testimony of petitioners’ own witnesses supports his argument. He
claims that three expert witnesses called by petitioners “agreed that the
exercise of the reserved rights would impair, injure, and diminish the
conservation interests that the easement sought to protect.”

      In his Status Report, respondent asks us to adopt as “reasonable
and well-supported” Mr. Ryan’s conclusion “that the easement was
worth $1,000,000 at the time of the donation.” Respondent also renews

        14 Treasury Regulation § 1.170A-14(e)(2) provides as a general rule that “a

deduction will not be allowed if the contribution would accomplish [an] enumerated
conservation purpose[] but would permit destruction of other significant conservation
interests.”
                                   23

[*23] an argument he made on brief that we should exclude Van Sant
and Wingard’s report. Even if we consider Van Sant and Wingard’s
report, respondent argues, we should give it “little, if any, weight
because its conclusions are contradictory and unsupported.” On the
premise that the easement’s “true value” was $1,000,000, respondent
concludes that petitioners “are subject to a forty percent gross valuation
misstatement penalty.”

       In their Status Report, petitioners largely agree with
respondent’s list of issues for us to resolve on remand. They ask that we
decide “the remaining issues relating to the validity of the conservation
easement, including whether the conservation easement protects the
conservation purposes in perpetuity under I.R.C. § 170(h)(5)(A) and
whether there was adequate baseline documentation of the property at
the time of the donation.” Petitioners’ nonexclusive list leaves open the
possibility of additional issues, but neither party has identified any
other issues regarding the partnership’s compliance with section 170(h)
and its accompanying regulations. Petitioners also raise the prospect of
a reasonable cause defense to valuation misstatement penalties, which
respondent did not acknowledge in his Status Report.

        We view as follows our tasks on remand. First, we have to decide
whether the documentation that the partnership made available to
NALT, before the contribution, concerning the condition of the Dover
Hall property satisfied the requirements of Treasury Regulation
§ 1.170A-15(g)(5)(i). If so, we must go on to decide whether the
partnership’s reservation of limited rights to develop the Dover Hall
property violates the requirement of section 170(h)(5)(A) that the
conservation purposes of a qualified conservation contribution be
“protected in perpetuity.” We will then need to determine the
easement’s value. If we conclude that the partnership satisfied the so-
called “baseline documentation” requirements of Treasury Regulation
§ 1.170A-14(g)(5)(i) and that its reserved rights do not violate section
170(h)(5)(A), the partnership will be entitled a charitable contribution
deduction measured by the easement’s value. And the value of the
easement will be relevant for the purpose of determining petitioners’
liability for valuation misstatement penalties regardless of the
partnership’s entitlement to a charitable contribution deduction.
Finally, should we determine that the value the partnership placed on
the easement in reporting its charitable contribution deduction resulted
in a substantial valuation misstatement, within the meaning of section
6662(e)(1), but not a gross valuation misstatement, within the meaning
                                    24

[*24] of section 6662(h)(2), we will need to consider petitioners’
reasonable cause defense to the otherwise applicable penalty.

III.   Baseline Documentation

       A.    Failure of Strict Compliance

       Although Treasury Regulation § 1.170A-14(g)(5)(i) requires the
donor of a qualified real property interest who reserves rights in the
donated property to make “sufficient” documentation available to the
donee before a gift, the regulation provides little or no guidance on how
to assess the sufficiency of a given quantum of documentation. Treasury
Regulation § 1.170A-14(g)(5)(i)(A) through (D) lists items that “may” be
included in the documentation. As petitioners observe, however, the
listed examples are merely illustrative.

        The absence of guidance on the sufficiency of documentation—
and the practical reality that the Internal Revenue Service and the
courts are not particularly competent to assess it—highlight the
importance of the signed written statement requirement provided in
Treasury Regulation § 1.170A-14(g)(5)(i)(D). The parties’ interests in
regard to the quantum of available documentation are not likely to be in
full alignment. (The donee would generally prefer more documentation;
the donor might prefer less, to give it more flexibility in the exercise of
its reserved rights.) Therefore, if the parties jointly agree that the
baseline documentation made available to the donee before the gift
accurately represents the property’s condition at that time, their
agreement can be taken as validation that the documentation is
sufficient to enable the donee to effectively monitor the donor’s exercise
of its reserved rights in the property.

      Although the regulation does not explicitly state a deadline for
the signed written statement, it does provide that the required
statement must “accompany” the documentation to which it attests.
And Treasury Regulation § 1.170A-14(g)(5)(i) requires the donor to
make that documentation available to the donee “prior to the time the
donation is made.” Therefore, by implication, the regulation requires
the parties to sign the statement before the date of the gift.

      The “Baseline Documentation Acknowledgment” included in the
record does not indicate when it was signed. The only date given on the
acknowledgment is the date of recording of the easement deed. Thus,
the acknowledgment cannot have been signed until on or after the
                                    25

[*25] recording date of December 30, 2011, which, in turn, was after the
date of the gift.

      Moreover, the Baseline Documentation Acknowledgment states
only that the that the documentation to which it was attached, which
was not assembled in its final form until spring 2012, accurately
represented the physical condition of the Dover Hall property at some
unspecified time.      It does not evaluate the sufficiency of the
documentation by reference to the property’s condition at the time of the
gift. The acknowledgment therefore does not evidence the mutual
agreement of the partnership and NALT that the documentation made
available to NALT before the date of the gift was sufficient to establish
the condition of the property at that time.

       Petitioners argue that the signed written statement requirement
was satisfied by the representations set forth in section 6.18.2 and 6.18.3
of the easement deed, which was signed by Nathaniel Carter, as general
manager of the partnership, and by Andrew L. Johnson, NALT’s
president. Those signatures, petitioners reason,

      confirm[ed] that [Messrs. Carter and Johnson] had
      reviewed the documentation required by Treas. Reg.
      § 1.170A-14(g)(5)(i)(A)-(D), including on-site photographs
      and Mr. Echol’s [sic] naturalist’s report on the conservation
      area showing the condition of the property at the time of
      the donation and confirming that the documentation was
      an accurate representation of the condition of the property
      at the time of the donation.

Petitioners interpret the representations as referring “to Mr. Echols [sic]
work-product.” In the representations, they say, Messrs. Carter and
Johnson “warrant[ed] that th[e] documents [Mr. Echols compiled] were
an accurate representation of the condition of the property at the time
of the donation.” Thus, petitioners conclude, those documents, and
Messrs. Carter and Johnson’s warrant of their accuracy, “meet[] the
baseline requirements of the regulations, including the requirement of
a signed statement.”

      We do not agree that section 6.18.2 and 6.18.3 of the deed signed
by Nathaniel Carter and Mr. Johnson satisfies the signed written
statement requirement of Treasury Regulation § 1.170A-14(g)(5)(i)(D).
Section 6.18.2 and 6.18.3 sets forth unilateral representations made by
the partnership to NALT. In section 6.18.3, the partnership represents
                                    26

[*26] to NALT that the Baseline Documentation accurately represents
the condition of the Conservation Area. Mr. Johnson’s signature on the
deed that includes that representation does not demonstrate that NALT
agreed that the documentation was accurate. Treasury Regulation
§ 1.170A-14(g)(5)(i)(D) requires the donor and donee to jointly certify the
accuracy of clearly referenced documentation. A unilateral certification
of documentation, even if that certification accompanies and clearly
references the documentation, does not satisfy the signed written
statement requirement of Treasury Regulation § 1.170A-14(g)(5)(i)(D).

      In short, Treasury Regulation § 1.170A-14(g)(5)(i)(D) requires a
representative of the donee to join the donor in executing a signed
written statement that attests to the sufficiency of the documentation
made available to the donee before the gift. Neither the Baseline
Documentation Acknowledgment included with the documentation as
supplemented in spring 2012 nor the partnership’s unilateral
representations to NALT in the easement deed demonstrate strict
compliance with the signed written statement requirement of Treasury
Regulation § 1.170A-14(g)(5)(i)(D).

      B.     Substantial Compliance

      Our conclusion that petitioners have not demonstrated the
partnership’s strict compliance with the baseline documentation rules
does not end our inquiry. As we wrote in the Order in which we
requested supplemental briefs, “[a] taxpayer’s failure to strictly comply
with a rule that is directory rather than mandatory can be excused if the
taxpayer substantially complied with the rule.”

       Our caselaw on the substantial compliance doctrine can be read
to suggest a two-step analysis. First, we ask whether the relevant rule
is directory or mandatory. If the rule is mandatory, strict compliance is
required. See, e.g., Taylor v. Commissioner, 67 T.C. 1071, 1077 (1977);
Dunavant v. Commissioner, 63 T.C. 316, 319 (1974). If the rule is
instead directory, a taxpayer’s failure to strictly comply may be excused.
In those cases, we go on to ask whether the taxpayer’s compliance,
though imperfect, was at least substantial. Taylor, 67 T.C. at 1077–78.

       Those two questions—whether a rule is directory or mandatory
and whether a taxpayer’s compliance was substantial—are closely
interrelated. Both aim to implement Congress’s intent. In Sperapani v.
Commissioner, 42 T.C. 308, 331 (1964), we suggested that a rule is
mandatory if it “relate[s] to the substance or essence of the statute.” And
                                     27

[*27] in Smith v. Commissioner, T.C. Memo. 2007-368, 2007 WL
4410771, at *19, aff’d, 364 F. App’x 317 (9th Cir. 2009), we suggested
that a taxpayer’s imperfect compliance is nonetheless substantial if it
“adequately serve[s] the purposes intended by Congress.” See also
Durden v. Commissioner, T.C. Memo. 2012-140, 2012 WL 1758655, at *2
(suggesting that a taxpayer’s compliance is substantial if it is sufficient
to “fulfill[] the essential statutory purpose”).

       Under a strict, two-step process, if we classified a rule as directory
rather than mandatory, we would then ask whether the taxpayer’s
failures of compliance prevent achievement of the legislative purpose.
But the answer to that second question can influence—and even
determine—the answer to the first. That a taxpayer’s failures of
compliance do not prevent achievement of Congress’s purpose
demonstrates that the rule or rules in question must not go to the
substance or essence of the statute—that is, they are directory and not
mandatory. In Vaughan v. John C. Winston Co., 83 F.2d 370, 372 (10th
Cir. 1936), the Court of Appeals for the Tenth Circuit wrote: “If a
requirement is so essential a part of the plan that the legislative intent
would be frustrated by a noncompliance, then it is mandatory.” The
converse should also be true: If noncompliance does not frustrate
legislative intent, the rule should be classified as directory (and
compliance that is sufficient to fulfill legislative intent should be judged
substantial).

         Petitioners have not demonstrated strict compliance with the
baseline documentation rules of Treasury Regulation § 1.170A-
14(g)(5)(i) because they have not established that the documentation of
the condition of the Dover Hall property made available to NALT before
December 27, 2011, was accompanied by the signed written statement
required by Treasury Regulation § 1.170A-14(g)(5)(i)(D). The purpose of
that requirement, as we understand it, is to ensure that the
documentation of the property’s condition made available to a donee is
sufficient to enable the donee to fulfill its responsibility of preventing
the donor from exercising reserved rights in the donated property in a
manner that would undermine the gift’s conservation purposes. We
therefore ask whether the record provides a basis for concluding that,
notwithstanding the partnership’s failure to have demonstrated strict
compliance with the signed written statement requirement, the
documentation made available to NALT was sufficient to enable it to
fulfill its oversight responsibilities.
                                   28

[*28] The partnership’s failings in regard to baseline documentation
are temporal. The record includes a statement, signed by Nathaniel
Carter on behalf of the partnership and by NALT’s stewardship
coordinator, that attests to the adequacy of the documentation available
to NALT as supplemented by Mr. Echols’s spring review of the property.
But the signed written statement included in the record does not attest
to the adequacy of the documentation available to NALT before the gift.
How significant was the possible delay of four or five months in the
completion of the baseline documentation? More to the point, what is
the risk that, on the basis of the documentation it had, NALT would
have approved the partnership’s exercise of a reserved right that it
would not have approved if it had had complete documentation in
December? Under the circumstances, we do not view that risk to be
significant.

       Moreover, NALT had substantial documentation concerning the
condition of the Dover Hall property before its board approved the gift
on December 9, 2011. Mr. Echols visited the property several times in
October 2011. During those visits, he took notes and photos to document
the property’s important conservation features. On the day the board
met to approve the gift, Mr. Echols presented to the board the materials
he had assembled. At that meeting, the board approved acceptance of
the easement. We infer from that chronology that the board wanted to
consider the adequacy of Mr. Echols’s documentation before granting its
approval. And its vote to accept the partnership’s gift indicates that the
NALT board was satisfied with the documentation then available.

        It would be inappropriate to infer the adequacy of documentation
of the condition of donated property available to a donee from the donee’s
acceptance of the gift alone. Making that inference from the mere
acceptance of the gift would effectively read the signed written
statement requirement out of the regulations. But the record before us
provides more than NALT’s acceptance of the gift from which to infer
the adequacy of the documentation available to NALT before the gift.
Again, we know that Mr. Echols had assembled substantial
documentation before the gift. According to his testimony, most of the
documentation in the final package came from his visits to the property
in October 2011.        And Mr. Echols provided the then-available
documentation to the NALT board on the day the board approved
acceptance of the partnership’s gift. We thus have stronger grounds for
inferring NALT’s satisfaction with the available documentation than
just the organization’s acceptance of the gift.
                                   29

[*29] Further, we have Mr. Echols’s testimony that, in his judgment,
the documentation he had assembled before the gift was adequate. At
trial, petitioners’ counsel asked Mr. Echols whether he had “assemble[d]
the information required by the regulations prior to 2011.” Mr. Echols
responded that he had. We assume, first, that counsel’s reference to
2011 was a slip of the tongue. Under the circumstances, it seems
obvious that she meant to ask Mr. Echols whether he had assembled the
required information before 2012. But counsel’s formulation of the
question has another problem. Strictly speaking, it calls for a legal
conclusion. Mr. Echols, so far as we know, was not qualified to interpret
Treasury Regulation § 1.170-14(g)(5)(i) and would not have been allowed
to volunteer his views even if he were. Again, it seems obvious that
counsel misspoke. Under the circumstances, we will interpret her
question as seeking Mr. Echols’s judgment not on the legal issue of what
Treasury Regulation § 1.170A-14(g)(5)(i) requires but instead on the
factual question of whether the documentation of the condition of the
Dover Hall property that Mr. Echols had assembled before December 27,
2011, was sufficient to enable NALT to fulfill its responsibilities of
monitoring the partnership’s exercise of its reserved rights in the
property. And we take Mr. Echols’s affirmative answer to mean that, in
his judgment, the then-available documentation was sufficient for
NALT’s purposes.

       Because counsel was essentially asking Mr. Echols to evaluate his
own work, his testimony was hardly disinterested. Indeed, Mr. Echols
acknowledged that “it’s customary for [him] not to sign” on NALT’s
behalf the statements required by Treasury Regulation § 1.170A-
14(g)(5)(i)(D). The statement ultimately prepared and attached to the
baseline documentation in its final form was signed by Steven Carter,
NALT’s stewardship coordinator. We cannot view as a wholly adequate
substitute for a timely signed written statement the testimony of one
who, for understandable reasons, would not customarily sign those
statements. Even so, the testimony of Mr. Echols, whom we found to be
a credible witnesses, provides further grounds for confidence that the
documentation of the condition of the Dover Hall property available to
NALT before the partnership’s conveyance of a conservation easement
on the property was sufficient for NALT to effectively monitor the
partnership’s exercise of its reserved rights in the property.

      Contrary to respondent’s argument, Mr. Echols’s return to the
Dover Hall property in the spring to compile additional documentation
does not establish that the documentation available in December had
been inadequate. As Mr. Echols explained, in 2011, “follow-up spring
                                   30

[*30] surveys” were “customary.” Apparently, donors tended to make
their gifts at the end of the year, presumably in the expectation of
obtaining a tax deduction for the year. Therefore, NALT found itself
“often visiting the property late in the year.” The customary spring
surveys allowed NALT to “provide a full ecological picture of the
property.” The condition of a property, in ecological terms, can obviously
change with the seasons. NALT and other donees might well find it
useful to document a property’s ecological conditions in various seasons.
But Treasury Regulation § 1.170A-14(g)(5)(i) does not require year-
round documentation. It requires only documentation that establishes
the condition of donated property at the time of the gift, in whatever
season that happens to be.

        In sum, several factors support the conclusion that NALT had
sufficient documentation of the condition of the Dover Hall property to
fulfill its responsibility of monitoring the partnership’s exercise of its
reserved rights and thereby ensure the protection in perpetuity of the
gift’s conservation purposes. The baseline documentation assembled in
its final form is accompanied by a written statement signed by
Nathaniel Carter and NALT’s stewardship coordinator attesting to the
adequacy of the documentation. Mr. Echols had assembled most of that
documentation by December and the rest a few months later. NALT’s
board received the then-available documentation on the day it approved
the gift and presumably considered the documentation in granting its
approval. And, as we interpret Mr. Echols’s response to an infelicitously
posed question from petitioners’ counsel, in his judgment, the
documentation he had compiled by December was sufficient for NALT’s
purposes. We do not view any one of those factors as dispositive. Taken
together, however, they convince us that the partnership’s imperfect
compliance with the baseline documentation rules did not prevent them
from achieving their purpose. We are confident that the documentation
available to NALT was sufficient to enable it to effectively monitor the
partnership’s exercise of its reserved rights in the Dover Hall property
and thereby ensure the perpetual protection of the conservation
purposes of the partnership’s gift to NALT. It follows that the baseline
documentation rules are directory rather than mandatory, that
substantial compliance with those rules would be sufficient, and that
the partnership substantially complied.
                                   31

[*31] IV.   Effect of Reserved Rights on Section 170(h)(5)(A)

      A.     Applicable Law

       Treasury Regulation § 1.170A-14(e)(2) provides as a general rule
that “a deduction will not be allowed if the contribution would
accomplish [an] enumerated conservation purpose[] but would permit
destruction of other significant conservation interests.” The regulations
give the example of an easement to preserve farmland “pursuant to a
State program for flood prevention and control.” Id. The easement
would not serve the purpose of preserving open space “if under the terms
of the contribution a significant naturally occurring ecosystem could be
injured or destroyed by the use of pesticides in the operation of the
farm.” Id. The rule provided in Treasury Regulation § 1.170A-14(e)(2),
however, “is not intended to prohibit uses of the property . . . if, under
the circumstances, those uses do not impair significant conservation
interests.”

       Treasury Regulation § 1.170A-14(f) presents two contrasting
examples of scenic easements on property visible from a national park.
In example (3), the grantor retains the right to subdivide the property
into 90-acre parcels and build one single-family home on each parcel.
The example assumes as a fact that “[r]andom building on the property,
even as little as one home for each 90 acres, would destroy the scenic
character of the view.” Treas. Reg. § 1.170A-14(f) (example 3). The
example concludes that “[N]o deduction would be allowable under this
section.” Id.

         By contrast, the property at issue in example (4) includes some
areas “generally not visible from the national park.” Treas. Reg.
§ 1.170A-14(f)(4) (example 4). The easement allows for the building of
homes in those areas. The example states: “The donor and the donee
have already identified sites where limited cluster development would
not . . . impair the view.” Id. The example concludes that “the donation
[of the easement] qualifies for a deduction under this section.” Id.

      Treasury Regulation § 1.170A-14(g)(1) provides:

      In the case of any donation under this section, any interest
      in the property retained by the donor . . . must be subject
      to legally enforceable restrictions (for example, by
      recordation in the land records of the jurisdiction in which
      the property is located) that will prevent uses of the
                                     32

[*32] retained interest inconsistent with the conservation
      purposes of the donation.

       B.     The Parties’ Arguments

              1.     Respondent

       Respondent emphasizes Mr. Wilson’s acknowledgment that the
partnership’s exercise of its reserved rights to limited development of
the Dover Hall property would “diminish” the easement’s conservation
values. And respondent says that “[p]etitioners’ other expert witnesses”
“largely agreed.” Respondent alleges that “all three” of petitioners’
expert witnesses “agreed that the exercise of the reserved rights would
impair, injure, and diminish the conservation interests that the
easement sought to protect.”

      Respondent argues that “the total destruction of a conservation
purpose is not necessary for a use to be inconsistent.” Pointing to the
example of the open space easement on farmland in Treasury
Regulation § 1.170A-14(e)(2), respondent contends that, if a donor’s use
merely “injures a conservation purpose, that would also be inconsistent
with protecting the easement in perpetuity.” That example, again,
concludes that the easement would not perpetually protect open space if
the use of pesticides could injure or destroy a significant, naturally
occurring ecosystem.

       Respondent concludes that the partnership’s exercise of its
reserved rights “would . . . fall within the definition of ‘inconsistent uses’
contained in Treas. Reg. § 1.170A-14(e)(2).” Consequently, “the
easement is not exclusively for conservation purposes, as required by
I.R.C. § 170(h)(1)(C) and Treas. Reg. § 1.170A-14(e), and the deduction
claimed should therefore be disallowed.”

              2.     Petitioners

       Apparently relying on Treasury Regulation § 1.170A-14(f)
(example 4), petitioners contend that “[t]he law allows a Donor to retain
rights in the donated conservation property, including the right to build
on the property.” Petitioners insist that the rights retained by the
partnership under the easement “do not destroy any conservation
interests.” Section 3.25.2 of the easement deed, they reason, “ensures
that the owner’s exercise of any retained right can have no material
adverse effect on the conservation purposes or on the significant
environmental features of the conservation area.” Petitioners describe
                                   33

[*33] the testimony of their experts as having “confirmed that the
exercise or retained rights would have a negligible impact on the
Conservation Purposes.”

       Citing Mr. Sligh’s oral testimony, petitioners posit that NALT, in
approving building areas, “would leave some trees and other natural
habitat on the lot to enhance the aesthetic value of that lot.” And citing
Mr. Sligh’s written report, they contend that “[t]he development of
eleven home sites will not affect the species diversity present within the
Conservation Easement.” Referring to Mr. Sligh’s testimony and
Mr. Echols’s report and testimony, petitioners assure us that “[t]he
presence of nine-docks [sic] along Green Creek would have a negligible
effect on the conservation purposes of relatively open space and scenic
views.”

       Petitioners claim to have “presented unrebutted evidence that
exercising retained rights would have, at most, a negligible impact on
the conservation purposes.” And, they observe, “[r]espondent presented
no evidence to the contrary.”

      C.     Analysis

       The question before us, as we see it, is whether the partnership’s
exercise of its reserved rights in the Dover Hall property would be
“inconsistent with the conservation purposes” of the partnership’s
donation of the easement to NALT. Treas. Reg. § 1.170A-14(g)(1).
Respondent’s reliance on Treasury Regulation § 1.170A-14(e)(2) strikes
us as misplaced. Treasury Regulation § 1.170A-14(e)(2) generally
requires denial of a deduction when the contribution of a qualified real
property interest would accomplish its specified conservation purposes
but would also “permit destruction of other significant conservation
interests.” Respondent’s position, as we understand it, is that the
partnership’s reserved rights to limited development of the Dover Hall
property would undermine the very conservation purposes for which the
partnership claims to have conveyed the easement. Therefore, we view
the governing authority as Treasury Regulation § 1.170A-14(g)(1) rather
than Treasury Regulation § 1.170A-14(e)(2). And the relevant question
under Treasury Regulation § 1.170A-14(g)(1) is whether the
partnership’s exercise of its reserved rights would be “inconsistent with
the conservation purposes” of its donation.

      The parties emphasize different aspects of the oral and written
testimony of petitioners’ three expert witnesses. All three experts
                                   34

[*34] agreed that the building of docks and homesites could have some
adverse effects on the conservation values of the Dover Hall property.
But they also agreed that any adverse effect would be minimal and that,
overall, the easement—taking into account the reserved rights—would
protect those conservation values.

      Mr. Wilson acknowledged that the building of homes and roads
on the Dover Hall property would have “a direct impact to habitats on
the conservation area.” He agreed that the partnership’s exercise of its
reserved rights would “diminish” the property’s conservation values,
“but not significantly.” His written report ultimately concludes that “the
easement provides for the protection of the conservation values in
perpetuity.”

      Similarly, Mr. Sligh acknowledged that the addition of nine docks
on the shoreline of Green Creek would “slightly decrease” the
conservation benefits of the shoreline, but they would have “very little
negative impact.” Mr. Sligh ultimately concluded that the partnership’s
reserved rights would “not diminish the overall Conservation Values” of
the Dover Hall property.

      Mr. Echols testified that the 11 homesites would impair the
easement’s conservation values “to a negligible degree.” His written
report concludes that “the allowable reserved rights do not affect the
perpetuity of the Conservation Area.”

       All three experts emphasized the importance of the requirement
in the easement deed that NALT approve any building sites. Mr. Wilson
made the obvious point that the extent to which the building of
homesites and associated roads would impair the easement’s
conservation values would depend on where they were placed. Thus, in
reaching their conclusions, all three experts seemed to have assumed
that NALT would fulfill its responsibility under the easement deed of
denying approval of any exercise of a reserved right that would have a
material adverse impact on the easement’s conservation values.
Mr. Wilson characterized the requirement for NALT’s approval as
“perhaps the most important provision in the reserved rights.”

       Section 170(h) and its accompanying regulations obviously and
necessarily rest on the premise that donees will enforce their rights in
contributed property. Otherwise, no contribution of a qualified real
property interest could qualify for a deduction.         Therefore, in
determining whether the conservation purposes of the partnership’s
                                          35

[*35] contribution to NALT will be protected in perpetuity, we must
assume—as apparently did petitioners’ expert witnesses—that NALT
will not approve the partnership’s exercise of any reserved rights that
would have a material adverse effect on those purposes. 15

       Thus, whether the partnership’s contribution satisfies the
protected-in-perpetuity requirement of section 170(h)(5)(A) boils down
to whether the partnership’s use of the property in a manner that would
have an immaterial adverse effect on the contribution’s conservation
purposes would be “inconsistent” with those purposes. Treas. Reg.
§ 1.170A-14(g)(1). The answer, by definition, is “no.” “Immaterial,” in
this context, means “of no substantial consequence.” Immaterial,
www.merriam-webster.com/dictionary/immaterial          (last    updated
Oct. 26, 2023). An effect that is immaterially adverse should be treated
in the same manner as an effect that is not adverse at all. Allowing the
possibility of an immaterial adverse effect to determine the
partnership’s entitlement to a deduction would give the effect
substantial consequence, contrary to the normal meaning of
“immaterial.” We therefore conclude that the partnership’s reserved
rights in the Dover Hall property do not violate the requirement of
section 170(h)(5)(A) that a contribution’s conservation purpose be
protected in perpetuity.

V.      The Easement’s Value

       The mandate of the Eleventh Circuit requires us to accept that
the easement the partnership conveyed to NALT was a qualified real
property interest. We have concluded that the partnership complied
with the documentation requirements of Treasury Regulation § 1.170A-
14(g)(5)(i) and that the rights the partnership retained in the Dover Hall
property do not prevent the contribution’s conservation purposes from

        15 Our expectation that NALT would deny any request by the partnership to

exercise a reserved right that would have a material adverse effect on the easement’s
conservation purposes rests on more than a “vague hope.” Cf. Pine Mountain Preserve,
LLLP, 151 T.C. at 317 (Morrison, J., dissenting). The easement deed requires NALT
to deny approval of a request in those circumstances. We merely accept that NALT
will fulfill its responsibilities under the easement deed. In that respect, the facts of
the present cases may be distinguishable from those of Pine Mountain. In the quoted
portion of his dissenting opinion in Pine Mountain, Judge Morrison was addressing an
easement granted in 2006 (one of three easements at issue in that case). Under terms
of the 2006 easement, the donee (also NALT) was apparently allowed, but not required,
to “withhold approval if it believes that the Building Area sites proposed by Pine
Mountain would ‘result in any material adverse effect on any of the Conservation
Values or Conservation Purposes.’” Pine Mountain Preserve, LLLP, 151 T.C. at 259.
                                   36

[*36] being protected in perpetuity, as required by section 170(h)(5)(A).
Respondent raises no other challenges to the partnership’s entitlement
to a charitable contribution deduction under section 170(a)(1).
Therefore, the partnership is entitled to a deduction equal to the fair
market value of the easement at the time of the contribution. See Treas.
Reg. § 1.170A-1(c)(1).

       Each side presented expert testimony on the issue of the
easement’s value. Before trial, respondent filed a Motion in Limine to
exclude the report prepared by petitioners’ experts. On the last day of
trial, we issued an Order stating that we would take respondent’s
motion “under advisement.” On the day we entered our initial decisions
in the cases, we denied respondent’s Motion in Limine as moot. In his
postremand Status Report, respondent renewed his claim that the Van
Sant and Wingard report should be excluded. The admissibility of that
report thus presents a threshold issue in determining the value of the
easement. For the reasons explained infra Part V.A.2, we conclude that
the Van Sant and Wingard report is admissible. For the reasons
explained infra Part V.B, however, Van Sant and Wingard’s report does
not persuade us that the easement was worth more than the $1,000,000
value determined by respondent’s expert, Mr. Ryan.

      A.     Admissibility of Van Sant and Wingard Report

             1.    The Parties’ Arguments

       Respondent argues that Van Sant and Wingard’s report does not
comply with Rule 143(g)(1), which requires a party who plans to call an
expert witness to have the expert submit a written report that, among
other things, includes “a complete statement of all opinions the witness
expresses and the basis and reasons for them.” Respondent argues that
the Van Sant and Wingard report fails to identify specific opinions with
either of its coauthors.      That failure, according to respondent,
“significantly impair[ed his] ability to cross-examine the authors, while
also denying [him] the reasonable opportunity to obtain evidence in
rebuttal to the authors’ testimony, because [he] ha[d] no basis upon
which to determine which author wrote which portions of the report.”
Respondent claims that Van Sant and Wingard’s allegedly inconsistent
testimony at trial concerning the portions of the report that each
authored simply confirms his position regarding its admissibility.

      In further support for his argument, respondent cites Estate of
Noble v. Commissioner, T.C. Memo. 2005-2, 2005 WL 23303. In that
                                          37

[*37] case, we excluded from evidence a report prepared by the
appraisal firm Shenehon Co. Although the report indicated on its face
that it had been prepared by three individuals—presumably officers or
employees of Shenehon—only one of those individuals was available for
trial. We excluded the report from evidence “on the basis of” our earlier
opinion in Bank One Corp. v. Commissioner, 120 T.C. 174, 278 (2003),
aff’d in part, vacated in part, and remanded sub nom. JPMorgan Chase
& Co. v. Commissioner, 458 F.3d 564 (7th Cir. 2006). Estate of Noble v.
Commissioner, 2005 WL 23303, at *2.             In Bank One, on the
Commissioner’s motion, we had excluded a rebuttal report of one of the
taxpayer’s experts. The Commissioner claimed that the rebuttal report
“was tainted in its preparation by the significant participation of [the
taxpayer’s] counsel.” Bank One, 120 T.C. at 278. In articulating the
basis for our decision to grant the Commissioner’s motion, we noted that
the expert “never explained to our satisfaction that the words, analysis,
and opinions in that report were his own work.” Id.

      Petitioners argue that Noble is distinguishable from their cases
because, in Noble, only one of the three authors of the rejected joint
report was able to testify. More generally, petitioners argue that Rule
143(g) does not prohibit joint expert reports and assert that experts who
prepare a joint report need not explain which portions of the report each
wrote. They cite prior cases in which we have accepted joint expert
reports. See Esgar v. Commissioner, T.C. Memo. 2012-35, aff’d, 744 F.3d
648 (10th Cir. 2014); Estate of Ford v. Commissioner, T.C. Memo. 1993-
580, aff’d, 53 F.3d 924 (8th Cir. 1995); Estate of Dougherty v.
Commissioner, T.C. Memo. 1990-274; Jacobson v. Commissioner, T.C.
Memo. 1989-606. 16

       Respondent counters that the cases petitioners rely on are no
longer authoritative because they do not reflect the changes to the
Federal Rules of Evidence (FRE) concerning expert testimony adopted
to reflect the Supreme Court’s opinions in Daubert v. Merrell Dow

        16 Petitioners also cite a much earlier opinion, Fogle v. Commissioner, T.C.

Memo. 1966-148, 1966 Tax Ct. Memo LEXIS 134. The findings of fact in that case
include a reference to a submission to “the court” of a “joint appraisal” by two
appraisers. Id. at *3. But that report was received by an Indiana state court in an
action for the partition and sale of jointly owned property. The taxpayer in that case,
one of the joint owners, objected to the sale and refused to accept his share of the
proceeds. We concluded that he was subject to tax on his share of the proceeds under
the constructive receipt doctrine.
                                    38

[*38] Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v.
Carmichael, 526 U.S. 137 (1999).

       Daubert held that the FRE provisions concerning expert
testimony then in effect had superseded prior caselaw under which that
testimony could be admitted only if grounded in principles that had
received general acceptance in the relevant field. See Frye v. United
States, 293 F. 1013 (D.C. Cir. 1923). Although Daubert dealt with
scientific testimony, Kumho Tire extended Daubert’s holding to
testimony based on technical or other specialized knowledge. Daubert
and Kumho Tire did not, however, remove all restrictions on the
admissibility of expert testimony. The cases envision that a trial judge
considering an offer of expert testimony will serve a “gatekeeping”
function, see Kumho Tire, 526 U.S. at 141, admitting only evidence that,
even if not grounded in generally accepted principles, is nonetheless
both reliable and relevant to the case at hand. In 2000, Congress
amended FRE 702 to codify Daubert’s reliability requirement. As
amended, the Rule allows expert testimony only if it is “based on
sufficient facts or data” and “the product of reliable principles and
methods,” and if the expert “has reliably applied the principles and
methods to the facts of the case.” Fed. R. Evid. 702.

             2.     Analysis

       While petitioners are correct that Rule 143(g) does not flatly
prohibit joint expert reports, respondent’s argument does not rest on
that proposition. As we understand him, respondent argues that a joint
report does not comply with Rule 143(g) unless it identifies the specific
opinions and analysis for which each author takes responsibility.

        But we do not regard the appraisal that Van Sant and Wingard
prepared as deficient in that respect.       Their report includes a
certification by each of them taking responsibility for all of the report’s
analysis, opinions, and conclusions. Respondent points to nothing in the
report that would indicate that some opinions and analyses were those
of only one of its two signatories. (While Mr. Wingard acknowledged
occasional disagreements, he testified that he and Mr. Van Sant were
able to resolve them and arrive at mutually acceptable conclusions.)

       Any questions about who actually put pen to paper (or, more
likely, fingers to keyboard) in the preparation of the report strike us as
beside the point. An expert report compliant with Rule 143(g) must
state the witness’ conclusions and analysis. Satisfaction of that
                                          39

[*39] condition does not require every word in the report to spring from
the witness’ brow. Words written by another can accurately express the
witness’ views. If the witness is willing to adopt those words as his own
and stand behind the conclusions they express and the analysis
supporting them, it should be of no moment that the witness was not the
initial author.

       Requiring every word in an expert report to be identified with an
individual author who is available to testify would greatly hinder our
ability to rely on experts who work in firms. The larger and more
complex the matter, and the more participants needed to prepare a
report, the less likely its admission into evidence would be.

       Although petitioners were unable to cite a post-Daubert case in
which we received a joint expert report, 17 we do not view the changes in
standards regarding expert testimony initiated by Daubert as being
particularly germane to the issue of joint reports. Daubert and Kumho
Tire liberalized the standards for admitting expert testimony by
allowing for the admission of opinions based on analysis that had not
received general acceptance in the relevant field. Daubert also
emphasized that expert testimony must nonetheless be assessed as
reliable. But reports whose preparation involved multiple participants
are not inherently less reliable than those of a single author. If
anything, the consideration and synthesis of multiple viewpoints may
enhance reliability.

       While we acknowledge some tension between our opinion in
Noble, on which respondent relies, and our earlier opinion in Ford,
which petitioners cite, we do not attribute their possibly divergent
results to intervening Supreme Court precedent. Ford, like Noble,

        17 Although Esgar v. Commissioner, 2012 WL 371809, postdated Daubert,
Kumho Tire, and the 2000 amendment to FRE 702, we do not view Esgar as involving
a joint report. The report at issue in Esgar might be more accurately described as a
“meta-report.” In that case, which addressed the contribution of a conservation
easement, the Commissioner objected to a report prepared by one of the taxpayer’s
experts, a Mr. Emmerling. Mr. Emmerling’s report, as we described it, “summarized,
and in certain situations corrected, the conclusions of [the taxpayers’] other experts.”
Esgar v. Commissioner, 2012 WL 371809, at *11. The Commissioner objected to Mr.
Emmerling’s report because it was based on the opinions and analysis of the taxpayers’
other experts rather than “independent data and information.” Id. at *12. We agreed
with the taxpayers that Mr. Emmerling’s report could “assist the Court” and thus
admitted it. Id. Although Mr. Emmerling’s report reviewed conclusions of other
experts, his analysis of those conclusions was his own. Whatever other issues his
report might have raised, uncertainty of authorship was not one of them.
                                   40

[*40] involved an appraisal report prepared by three individuals on
behalf of Shenehon Co., only one of whom testified at trial. We admitted
the Shenehon report and used it as the principal basis for our conclusion
regarding the value of the closely held stock in issue. Our opinion in
Ford gives no indication that the Shenehon report in that case did not
accurately reflect the views of the available witness. By contrast, our
statement in Noble that our opinion in that case was based on Bank One
indicates that we had reason for suspicion about the extent to which the
Shenehon representative who appeared at trial stood behind the report’s
conclusion. If that were the case, however, we did not articulate in our
opinion the basis for any such suspicions. Therefore, we accept that
Ford and Noble might, on their surfaces, be difficult to reconcile. We see
no reason, however, to attribute the different results in those cases to
intervening changes in the rules concerning expert testimony.

      We therefore reject respondent’s arguments for excluding Van
Sant and Wingard’s report. Although we have considered that report in
determining the value of the easement, for the reasons explained infra
Part V.B, we do not find the report reliable.

      B.     The Van Sant and Wingard Report’s Reliability

       Respondent argues that, even if we admit Van Sant and
Wingard’s report into evidence (as we have decided to do), we should
give their conclusions “little, if any, weight.” Respondent points to the
difficulty Van Sant and Wingard had in explaining the 30% adjustment
they made for the effect of the easement on the value of the Dover Hall
property and the inconsistency of their testimony on that point.

       By contrast, petitioners suggest that the 30% adjustment Van
Sant and Wingard made for the effects of the easement was too low.
They observe that a 9.7% reduction in units/landmass and a 20%
reduction in docks “produces a reduction of approximately 30% of the ‘on
paper’ attributes.” But reducing Dover Hall’s value by 30% to account
for the easement would have been appropriate, they reason, only “if all
acres were created equal.” On the premise that the easement covers
Dover Hall’s most valuable acres, petitioners suggest that “a 30%
reduction may not be enough.” (Petitioners do not provide any more
explanation than did Van Sant and Wingard of the rationale for simply
summing the percentage reductions in various attributes without
weighting those reductions by the portion of Dover Hall’s total value
accounted for by those attributes.)
                                           41

[*41] We agree with respondent that Van Sant and Wingard’s inability
to explain their determination that the easement reduced by 30% the
value of the Dover Hall property renders their report unreliable. Their
summation of the percentage reductions in various attributes has no
apparent logic. Simply summing up the percentage reductions in
acreage available for development, residential units that can be
developed, or docks that can be built does not take into account the
extent to which those attributes contribute to the property’s total
value. 18 Van Sant and Wingard’s conclusion that the easement was
worth $10,300,000 rests on the proposition that the easement reduced
by 30% the value of the Dover Hall property. Because they failed to
establish the validity of that proposition, we cannot rely on the
conclusion they drew from it.

        C.      Mr. Ryan’s Report

       By contrast, we found Mr. Ryan’s report credible. By comparing
the value of the Dover Hall property before the grant of the easement to
its value thereafter, having been unable to identify appropriate sales of
easements to use as frames of reference, Mr. Ryan complied with
Treasury Regulation § 1.170A-14(h)(3)(i). That section provides, in
relevant part, that

        [i]f there is a substantial record of sales of easements
        comparable to the donated easement . . . the fair market
        value of the donated easement is based on the sales prices
        of such comparable easements. If no substantial record of
        market-place sales is available to use as a meaningful or
        valid comparison, as a general rule . . . the fair market
        value of a perpetual conservation restriction is equal to the
        difference between the fair market value of the property it
        encumbers before the granting of the restriction and the
        fair market value of the encumbered property after the
        granting of the restriction. The amount of the deduction in
        the case of a charitable contribution of a perpetual
        conservation restriction covering a portion of the
        contiguous property owned by a donor and the donor’s
        family . . . is the difference between the fair market value
        of the entire contiguous parcel of property before and after

         18 Under Van Sant and Wingard’s logic, a thief who absconded with one of a

car’s four doors (25% of the total), one of its four tires (also 25%), and two of its four
sparkplugs (50%) should congratulate himself on having stolen the entire car.
                                          42

[*42] the granting of the restriction. If the granting of a
      perpetual conservation restriction . . . has the effect of
      increasing the value of any other property owned by the
      donor or a related person, the amount of the deduction . . .
      shall be reduced by the amount of the increase in the value
      of the other property, whether or not such property is
      contiguous.

      Petitioners challenge the reliability of Mr. Ryan’s report on
several grounds. None of petitioners’ challenges, however, convinces us
that Mr. Ryan’s analysis was unsound.

       Petitioners argue that Mr. Ryan relied on inappropriate reference
transactions for his “before” analysis. Petitioners dismiss those
transactions as “distressed sales of timber tracts with little or no water
influence.” Referring to those properties and the transactions in which
they sold, petitioners claim “one was in receivership, one in bankruptcy,
one in judicial foreclosure and one sold in a bank sale.” 19

       Petitioners also suggest that Mr. Ryan did not adequately inspect
the Dover Hall property. In their opening brief, petitioners claimed:
“Mr. Ryan admitted he never saw the full expanse of Green Creek nor
fully understood the boundaries of the Conservation Easement.”
Petitioners’ reply brief escalated that argument: Mr. Ryan, they claim,
“admits not seeing Green Creek or the easement, so he has no basis for
determining value.”

        Petitioners challenge the roughly $15 million preeasement value
Mr. Ryan assigned to the Dover Hall property on the ground that it is
inconsistent with the benchmark established by petitioner Evans’s
purchase of a 50% interest in the partnership for $30 million less than
three years before the partnership’s donation of the easement. They
claim that Mr. Evans’s purchase put a value on the Dover Hall property
of “at least $60 million” 20 and profess incredulity that the property could

        19 Mr. Ryan’s report acknowledged that two of his comparable sales were out

of foreclosure. At trial, he testified that he knew that the seller in another sale had
been in bankruptcy. While the selling entity in the fourth sale may have been under
common ownership with another entity that was in receivership, the record does not
establish that the seller itself was in receivership.
        20 On the premise that the price Mr. Evans paid for his interest in the

partnership would have reflected a discount for lack of control, petitioners argue that
that price implied a “total value” for the Dover Hall property “closer to $75 million or
$80 million.”
                                         43

[*43] lose “75 percent of [its] overall value . . . over the course of two and
a half years.”

       Petitioners also insinuate that Mr. Ryan’s determination of
different per-acre values for the portions of the Dover Hall property
within and outside the easement violates the rule of Treasury
Regulation § 1.170A-14(h)(3)(i) that requires the valuation of the entire
contiguous property owned by the donor. They note that Van Sant and
Wingard “prepared their appraisal in accordance with” the requirement
that “they value the entire 5,145 acre tract before the donation and
again after the donation,” and compare that approach favorably to
Mr. Ryan’s use of “small sales of easement properties in his after value
methodology.”

        Petitioners’ claims about the adequacy of Mr. Ryan’s inspection of
the Dover Hall property do not, in our judgment, undermine the
reliability of his report. Although Mr. Ryan admitted that he did not
recall seeing Green Creek on his initial visit to the property, he testified
that he had observed the creek on a later visit. To the extent that
Mr. Ryan was unsure of the easement’s precise boundaries, that
uncertainty was not due to a lack of diligence on his part but instead to
the caretaker’s inability to identify the boundaries. And even if
Mr. Ryan could not visually inspect the easement’s exact boundaries, we
accept that his visit to the property gave him an adequate sense of the
nature of the property covered by the easement. To accuse Mr. Ryan of
having failed to see Green Creek or the property subject to the easement
at all (as petitioners do in their reply brief) is an obvious overstatement.

      Petitioners’ principal complaint about Mr. Ryan’s report is that
the comparable sales he used to determine the preeasement value of the
Dover Hall property were, in their view, not really comparable; they
were distressed sales of timberland with no water influence. But
Mr. Ryan made adjustments where he could to back out the value of
merchantable timber. 21 And he took the properties’ water features into
account in ranking them as either superior or inferior to the Dover Hall

        21 Mr. Ryan’s failure to adjust for the timber value of the one property he

considered superior to the Dover Hall property increased the preeasement value he
assigned to the Dover Hall property, and thus also increased the value he assigned to
the easement.
                                          44

[*44] property. 22 Although Mr. Ryan did not adjust his values (or
otherwise take into account as a negative factor) the conditions of his
comparable sales, he explained at trial the basis for his confidence that
in no case did a seller’s motivation to sell result in the acceptance of a
price that did not reflect the property’s true value.

       We do not view Mr. Ryan’s assignment of a differing value to each
acre of Dover Hall within the easement and each acre outside it as
violating the rule of Treasury Regulation § 1.170A-14(h)(3)(i) that
requires the valuation of the entire contiguous parcel owned by the
donor from which the easement is carved out. That requirement allows
for consideration of the extent to which a conservation easement
increases the value of surrounding property owned by the donor or a
related party. Neither the terms of the rule nor its apparent rationale
requires assigning a uniform value to each acre of the property. It
should be expected that the portions of the overall parcel subject to
restriction would be worth less per acre than the portions whose use is
not so limited. Indeed, as respondent points out, Van Sant and
Wingard’s use of uniform per-acre values leads to several
incongruities. 23

       We do not find Mr. Evans’s purchase of a 50% interest in the
partnership in April 2009 probative of the value of the easement upon
its donation to NALT in December 2011. To begin with, the record does
not establish the composition of the partnership’s assets when
Mr. Evans purchased his interest. 24 Even if we were to accept that, at
that time, the partnership owned the Dover Hall property as its only
asset, Mr. Evans’s purchase of his partnership interest would at most
establish only that the property was worth around $60 million in April
2009. That datum might have some bearing on Dover Hall’s value 32
months later. But see RERI Holdings I, LLC v. Commissioner, 149 T.C.
1, 41 (2017) (opining that “evidence of [a] property’s value in February

        22 If the absence of water features renders a property invalid as a frame of

reference in valuing the Dover Hall property, then three of the comparables Van Sant
and Wingard used would be invalid as well.
       23 For example, as respondent observes, the value Van Sant and Wingard
assigned to the easement ($10,300,000) exceeds the product of the 500 acres covered
by the easement and the $9,000 per-acre value they assigned to the Dover Hall
property before the grant of the easement (500 acres × $9,000 = $4,500,000).
        24 Because the parties’ Stipulation concerning the partnership’s assets uses the

present tense, it speaks only as of April 2017 and does not establish what the
partnership owned at any earlier time, including when Mr. Evans purchased his
interest in the partnership.
                                         45

[*45] 2002 . . . is of limited worth in assessing the property’s value [when
donated to a charitable organization] in August 2003”), aff’d sub nom.
Blau v. Commissioner, 924 F.3d 1261 (D.C. Cir. 2019). We might also
accept that a 75% decline in the value of property in less than three
years would be relatively unusual. But both Mr. Ryan’s report and that
of Van Sant and Wingard indicate that the Dover Hall property declined
in value during that period (as, indeed, did the qualified appraisal
prepared in connection with the partnership’s return).                And a
diminished value of the Dover Hall property as a whole in December
2011 is only part of the inquiry. Determining that value is only a step
in the ultimate objective of valuing the easement the partnership
conveyed to NALT. At most, the price Mr. Evans paid for his interest in
the partnership might indicate that Mr. Ryan undervalued the
easement to some extent. As explained below, however, petitioners have
not offered us a reliable means of determining a higher value.

       D.      Conclusion

       We therefore accept Mr. Ryan’s determination that the easement
the partnership conveyed to NALT on December 27, 2011, was worth
$1,000,000 at that time. We found Mr. Ryan’s analysis sound and his
defense of that analysis convincing. In particular, he addressed to our
satisfaction the questions petitioners raised about the comparability of
the properties he used as points of reference in his “before” analysis.

       Petitioners have given us no reliable means of determining a
value for the easement, as of December 27, 2011, higher than
$1,000,000. Petitioners ultimately ask us to determine that the
easement was worth $17,656,981—an amount well in excess of both the
amount reported on the partnership’s return and the value determined
by their own experts. Petitioners describe their proposed value for the
easement as “[a] before value of $58,856,605 less [their experts’] 30%
reduction.” Petitioners’ asserted “before” value appears to be based on
the price Mr. Evans paid for his 50% interest in the partnership, but if
that was their intent, they seem to have made an arithmetic error. 25

       The $17,656,981 value that petitioners ultimately ask us to
assign to the easement by combining (i) the price Mr. Evans paid for his
interest in the partnership and (ii) Van Sant and Wingard’s 30%
adjustment to reflect the diminution of the value of the Dover Hall

        25 Mr. Evans paid $29,428,027 for his interest in the partnership; that amount

divided by 0.5 is $58,856,054.
                                    46

[*46] property caused by the easement is no more reliable than its
constituent parts. Mr. Evans’s purchase in April 2009 is of little or no
relevance in determining the value of the Dover Hall property in
December 2011, and Van Sant and Wingard’s 30% adjustment is either
inexplicable or—to the extent we credit the explanation they offered at
trial—illogical.

VI.   Valuation Misstatement Penalties

       Section 6662(a) and (b)(3) imposes an accuracy-related penalty if
any part of an underpayment of tax required to be shown on a return is
due to a substantial valuation misstatement. The penalty is 20% of the
portion of the underpayment of tax to which the section applies.
§ 6662(a). In the case of a gross valuation misstatement, the penalty
rate is increased from 20% to 40%. § 6662(h)(1). The substantial
valuation misstatement penalty applies to any portion of an
underpayment that is attributable to the taxpayer’s claiming on a return
a value or basis that is 150% or more of the correct value or basis.
§ 6662(e)(1). The gross valuation misstatement penalty applies if the
claimed value or basis is 200% or more of the correct amount.
§ 6662(h)(2). The penalty for a valuation misstatement does not apply,
however, unless the portion of the taxpayer’s underpayment for a
taxable year attributable to either a substantial or a gross valuation
misstatement exceeds $5,000 (or, in the case of most corporations,
$10,000). § 6662(e)(2).

       Section 6664(c) provides an exception to the accuracy-related (and
fraud) penalties if there was reasonable cause for the portion of the
underpayment subject to the penalty and the taxpayer acted in good
faith with respect to that portion. Section 6664(c)(3), however, limits
the availability of the reasonable cause exception in the case of valuation
misstatements with respect to property other than marketable
securities for which the taxpayer claimed a charitable contribution
deduction. Under that section, the reasonable cause exception does not
apply in the case of a gross valuation misstatement. In addition, the
exception does not apply in the case of a substantial valuation
misstatement unless “(A) the claimed value of the property was based
on a qualified appraisal made by a qualified appraiser, and (B) in
addition to obtaining such appraisal, the taxpayer made a good faith
investigation of the value of the contributed property.”

      Although taxpayers generally bear the burden of proof under Rule
142(a), section 7491(c) provides that “the Secretary shall have the
                                     47

[*47] burden of production in any court proceeding with respect to the
liability of any individual for any penalty, addition to tax, or additional
amount imposed by this title.” In Dynamo Holdings Ltd. Partnership v.
Commissioner, 150 T.C. 224, 226 (2018), we held that “the
Commissioner does not bear the burden of production with respect to
penalties in a partnership-level proceeding.” But the holding of that
opinion and its underlying rationale are limited to partnerships subject
to TEFRA’s unified partnership audit and litigation rules. Although the
present cases involve deductions claimed by a partnership, we concluded
in our prior opinion that that partnership is subject to the small
partnership exception to the TEFRA rules. § 6231(a)(1)(B); Carter, T.C.
Memo. 2020-21, at *3 n.3. Therefore, the cases before us involve “the
liability of . . . individual[s] for . . . penal[ties],” within the meaning of
section 7491(c).

       To meet his burden of production under section 7491(c), the
Commissioner must produce evidence regarding the appropriateness of
imposing the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
If the Commissioner satisfies his burden of production, “the taxpayer
must come forward with evidence sufficient to persuade a Court that the
Commissioner’s determination is incorrect.” Id. at 447. Once the
Commissioner satisfies his burden of production, the taxpayer generally
has the burden of proof with respect to exculpatory factors such as
reasonable cause. See id. at 446–47.

      The Commissioner’s burden of production under section 7491(c)
requires him to establish compliance with the supervisory approval
requirements of section 6751(b)(1). Graev v. Commissioner, 149 T.C.
485, 493 (2017), supplementing and overruling in part 147 T.C. 460
(2016); Carter, T.C. Memo. 2020-21, at *27. Section 6751(b)(1) provides:
“No penalty under this title shall be assessed unless the initial
determination of such assessment is personally approved (in writing) by
the immediate supervisor of the individual making such determination
or such higher-level official as the Secretary may designate.”

       As noted at the outset, in our initial opinion in these cases, we
concluded that respondent had not met his burden of demonstrating
timely supervisory approval in compliance with section 6751(b)(1). In
light of the Eleventh Circuit’s reversal of our decisions, however, we
must accept that supervisory approval was timely and that respondent
has met that aspect of his burden of production under section 7491(c).
                                  48

[*48] It follows from our conclusion as to the value of the easement the
partnership conveyed to NALT that respondent has met the rest of his
burden under section 7491(c) and has established the appropriateness
of gross valuation misstatement penalties. Because the $14,175,000
value for the easement claimed on the partnership’s return was well
more than 200% of the $1,000,000 we have determined to have been the
easement’s correct value on the relevant date, the partnership’s
reporting effected a gross valuation misstatement, within the meaning
of section 6662(e)(1)(A) and (h)(2)(A). Because of the magnitude of the
partnership’s misstatement, its partners cannot avoid gross valuation
misstatement penalties by availing themselves of the reasonable cause
exception of section 6664(c). Therefore, petitioners are subject to 40%
gross valuation misstatement penalties on the portions of their
underpayments attributable to the excess of the value of the easement
reported on partnership’s return over $1,000,000.

      Decisions will be entered under Rule 155.