Tax Court Warns Counsel in Advance of Trial in Syndicated Conservation Easement Case (10/31/25)

In Cottonpatch Timber Company, LLC v. Commissioner (T.C. No. 26103-22, here, at #54 Order dtd 10/29/25), TN here, Judge Gustafson sent warnings to counsel in a syndicated conservation easement case in advance of the trial setting currently for December 15, 2025. Specifically, he cautioned:

As to valuation, the Tax Court has criticized overvaluation of conservation easements in Mill Road, at *48-53, and in a number of recent opinions in other cases. Petitioner’s counsel should be able, in due course, to explain why its position this case is materially different from the strongly criticized positions in those cases, since a position that ignores those opinions and reflects the gross fallacies in those previous positions might be frivolous, see sec. 6673(a)(2), and trial time spent in disregard of those opinions would likely be a waste.

The Mill Road opinion is here.

In addition, Judge Gustafson closed with this cautionary advice:

          The judge stated to counsel that he is considering the possibility of issuing, at the conclusion of the trial in this case, a bench opinion pursuant to Rule 152. The parties should keep that possibility in mind as they prepare their pretrial memoranda, since in that event there would be no post-trial briefing.

These cautions to counsel echo Judge Buch’s Order with attached extensive bench opinion in a conservation easement shelter. Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (Federal Tax Procedure Blog 7/16/25; 9/10/25), here. I think Tax Court judges are getting less tolerant, rightfully so, considering the massive waste of time for trials to claim grossly inflated valuations for conservation easements.

I wonder if some phenomenon like baseball arbitration is at play in the judges' determinations in these syndicated easement cases. In baseball arbitration, each party submits its value (with proof) and the arbiters pick the submission closest to what they think the real value is. The notion in baseball arbitration is that the parties will get real in their valuations. I discuss baseball arbitration in Arbitration to Settle Cross-Border Transfer Pricing Disputes between Competent Authorities Under Tax Treaties (Federal Tax Procedure Blog 11/26/12), here.

Counsel for the petitioners in these syndicated easement cases submit (with trial) grossly inflated valuations, and the IRS submits the only valuation(s) approaching real value. In that situation,  the judge must determine value on the basis of the IRS's submission with perhaps some adjustments based on cross-examining of the IRS's experts at trial.