Tax Court Yet Again Finds Bullshit Conservation Easement Grossly Overvalued (11/4/25; 11/16/25)

In Paul Adams Quarrry Trust v. Commissioner, T.C. Memo. 2025-112, GS here and TN here, the Tax Court (Judge Toro) shot down another bullshit conservation easement gambit (this time not a syndicated one, but following the same game plan). As common in such cases, the Court found that the claimed value of the easement was grossly excessive, resulting in denial of most of the amount claimed and imposition of the gross valuation misstatement penalty under I.R.C. § 6662(a) and (h).

Worthy of note is the Court’s opening paragraph:

This case concerns the contribution of a conservation easement by Paul-Adams Quarry Trust, LLC (PaulAdams), in 2017. Petitioner is Francis L. (Rusty) Adams, Paul-Adams’s tax matters partner.1 Petitioner’s heightened rhetoric aside, this is not a difficult case. The principal question before the Court is the value of the easement Paul-Adams granted to the Oconee River Land Trust (Oconee Trust) in December 2017 over approximately 207 acres in Elberton, Georgia (Paul-Adams property). The easement restricted what Paul-Adams [*7] could do in the future with those 207 acres. Paul-Adams claimed in its return that the restriction reduced the value of the Paul-Adams property by $10,234,108. This claim has no basis in reality, and we therefore reject it.

The Court repeats this theme throughout the 100+ pages of the opinion.

Similar to the baseball arbitration phenomenon I mentioned in an earlier blog (see Court Warns Counsel in Advance of Trial in Syndicated Conservation Easement Case (Federal Tax Procedure Blog 10/31/25), here), the Court in Paul Adams Quarrry Trust v. Commissioner finds for the most reasonable valuation—the IRS’s. The petitioner in Paul Adams Quarrry Trust v. Commissioner simply defaults on reasonable valuations.

I surmise that the strategy for bullshit SCE players (or in this case just CE players) is that they should just swing for the home run even though they know that they are wielding a toothpick rather than a bat because, well, what the hell!

Just a personal statement here: I hope the Tax Court starts levying substantial penalties on these bullshit artists wasting everyone’s time. (But, I am sure, making lots of money for the petitioners' lawyers to waste everyone else's time.)

Added 11/16/25 12:30pm: 

Peter Reilly has posted a good discussion of Paul Adams Quarry Trust. Peter Reilly, Tax Court’s Third Strike On Valuation: Jones Day Theory Rejected Again (Forbes 11/12/25), here. I posted the original blog entry before Reilly's discussion. However, Reilly sent me the link and I responded with the following comments (edited):

As usual, you tell a better story than I do. Some points:

1. Thanks for the reference to my blog entry at the end of your posting.

2. I am a bit surprised that the go-to appraiser, Claud Clark III, did not appear somewhere in the case. As you may know, Clark “settled” the injunction case with a permanent injunction but not admitting liability.  See TN here. He also seems to have given up his appraiser certifications in several states. See here.

3. I wonder whether the Jones Day lawyers cooked up the valuation theory on their own or perhaps were inspired by Clark.

4. As I noted in my blog, the opinion methodology Judge Toro applied may have functioned like baseball arbitration where PAQT effectively defaulted to anything like real value, thus permitting the judge to move easily to the IRS valuation.

5. You say that Jones Day is the only one putting forth the “market participants” theory where the value is based on the secret knowledge of a buyer unknown to a seller. That theory of value is not how markets work. Moreover, the Jones Day theory is just a variation of theories rejected in other cases. E.g., Buckelew Farm, LLC v. Commissioner, T.C. Memo. 2024-52, aff’d without published opinion, (11th Cir. 9/2/25), here. The Jones Day theory may have used different words couched as different theories, but it is the same.

6. I like the quote from Hodges: "This is where we are now—the Tax Court now tells taxpayers how to conduct their businesses to MINIMIZE tax benefits." That, too, is a different form of bullshit.

Peter, keep up the good work.