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Palmer Ranch Holdings Ltd. v. Commissioner of Internal Revenue Service

ELR Citation: 46 ELR 20031
Nos. 14-1416, (11th Cir., 02/05/2016)

The Eleventh Circuit held that a developer is entitled to a charitable deduction on its 2006 tax return for granting a conservation easement on an 82-acre parcel of property that contained a bald eagle nest. The developer valued the parcel at $25.2 million on the assumption that the property's highest and best use was residential delveopment, with the development of 360 dwelling units being reasonably probable. The IRS disallowed the deduction on grounds that the developer had overvalued the parcel in calculating the easement's worth. The developer challenged IRS' decision in tax court, which ruled in the developer's favor. The tax court concluded that it was reasonably probable that the development would have been approved by the local land use authority at that density. The appellate court upheld the tax court's determination of the parcel's highest and best use, but reversed the tax court's ensuing valuation. The parties' appraisers used a comparable-sales method of valuation, but the tax court did not and failed to provide an explanation for this departure. On remand, the tax court must at minimum explain why it departed from the comparable-sales method in valuing the parcel.