Conservation Easement Appraisals and Highest and Best Use Analysis: Lessons from Recent US Tax Court Decisions

Summary

In recent years, the number of charitable donations of conservation easements has surged. Much of the activity has involved syndicated conservation easements. Each donation requires an appraisal to support the value of the gift. Both Congress and the Internal Revenue Service as well as the US Department of Justice have challenged appraisal reports supporting these values in hundreds of recent syndicated conservation easement donations. The highest and best use analysis is the central focus in many of the challenges. This article revisits the 2020 US Senate Report concerning abusive appraisals supporting syndicated conservation easements; it then discusses the “before” value highest and best use issues raised in three recent US Tax Court cases involving donations of conservation easements.