In Theron E. Johnson v. Commissioner, the Tax Court ruled on the value of a conservation easement. The taxpayer believed that granting a conservation easement over his ranch would allow him in effect to create a private wildlife reserve. The court heard evidence from the taxpayer’s expert and the IRS’s expert on the value and found both experts’ post-encumbrance direct comparable sales analyses suffered from a lack of suitable comparables and rejected them. The court concluded that all of the IRS expert’s and all but one of the taxpayer’s expert’s encumbered comparables were in different markets. In addition, all the comparables required significant adjustments. The court ruled to adopt the midpoint between both expert’s ranges of values.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.