Tax Court Cuts $16.7M Deduction To $93,000 For Conservation Donation

According to Law360,  partnership that claimed a $16.7 million tax deduction for donating a conservation easement covering land in Georgia was trying to "fleece the public" with its claims that the land could be used for clay mining, a U.S. Tax Court judge said on October 8, 2024 in L Minerals LLC et al. v. Commissioner, docket number 17076-21, in the U.S. Tax Court slashing the deduction.

In a 69-page ruling, U.S. Tax Court Judge Patrick Urda cut the deduction for JL Minerals LLC to $93,000 and upheld penalties against the partnership for grossly overestimating the value of its contribution. JL Minerals "and its coterie of advisors took Congress's attempt to promote conservation and cynically used it as a cover to fleece the public fisc to the tune of nearly $17 million in baseless deductions," Judge Urda said.

While the partnership defended the value of its 2017 donation, and therefore its deduction amount, with an appraisal claiming the land could be used to mine kaolin, the judge said the "extensive record" in the case proved otherwise.

The record included testimony that multiple kaolin processors had looked at the roughly 65-acre tract, with its steep slopes and ravines, and decided it wasn't worth mining "or even keeping as part of a long-term reserve," Judge Urda said. 

Multiple companies had drilled and tested the property, with only one deciding to mine it, and that company later shut down its mine without a lease for future mining, the judge said.

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