Comparable-Sales Over Speculation: Eleventh Circuit Affirms 40% Penalty Where Tax Court’s Independent Valuation Makes Zoning and §6103 Disputes Irrelevant

Introduction

In Buckelew Farm, LLC (f.k.a. Big K Farms LLC) v. Commissioner of Internal Revenue, No. 24-13268 (11th Cir. Sept. 2, 2025) (per curiam) (unpublished), the Eleventh Circuit confronted a now-familiar conservation easement valuation dispute. Former Major League Baseball players Ryan Klesko and John Smoltz formed Buckelew Farm, which acquired approximately 1,561.65 acres in Jones County, Georgia, for $4,014,000 over 1998–2006. In 2013, Buckelew granted a conservation easement and claimed a charitable-contribution deduction of $47.57 million based primarily on a discounted-cashflow appraisal premised on a 307-lot “upscale” hunting- and conservation-oriented residential development plan.

The IRS disallowed the deduction and imposed a 40% gross valuation misstatement penalty. The Tax Court issued a mixed ruling: the easement itself qualified for §170 purposes, but the valuation was drastically overstated. The court adopted the IRS expert’s comparable-sales valuation—setting the property’s “before” value at $7.395 million and “after” value at $2.8 million—thus allowing a deduction of only about $4.6 million and sustaining the 40% penalty. The Tax Court rejected the IRS’s fraud claim.

On petition for review, Buckelew challenged the Tax Court’s concerns about zoning permissibility, as well as evidentiary and procedural rulings (in particular, admission of a third party’s tax return under §6103 and leave for the IRS to amend to add fraud). Crucially, Buckelew did not challenge the Tax Court’s independent adoption of the IRS’s valuation. The Eleventh Circuit affirmed, holding that the Tax Court’s valuation decision stood on an independent ground—its acceptance of the IRS expert’s comparable-sales analysis—and that alleged zoning or §6103 errors did not affect the dispositive valuation findings. The court also held Buckelew lacked standing to appeal procedural rulings on the fraud claim because Buckelew prevailed on that claim.

Summary of the Judgment

The Eleventh Circuit affirmed the Tax Court’s valuation of the property and the conservation easement using a comparable-sales methodology and the resulting imposition of a 40% accuracy-related penalty for a gross valuation misstatement under 26 U.S.C. § 6662(a), (h).
Any alleged error regarding zoning permissibility was immaterial because the Tax Court made an alternative, independent finding: even assuming legal permissibility of the proposed development, the IRS’s valuation was more persuasive and market-grounded.
The court rejected arguments based on confidentiality of tax return information under §6103 because exclusion is not a remedy for violations; in any event, the issue related to a fraud claim on which the taxpayer prevailed and was irrelevant to valuation.
Buckelew lacked standing to contest the Tax Court’s decision to permit the IRS to amend its answer to add a fraud claim because the Tax Court ultimately ruled for Buckelew on fraud.
Structural error arguments failed; any missteps were subject to harmless-error analysis and did not infect the valuation determination.

Analysis

1) Precedents Cited and Their Influence

United States v. Woods, 571 U.S. 31 (2013): Confirmed the availability of accuracy-related penalties in partnership contexts, setting the foundation for the penalty analysis applicable to conservation easement valuation misstatements.
TOT Property Holdings, LLC v. Commissioner, 1 F.4th 1354 (11th Cir. 2021): Provided the operative misstatement thresholds (20% penalty at 150%+ overstatement; 40% at 200%+), and endorsed the before-and-after valuation method where comparable easements are lacking. Also framed the “highest and best use” (HBU) inquiry by reference to regulatory factors, including zoning and likelihood of development. The court relied on TOT to evaluate both the valuation approach and the penalty trigger.
Pine Mountain Preserve, LLLP v. Commissioner, 978 F.3d 1200 (11th Cir. 2020): Reiterated the before-and-after method for conservation easement valuation, informing the Eleventh Circuit’s acceptance of Tax Court methodology and emphasis on market reality.
Palmer Ranch Holdings Ltd. v. Commissioner, 812 F.3d 982 (11th Cir. 2016): Clarified critical distinctions in valuation appeals: (a) valuation method (law, reviewed de novo) versus (b) numerical application (fact, reviewed for clear error). Also elaborated HBU as the “reasonable and probable” use driving value—grounding the focus on willingness-to-pay in the relevant market. The Eleventh Circuit applied Palmer Ranch to respect the Tax Court’s fact finding and its skepticism of speculative development-based DCF assumptions.
Estate of Jelke v. Commissioner, 507 F.3d 1317 (11th Cir. 2007); Estate of Dunn v. Commissioner, 301 F.3d 339 (5th Cir. 2002): Cited for the legal/factual bifurcation in valuation review and the high deference accorded to Tax Court’s numeric findings.
Symington v. Commissioner, 87 T.C. 892 (1986): A foundational Tax Court decision defining HBU as the highest and most profitable use likely needed in the reasonably near future; the Eleventh Circuit’s HBU analysis echoes Symington’s “market reality” lens.
Ocmulgee Fields, Inc. v. Commissioner, 613 F.3d 1360 (11th Cir. 2010); Estate of Wallace v. Commissioner, 965 F.2d 1038 (11th Cir. 1992): Standards of appellate review for Tax Court decisions—de novo on law, clear error on facts.
Sweet Additions Ingredient Processors, LLC v. Meelunie Am., Inc., 139 F.4th 1217 (11th Cir. 2025); In re Wagner, 115 F.4th 1296 (11th Cir. 2024); Holladay v. Allen, 555 F.3d 1346 (11th Cir. 2009): Emphasized the “highly deferential” clear-error standard: a plausible finding controls even if alternatives are equally or more plausible.
Nowicki v. Commissioner, 262 F.3d 1162 (11th Cir. 2001): Critical to the §6103 argument: there is no exclusionary rule remedy for unauthorized disclosure of return information; Congress provided civil/criminal penalties instead. The Eleventh Circuit relied on Nowicki to dispatch the suppression argument.
Diamond v. United States, 944 F.2d 431 (8th Cir. 1991): Acknowledged the seriousness of §6103 violations—cited by Buckelew—but did not alter the Eleventh Circuit’s remedial analysis under Nowicki.
Best Canvas Products & Supplies, Inc. v. Ploof Truck Lines, Inc., 713 F.2d 618 (11th Cir. 1983): Recognized potential prejudice from late amendments; nevertheless, here any prejudice was moot because the taxpayer prevailed on fraud.
Wolff v. Cash 4 Titles, 351 F.3d 1348 (11th Cir. 2003); Thomas v. Broward County Sheriff’s Office, 71 F.4th 1305 (11th Cir. 2023); United States v. Pavlenko, 921 F.3d 1286 (11th Cir. 2019): Standing principles: only aggrieved parties may appeal adverse rulings. Buckelew lacked standing to challenge procedural rulings on a claim it won (fraud).
Sullivan v. Louisiana, 508 U.S. 275 (1993); Arizona v. Fulminante, 499 U.S. 279 (1991): Distinguished structural errors (rare, fundamental defects) from trial errors subject to harmless-error review; the Eleventh Circuit rejected structural-error framing for the alleged §6103 and amendment issues.
Polelle v. Florida Secretary of State, 131 F.4th 1201 (11th Cir. 2025): Waiver through failure to brief arguments; used to underscore that Buckelew did not challenge the Tax Court’s independent valuation ground on appeal.

2) The Court’s Legal Reasoning

The Eleventh Circuit’s reasoning rested on three interlocking pillars: (a) standard of review and the deference due to Tax Court factfinding, (b) the independence and sufficiency of the Tax Court’s valuation ground, and (c) the non-dispositive nature of the evidentiary and procedural complaints relative to the valuation outcome.

a) Standard of Review and Valuation Framework

Legal issues (valuation methodology, interpretation of the Code and regulations) are reviewed de novo, but the numerical application of those methodologies is a fact question reviewed for clear error.
The Tax Court employed the accepted before-and-after method for easement valuation because comparable easements were not available; it then chose between competing expert valuations of the property’s HBU and market value.
HBU requires more than theoretical permissibility; it must be a reasonable and probable use in the reasonably near future, grounded in marketplace willingness to pay.

b) Independent Ground: Comparable-Sales Analysis Controls

The Tax Court rejected the taxpayer’s valuation on two independent bases: (1) serious doubts about zoning permissibility of the proposed development, and (2) even assuming permissibility, the development plan was not financially feasible or maximally productive under 2013 Jones County market conditions.
The court found the IRS expert’s comparable-sales approach—using Georgia properties with similar development potential and contemporaneous local market data—more persuasive than the taxpayer’s speculative DCF model, which extrapolated from high-end resorts far from Jones County and assumed robust lot absorption over a decade.
Market reality was dispositive: a rational buyer would not pay around $32,600 per acre in Jones County when substitute properties supporting similar uses sold for $1,602–$4,971 per acre. That empirical spread undercut the DCF’s implicit pricing and absorption assumptions.
Importantly, the Tax Court expressly stated that its acceptance of the IRS valuation did not depend on zoning doubts; it stood independently on financial feasibility and market comparables. On appeal, Buckelew did not attack this independent ground, thereby waiving the only argument that could alter the outcome.

c) Penalties and Ratio

With the court fixing the “before” value at $7.395 million and the “after” value at $2.8 million, the allowable deduction was about $4.6 million. Buckelew’s claimed $47.57 million deduction exceeded 200% of the correct amount many times over, satisfying the “gross valuation misstatement” threshold and warranting the 40% penalty under §6662(h).

d) §6103 and Procedural Issues Are Non-Dispositive

§6103 confidentiality: Even assuming a disclosure issue, Nowicki forecloses exclusion as a remedy; Congress provided penalties, not suppression. Moreover, the admitted tax return related to a fraud issue on which Buckelew prevailed, rendering any error harmless and irrelevant to valuation.
Amended answer adding fraud: Because the Tax Court ruled for Buckelew on fraud, it suffered no adverse judgment and lacked standing to challenge the amendment order on appeal.
Structural error theory: The court rejected the notion that the confluence of §6103 and amendment rulings created a structural error. Such issues are ordinarily reviewed for prejudice; here they had no impact on the dispositive valuation findings.

3) Impact and Practical Implications

Although unpublished, the decision provides persuasive guidance in the Eleventh Circuit’s continuing refinement of conservation-easement valuation disputes.

Comparable-sales primacy over speculative DCF: Where local market data are available, courts are likely to prefer comparable-sales approaches that reflect contemporary, localized market realities over DCF models built on ambitious development scenarios, distant resort analogues, or optimistic absorption schedules.
HBU must be market-credible, not just theoretically permissible: Even if zoning hurdles could be overcome, HBU fails if financial feasibility is improbable under local conditions. Legal and business risks independently defeat HBU.
Alternative-ground affirmance: Litigants must challenge all independent grounds supporting a judgment. Failure to brief a dispositive, independent valuation ground (as here) will generally be fatal on appeal.
Penalty exposure remains significant: The opinion reinforces that outsized gaps between claimed and supported values in easement cases readily trigger §6662(h)’s 40% penalty—particularly where the market evidence contradicts speculative valuation assumptions.
§6103 is not an exclusionary rule: Taxpayers alleging improper disclosure should pursue statutory remedies; they should not expect evidence suppression to overturn Tax Court outcomes, especially when the evidence concerns issues on which they prevailed.
Standing and procedural prudence: A party cannot appeal procedural rulings on issues it won; appellate resources should focus on adverse determinations. Attempts to bootstrap non-prejudicial procedural issues into “structural error” are unlikely to succeed.

Complex Concepts Simplified

Conservation easement: A legal restriction placed on real property to preserve certain conservation values (e.g., open space), typically donating the restriction to a qualified organization. The federal tax code permits a charitable deduction equal to the loss in fair market value caused by the easement.
Before-and-after valuation method: If comparable easement sales are unavailable, value is determined by subtracting the property’s post-easement fair market value (“after” value) from its pre-easement value (“before” value).
Highest and best use (HBU): The reasonable, probable, and legally permissible use of property that yields the highest value in the reasonably near future—accounting for physical possibility, financial feasibility, and market demand, not just theoretical zoning possibilities.
Comparable-sales vs. DCF: Comparable-sales valuation looks to recent sales of similar properties in the relevant market; discounted-cashflow models project future income and discount to present value. Courts tend to distrust DCFs built on speculative development assumptions that diverge from local market data.
Accuracy-related penalties (26 U.S.C. §6662): Monetary penalties for understatements arising from valuation misstatements; 20% for substantial misstatements (150%+ overstatement) and 40% for gross misstatements (200%+ overstatement).
§6103 confidentiality of tax returns: Federal law protects the confidentiality of tax returns/return information but provides civil and criminal penalties for unauthorized disclosure; it does not provide an exclusionary rule to suppress evidence in court proceedings.
Structural error vs. harmless error: Structural errors are rare, fundamental defects affecting the entire framework of a proceeding. Most trial errors—including evidentiary admissions and amendments—are evaluated for actual prejudice (harmless-error review), not treated as automatically reversible.
Standing to appeal: Only a party aggrieved by an adverse ruling may appeal it. A party cannot appeal a procedural ruling on a claim it ultimately won.

Conclusion

Buckelew underscores three settled but crucial points in conservation-easement litigation. First, valuation lives or dies on market credibility. Courts will favor localized comparable-sales analyses over speculative DCF models premised on ambitious development schemes, especially in markets still recovering from macroeconomic shocks. Second, HBU analysis is multi-factored: legal permissibility and financial feasibility are independent filters—failure on either defeats a taxpayer’s valuation. And even if HBU is accepted, the derived dollar value must still be proven by reliable market evidence. Third, appellate success depends on confronting the actual pillars of the Tax Court’s ruling. Zoning-permissibility and §6103 skirmishes cannot overcome an unchallenged, independently adequate valuation finding, and procedural rulings on issues the taxpayer wins are not appealable.

For future cases, the opinion serves as a caution that aggressive easement valuations anchored in distant, luxury comparables and optimistic absorption schedules will receive exacting scrutiny; that penalties will attach where market data contradict claimed values; and that appellate courts will affirm on any independent ground adequately supporting a Tax Court’s judgment.