Eleventh Circuit: No Mandatory Four-Factor Appraisal Test for “Highest and Best Use” in Conservation Easement Valuations

1. Introduction

In Savannah Shoals, LLC v. Commissioner of Internal Revenue (11th Cir. July 16, 2026), the Eleventh Circuit affirmed a U.S. Tax Court decision that allowed a charitable deduction in principle for a donated conservation easement, but drastically reduced the easement’s value and upheld a 40% gross valuation misstatement penalty.

The dispute centered on valuation methodology—specifically, the property’s “highest and best use” before the easement. The taxpayer claimed the land’s best use was an aggregate quarry, supporting a claimed deduction of about $23 million. The IRS contended that quarrying was not a realistic use and that the land’s best use was low-density residential and recreational, yielding a far lower easement value.

The key appellate issues were whether the Tax Court (i) had to apply a rigid four-factor “highest and best use” appraisal test, (ii) mishandled expert and map evidence, and (iii) clearly erred or failed to make adequate findings when rejecting quarrying as the likely best use.

2. Summary of the Opinion

The Eleventh Circuit held:

  • No rule requires the Tax Court to apply a mandatory four-factor appraisal test for highest and best use in conservation easement valuation; the governing regulation and Eleventh Circuit precedent call for an objective assessment of development likelihood, with a central emphasis on whether market demand makes the proposed use reasonably probable.
  • The Tax Court did not abuse its discretion in admitting or considering the Commissioner’s expert evidence, and many objections were forfeited because they were not raised below.
  • The Tax Court’s factual finding that an aggregate quarry was not financially feasible—because the market would not support projected sales and because of competition and delivered-price disadvantages—was not clearly erroneous.
  • The Tax Court provided sufficient findings and reasoning to permit appellate review and was not required to perform its own independent quantitative quarry valuation.

Accordingly, the court affirmed the easement value of $480,000 and upheld the 40% penalty based on the taxpayer’s claimed $23 million deduction.

3. Analysis

A. Precedents Cited

Valuation framework, conservation easements, and “highest and best use”

  • Palmer Ranch Holdings Ltd. v. Comm'r, 812 F.3d 982 (11th Cir. 2016): The opinion treated Palmer Ranch as the primary Eleventh Circuit anchor for (i) standards of review (legal issues de novo; factual findings for clear error), (ii) the taxpayer’s burden to prove the amount of a deduction, and (iii) the requirement that highest-and-best-use analysis include an inquiry into whether “the market will demand the use.” The court relied on Palmer Ranch to validate the Tax Court’s focus on market demand rather than a rigid checklist.
  • TOT Prop. Holdings, LLC v. Comm'r, 1 F.4th 1354 (11th Cir. 2021): Used to reinforce the “before-and-after” method, the dependence of fair market value on highest and best use, and the permissibility of a practical, evidence-based assessment of whether a proposed development is “reasonable and probable” versus “too risky.” The court also invoked TOT Prop. to underscore the evidentiary significance of a recent arm’s-length sale as “overwhelmingly significant” to value.
  • Pine Mountain Pres., LLLP v. Comm'r, 978 F.3d 1200 (11th Cir. 2020): Cited for the statutory structure of conservation easement deductions under 26 U.S.C. § 170(h)—qualified real property interest, qualified organization, and exclusive conservation purposes—framing the background even though qualification was not contested on appeal.
  • Olson v. United States, 292 U.S. 246 (1934): The court treated Olson as the historical source of the “needed or likely to be needed in the reasonably near future” concept and the caution against valuation based on “mere speculation and conjecture.” The opinion used Olson to justify rejecting a quarry use that was possible in theory but not reasonably probable in the market.

Cross-circuit authorities on highest and best use in the easement context

  • Brooks v. Comm'r, 109 F.4th 205 (4th Cir. 2024): Cited as support for upholding Tax Court determinations rejecting speculative expert theories in highest-and-best-use disputes.
  • Whitehouse Hotel Ltd. P'ship v. Comm'r, 615 F.3d 321 (5th Cir. 2010): Cited for the broader proposition that Olson-style fair market value concepts translate into the charitable valuation context.
  • Corning Place Ohio, LLC v. Comm'r, 158 F.4th 715 (6th Cir. 2025): Used to reinforce that taxpayers must substantiate market demand for the asserted highest and best use.
  • Esgar Corp. v. Comm'r, 744 F.3d 648 (10th Cir. 2014): Addressed specifically because the taxpayer argued for a mandatory four-factor test. The Eleventh Circuit read Esgar narrowly: it recognized that appraisal factors are sometimes used, but it did not treat Esgar as imposing a strict legal requirement to apply them.

Tax Court decisions discussed for (non)binding appraisal standards

  • Buckelew Farm, LCC v. Comm'r, T.C.M. (RIA) 2024-052, aff'd, No. 24-13268, 2025 WL 2502669 (11th Cir. Sept. 2, 2025): Mentioned to show that courts sometimes use the appraisal factors, but the Eleventh Circuit did not read it as establishing a mandatory test.
  • Estate of Lloyd v. Comm'r, 71 T.C.M. (CCH) 1903 (1996): Quoted for the important limitation that professional appraisal guidelines may guide experts but are “not binding” on the court—supporting the Eleventh Circuit’s refusal to constitutionalize or harden an appraisal checklist into a legal command.

Evidence, experts, forfeiture, and judicial notice

  • Curtis Inv. Co., LLC v. Comm'r, 909 F.3d 1339 (11th Cir. 2018): Supplied the abuse-of-discretion standard for evidentiary rulings and emphasized trial-court leeway in expert reliability assessments.
  • In re Teltronics, Inc., 904 F.3d 1303 (11th Cir. 2018): Cited for the principle that evidentiary rulings are reversed only if “manifestly erroneous” and that Daubert-type concerns are reduced in bench trials because judges can filter questionable material.
  • United States v. Frazier, 387 F.3d 1244 (11th Cir. 2004): Used to state the Eleventh Circuit’s Rule 702 framework (qualification, reliability, helpfulness).
  • Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993): Referenced as the reliability touchstone embedded in the Rule 702 inquiry.
  • Lindsey v. Navistar Int'l Transp. Corp., 150 F.3d 1307 (11th Cir. 1998): Applied to hold that failing to raise a Daubert challenge below forfeits the argument on appeal.
  • Cent. Baptist Church of Albany, Ga., Inc. v. Church Mut. Ins. Co., 146 F.4th 1003 (11th Cir. 2025): Cited for the preservation requirement—unraised objections generally cannot be advanced on appeal.
  • Gov't of Canal Zone v. Burjan, 596 F.2d 690 (5th Cir. 1979) and Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc): Together support judicial notice of official government maps and explain why pre-1981 Fifth Circuit decisions bind the Eleventh Circuit.
  • United States v. Proch, 637 F.3d 1262 (11th Cir. 2011): Example of judicial notice using maps to determine relative locations.

Appellate review of findings and adequacy of explanation

  • Guevara v. Lafise Corp., 127 F.4th 824 (11th Cir. 2025) and Curtis v. Comm'r, 623 F.2d 1047 (5th Cir. 1980): Used to explain the requirement that findings be sufficiently particular for appellate review and that remand is appropriate only when reasoning is too sparse to confirm correct legal application.
  • Holladay v. Allen, 555 F.3d 1346 (11th Cir. 2009) and Anderson v. City of Bessemer City, 470 U.S. 564 (1985): Supported the “highly deferential” clear-error standard—if the trial court’s account is plausible, it stands.
  • Morrissette-Brown v. Mobile Infirmary Med. Ctr., 506 F.3d 1317 (11th Cir. 2007): Cited for the “definite and firm conviction” formulation of clear-error review.
  • Herring v. Sec'y, Dep't of Corr., 397 F.3d 1338 (11th Cir. 2005): Applied to disregard arguments raised for the first time in a reply brief.

Other authorities discussed (illustrative but not adopted)

  • Kroner v. Comm'r, 48 F.4th 1272 (11th Cir. 2022): Cited for the proposition that Tax Court opinions are not binding precedent on the Eleventh Circuit.
  • Champions Retreat Golf Founders, LLC v. Comm'r, 124 T.C.M. (CCH) 267 (2022) and In re Greater Se. Cmty. Hosp. Corp. I, 2008 WL 2037592 (Bankr. D.D.C. May 12, 2008): Raised to reject the taxpayer’s attempt to convert “positive return” into a categorical financial-feasibility rule; the Eleventh Circuit treated these as context-specific and noncontrolling.
  • Gersten v. Comm'r, 267 F.2d 195 (9th Cir. 1959): Distinguished as a case requiring the Tax Court to “fix a definite amount” of fair market value—something the Tax Court did here.

B. Legal Reasoning

1. The central holding: no mandatory four-factor checklist

The taxpayer urged that the Tax Court was required to apply four “appraisal factors” for highest and best use—(1) physically possible, (2) legally permissible, (3) financially feasible, and (4) maximally productive—and that failure to do so was legal error.

The Eleventh Circuit rejected that framing. It held that the operative legal standard is supplied by:

  • 26 C.F.R. § 1.170A-14(h)(3)(ii), which requires an “objective assessment” of how “immediate or remote” development is likely to be absent the restriction, including the effect of zoning and similar laws; and
  • Eleventh Circuit precedent (Palmer Ranch Holdings Ltd. v. Comm'r; TOT Prop. Holdings, LLC v. Comm'r) that translates that regulation into a practical inquiry: is the proposed use “reasonable and probable,” “needed or likely to be needed” soon, and—critically—does the market demand it?

The court acknowledged the four appraisal factors may be used and often overlap with the regulatory inquiry, but it refused to transform them into a rigid legal requirement. This is the opinion’s principal doctrinal contribution: it decouples conservation-easement highest-and-best-use law from a mandatory appraisal checklist, while still allowing courts to consider those factors as helpful evidentiary structure.

2. Market demand as a core component of “financial feasibility” and “reasonable probability”

The Tax Court rejected the quarry use largely because the evidence showed the quarry’s projected sales and profitability were unrealistic given (i) the limited radius of economical aggregate transport, (ii) rural and low-growth surrounding demand, and (iii) competing quarries closer to population centers with delivered-price advantages.

The Eleventh Circuit held that this focus was not an improper “single factor” approach; it was the heart of the legally required inquiry under Palmer Ranch Holdings Ltd. v. Comm'r, which requires asking whether “the market will demand the use.” In other words, the court treated “market demand” not as a discretionary consideration, but as a doctrinally essential screen against speculative valuation narratives.

3. The court’s approach to expert evidence and maps

On evidentiary questions, the Eleventh Circuit emphasized three themes:

  • Preservation/forfeiture: because key objections (e.g., Rule 702/Daubert-type challenges and objections to the expert’s reliance on maps) were not raised below, they were forfeited under Lindsey v. Navistar Int'l Transp. Corp. and Cent. Baptist Church of Albany, Ga., Inc. v. Church Mut. Ins. Co..
  • Bench-trial flexibility: even when expert reliability is contested, the concern about “dumping” questionable science on a jury is reduced in a bench trial, per In re Teltronics, Inc. and Curtis Inv. Co., LLC v. Comm'r.
  • Judicial notice of government maps: maps from agencies like USDA/USGS/Georgia DNR can be judicially noticed under Rule 201, consistent with Gov't of Canal Zone v. Burjan and United States v. Proch, when accuracy is not reasonably disputable.

Importantly, the Eleventh Circuit also minimized the materiality of the challenged map-based “abundance of aggregate” point, explaining that the Tax Court’s decisive rejection of quarrying rested on market size and competition, not on whether similar rock existed elsewhere.

4. No requirement that the Tax Court “do its own math”

The taxpayer argued that the Tax Court had to provide a quantitative quarry valuation (or perform an independent DCF recalculation) to permit appellate review and to determine whether quarrying still might beat residential use even with reduced projections.

The Eleventh Circuit rejected that demand. It held that (i) 26 U.S.C. § 7459(b) requires findings, and (ii) remand is warranted only when findings are too thin to confirm correct legal application (Guevara v. Lafise Corp.; Curtis v. Comm'r), but there is no rule requiring the Tax Court to construct an independent quantitative model when it finds the taxpayer’s inputs and market assumptions unreliable.

C. Impact

1. Litigation posture in conservation-easement valuation disputes

The opinion strengthens the IRS’s and Tax Court’s ability to defeat aggressive highest-and-best-use claims (especially those tied to large DCF-driven valuations) by focusing the dispute on whether the proposed use is reasonably probable in the market. Taxpayers should expect courts in the Eleventh Circuit to treat:

  • aggregate transport economics,
  • realistic market radius and demand segmentation,
  • competitive quarry positioning and delivered-price advantages, and
  • profit margin plausibility checks

as central factual predicates for (non)feasibility, rather than as peripheral details.

2. Doctrinal clarification: appraisal factors are not a legal straitjacket

By refusing to impose the four-factor appraisal test as a mandatory legal rubric, the Eleventh Circuit reduces “format” arguments on appeal (i.e., “the Tax Court didn’t recite the magic words”). Parties must engage the regulation’s core demand: objective likelihood of development and market reality, not checklist compliance.

3. Appellate review: deference plus preservation discipline

The decision underscores two practical points that will shape future appeals:

  • Preserve expert challenges early (Rule 702/Daubert; Rule 703 basis objections). Failure can forfeit arguments entirely.
  • Given clear-error deference, highest-and-best-use appeals are difficult unless the taxpayer can show that the Tax Court’s view of the evidence was not merely debatable, but implausible in light of the record.

4. Complex Concepts Simplified

  • Conservation easement deduction (26 U.S.C. § 170(h)): A taxpayer can claim a charitable deduction for donating a perpetual restriction that limits development to protect conservation values, if statutory requirements are met.
  • Before-and-after valuation (26 C.F.R. § 1.170A-14(h)(3)(i)): When there are no comparable easement sales, the easement’s value is the property’s fair market value before the easement minus its fair market value after the easement.
  • Highest and best use: Not “any conceivable use,” but the most valuable use that is reasonably probable in the near future. A use can be physically possible yet still rejected if the market and competitive conditions make it unlikely.
  • DCF (discounted cash flow): A valuation method that projects future cash flows (e.g., quarry sales), then discounts them to present value. Courts scrutinize DCF heavily because small assumption changes can produce huge valuation swings.
  • Gross valuation misstatement penalty (40%): Triggered when the claimed value is sufficiently inflated relative to the correct value (here, the Tax Court found the deduction exceeded 200% of the determined value).
  • Judicial notice (Rule 201): A court can accept certain facts without formal proof when they come from sources whose accuracy cannot reasonably be questioned (e.g., official government maps).

5. Conclusion

Savannah Shoals, LLC v. Commissioner of Internal Revenue establishes a clear Eleventh Circuit message for conservation-easement valuation disputes: the Tax Court is not required to apply a rigid four-factor appraisal checklist to determine highest and best use, and it may resolve the issue through an evidence-driven assessment of reasonable probability and market demand as directed by the Treasury Regulations and Eleventh Circuit precedent.

The decision also reinforces the practical mechanics of these cases—preservation of expert objections, the deference owed to Tax Court factfinding, and the permissibility of relying on objective sources (including judicially noticeable government maps) where appropriate. For taxpayers, the opinion highlights that ambitious deductions premised on speculative or weakly supported development scenarios face substantial risk not only of disallowance in valuation but also of significant penalties.