Piton Holdings, LLC, David L. Hall, Partnership Representative, Petitioner(s)

United States Tax Court 167 T.C. No. 4 PITON HOLDINGS, LLC, DAVID L. HALL, PARTNERSHIP REPRESENTATIVE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket No. 637-23. Filed July 15, 2026. ————— P is an LLC that is treated as a partnership for federal tax purposes. P is subject to the centralized partnership audit regime established by the Bipartisan Budget Act of 2015 (BBA), Pub. L. No. 114-74, 129 Stat. 584. P claimed charitable contribution deductions under I.R.C. § 170 for its donations of a conservation easement and a fee simple interest in 2018. R sent P a Notice of Final Partnership Adjustment disallowing the charitable contribution deductions and determining penalties. P allocated its claimed noncash charitable contribution deductions to four members. R contends that these four members do not reflect P’s membership at the time of the charitable contributions. P, citing SEC v. Jarkesy, 144 S. Ct. 2117 (2024), contends that the accuracy-related penalty R determined under I.R.C. § 6662 is not assessable as a matter of law because of the application of U.S. Const. amend. VII. P contends that the I.R.C. § 6662(d)(2)(B)(ii) disclosure exception may apply (if all requirements are met) to the I.R.C. § 6662(e) and (h) valuation misstatement penalties at issue. R contends that the disclosure exception Served 07/15/26  2 is limited to the I.R.C. § 6662(d) substantial understatement penalty and does not apply to the I.R.C. § 6662(e) and (h) valuation misstatement penalties. Held: The before value of the property was $1,440,000 or $3,800 per acre as determined by R’s expert using the comparable property sales method. Subtracting the property’s stipulated after value of $640,000 from the before value, the value of the easement was $800,000. Held, further, P improperly allocated its claimed noncash charitable contribution deductions. Held, further, because the claimed value of the easement exceeded the correct value by over 200%, P is liable for a gross valuation misstatement penalty under I.R.C. § 6662(h). Held, further, as we held in Riddle Aggregates, LLC v. Commissioner, No. 31104-21, 165 T.C. (Dec. 15, 2025), the “public rights” exception to U.S. Const. amend. VII applies to the accuracy-related penalty under I.R.C. § 6662(a), (b)(1)–(3), (c), (d), (e), and (h), and this “public rights” exception also applies to the accuracy-related penalty under I.R.C. § 6662(a), (b)(1)–(3), (c), (d), (e), and (h) for BBA partnerships. Held, further, the I.R.C. § 6662(d)(2)(B)(ii) disclosure exception does not apply to the I.R.C. § 6662(e) substantial valuation misstatement penalty nor to the I.R.C. § 6662(h) gross valuation misstatement penalty. ————— William A. Stone III, Andrew W. Steigleder, and Michael B. Coverstone, for petitioner. Ryan A. Ashburn, Logan T. Bohman, Ping Chang, Andrew J. Hagler, Caroline T. Parnass, Andrea S. Prigmore, Katelynn M. Sponseller, and Erin H. Stearns, for respondent.  3 KERRIGAN, Judge: This case is a partnership-level proceeding under the Bipartisan Budget Act of 2015 (BBA), Pub. L. No. 114-74, 129 Stat. 584, involving a syndicated conservation easement (SCE). Respondent issued a Notice of Final Partnership Adjustment (FPA) for tax year 2018 to David L. Hall, as partnership representative for Piton Holdings, LLC (petitioner). In the FPA respondent for tax year 2018 disallowed petitioner’s noncash charitable contribution deduction of $42,200,000 under section 170 1 and determined alternative penalties of $6,220,625 under section 6662(a), (b)(1)–(3), (c), (d), (e), and (h) and section 6662A. After the parties’ filing of Stipulations of Settled Issues, 2 the issues remaining for consideration are (1) the fair market value of the 1 Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. 2 In the Stipulation of Settled Issues filed October 29, 2024, respondent agreed not to challenge the following: (1) the conservation easement on the property places a restriction (granted in perpetuity) on the use which may be made of the real property under section 170(h)(2)(C) and the corresponding regulations; (2) the contribution of the conservation easement on the property is exclusively for conservation purposes pursuant to section 170(h)(1)(C) and the corresponding regulations; (3) the conservation purposes of the conservation easement on the property are protected in perpetuity pursuant to section 170(h)(5)(A) and the corresponding regulations; (4) the easement is a “qualified real property interest” pursuant to section 170; (5) during the tax year at issue Pelican Coast Conservancy, Inc. (PCC), was a tax-exempt entity pursuant to section 501(a) as an organization described in section 501(c)(3), was a qualified organization within the meaning of section 170(h)(1)(B), and had the experience and means to monitor and enforce the conservation easement on the property in perpetuity; and (6) during the tax year at issue Atlantic Coast Conservancy Properties, LLC (ACCP), was a tax-exempt entity pursuant to section 501(a) as an organization described in section 501(c)(3). Additionally, the parties stipulated that (1) petitioner did not donate the conservation easement to PCC in a bargain sale and (2) petitioner did not donate the fee simple interest to ACCP in a bargain sale. Respondent conceded the accuracy-related penalty on reportable transaction understatements under section 6662A. In the second Stipulation of Settled Issues filed on December 16, 2024, the parties stipulated that respondent has complied with the penalty approval requirements of section 6751(b)(1) by confirming timely supervisory approval of penalties under section 6662(c), (d), (e), and (h) for tax year 2018. As stated in the third Stipulation of Settled Issues filed on April 16, 2025, for the purpose of this litigation respondent does not contend that petitioner failed to attach a qualified appraisal, as defined in section 170(f)(11)(E)(i) and corresponding  4 conservation easement, (2) whether petitioner properly allocated its claimed noncash charitable contribution deductions, and (3) whether petitioner is liable for an accuracy-related penalty under section 6662. We hold that the fair market value of the land at the time of contribution was $1,440,000, that the value of the conservation easement was $800,000, and that petitioner did not properly allocate its noncash charitable contributions. Additionally, we hold that petitioner is liable for a 40% penalty for a gross valuation misstatement under section 6662(h). FINDINGS OF FACT Some of the facts are stipulated and so found. The Stipulations of Facts and the attached Exhibits are incorporated herein by this reference. Petitioner is an Alabama limited liability company (LLC). Petitioner’s principal place of business was Alabama when its Petition was timely filed. Absent stipulation to the contrary, appeal of this case would lie to the U.S. Court of Appeals for the Eleventh Circuit. See § 7482(b)(1)(E). I. History and Characteristics of the Property at Issue A. The Meeks Mountain Property On September 13, 2012, DESE Properties, LLC (DESE Properties), a disregarded entity of DESE Research, Inc. (DESE Research), purchased 662.42 acres of land in Madison County, Alabama (Parent Parcel), for $1,059,872, or $1,600 per acre. DESE Properties referred to the 662.42 acres of land that make up the Parent Parcel as the “Meeks Mountain property.” In 2017 and 2018 the chief executive officer of DESE Research was Wallace Kirkpatrick. At the time of purchase Dr. Kirkpatrick believed that the land was good for hunting regulations, to its Form 1065, U.S. Return of Partnership Income, for the tax year ending December 31, 2018, in support of its donation of a conservation easement to PCC or that petitioner failed to attach a qualified appraisal, as defined in section 170(f)(11)(E)(i) and corresponding regulations, to its Form 1065 for the tax year ending December 31, 2018, in support of its donation of a fee simple interest to ACCP. The parties stipulated that petitioner is entitled to a noncash charitable contribution deduction for the donation of the fee simple interest to ACCP and the fair market value of the 377.74 acres of land in Madison County, Alabama, after being encumbered by the conservation easement is $640,000.  5 and would make a smart investment. When it purchased the Parent Parcel, DESE Properties was aware that there were rock formations on the land. DESE Properties used the Parent Parcel for hunting and recreational purposes. The property at issue (Property) is a rural, undeveloped 377.74- acre parcel that is a portion of the Parent Parcel. It has a rolling to steep topography, and the entire Property is wooded with several visible rock outcroppings. This type of property is often referred to as a greenfield site, which is undeveloped land that likely has minerals, but will require permitting, extensive land clearing, and infrastructure development before it becomes an operating quarry. The Property’s street address is in Huntsville, Alabama, but it is not within the city limits. It is in an unincorporated area, and it is not subject to any zoning restrictions. The Property is in a mixed-use neighborhood consisting of vacant timber tracts, recreational tracts, agricultural tracts, and some rural residential homes. As shown below, the Property is in the southeast region of the Huntsville Metropolitan Statistical Area (MSA). It is approximately 19 road miles from downtown Huntsville, the largest city in the Huntsville MSA. The Huntsville MSA has experienced significant growth in the last several decades. According to the 2020 census, Madison County had a population of 388,153 people, of whom 215,043 resided in Huntsville.  6 B. Limestone Mining in Alabama As of December 27, 2018, there were 18 active limestone quarries within 50 miles of the Property, 8 of which were within 25 miles of the Property. As of December 31, 2018, Vulcan Materials Co. (Vulcan) operated at least six limestone quarries in Northern Alabama counties, including Madison, Morgan, Jackson, and Dekalb. Vulcan is the largest producer of construction aggregates in the United States. Two of Vulcan’s limestone quarries are in Madison County: the Huntsville Quarry, which has operated continuously for many years, and the Gurley Quarry, which has operated continuously since it was opened in February 2013. Of the crushed stone sold or used by Alabama producers in 2018, 86% was limestone and 14% was other types of aggregate such as dolomite, granite, and sandstone. The Alabama Department of Transportation (ALDOT) provides specifications to determine the quality of quarried materials for construction aggregate. Limestone aggregate has a low value-to-weight ratio because it is costly to transport over distances on account of its weight and bulkiness relative  7 to its economic value. Aggregates are generally produced close to where they are consumed because transportation costs play a significant role in the delivered price of aggregates. II. Individuals and Entities Involved A. OSI and OSI-Affiliated Entities Matthew Ornstein and Frank A. Schuler IV are promoters of SCEs. 3 As part of their business ventures, Messrs. Ornstein and Schuler created or directed the creation of many LLCs for which, for the purposes of this case, the parties agreed to use the term “OSI-affiliated entities.” Ornstein-Schuler Investments, LLC (OSI), was an OSI- affiliated entity that Messrs. Ornstein and Schuler used to effect their SCE transactions during the relevant period. Matthew Kaynard is an attorney with an LL.M. in taxation who served as the chief operating officer and general counsel of OSI in 2017 and 2018. Ryan Ellison was a vice president at OSI in 2017 and 2018. Herbert Brown is an attorney with an LL.M. in taxation who served as the assistant general counsel and director of security and tax compliance for OSI in 2017, 2018, and 2019. For the purpose of this Opinion the Court will refer to Messrs. Ornstein and Schuler, OSI-affiliated entities, and relevant employees of Ornstein-Schuler Investments, LLC, collectively as OSI unless it is necessary to specifically reference a particular entity or individual. B. Piton Holdings, LLC (Petitioner) Petitioner was formed on May 10, 2017, as an Alabama LLC and is the property-owning entity (PropCo) in this transaction. As of December 27, 2018, petitioner’s managers had no experience operating a limestone quarry. Additionally, petitioner had no employees with mining experience and had not hired a third-party company to assist in the management of a limestone quarry on the Property. 3 “Promoter” is sometimes viewed as a loaded term in the tax world because of the penalty imposed by section 6700(a) for “[p]romoting abusive tax shelters.” In this Opinion we use the term “promoter” in its ordinary sense, making no determination as to whether the activities of Messrs. Ornstein and Schuler, or of the entities they managed, would subject them to a civil penalty under section 6700(a), a question that is not before us.  8 C. Piton Group Piton Group, LLC (Piton Group), is an LLC that served as the investment company in this transaction, meaning it was the entity that was used to raise money from outside investors. D. 1908 Capital, LLC, and 1908 Capital PG Sean O’Toole and James Comerford formed 1908 Capital, LLC (1908 Capital), in 2017 “to facilitate economic development and smart conservation.” 1908 Capital’s role was to raise capital for the project. Messrs. O’Toole and Comerford created 1908 Capital PG, LLC (1908 Capital PG), to purchase membership interests in petitioner from OSI and then to serve as the manager for Piton Group and petitioner. Mr. Hall, petitioner’s partnership representative, worked for 1908 Capital in 2018. E. DESE Properties, LLC, and DESE Research, Inc. DESE Properties is a disregarded entity of DESE Research. DESE Properties’ business purpose is to hold recreational and investment properties. Buying and selling real estate was a hobby of Dr. Kirkpatrick’s. DESE Properties purchased or sold 18 properties between 2016 and 2018, 8 of which were in Madison County. III. Background of the Transaction A. DESE’s 2017 Discussions and Transaction with OSI On May 15, 2017, Mr. Ellison of OSI asked Bruce Berry, a real estate broker who did work on behalf of Dr. Kirkpatrick, to provide him with a list of information so that he could draft a purchase and sale agreement for property owned by Dr. Kirkpatrick. Mr. Berry provided him with information about the Parent Parcel, including that DESE Properties owned the land and that the purchase price was $2,200 per acre. On May 19, 2017, Mr. Ellison emailed Mr. Berry to inform him that OSI was interested in acquiring 289 acres of the Parent Parcel. On June 3, 2017, Mr. Kaynard outlined the anticipated structure of the acquisition of 371 acres of the Parent Parcel, instead of 289 acres, in an email to Mr. Ellison. In his email Mr. Kaynard explained the requirements for petitioner to be formed as a partnership and that the proposed structure would preserve the long-term holding period for the real estate at issue. On June 6, 2017, Mr. Ellison emailed Dr.  9 Kirkpatrick describing the proposed structure. Mr. Ellison explained that a second DESE entity must be formed so that petitioner could be formed as a partnership before Longleaf Ventures, LLC (Longleaf), an OSI-affiliated entity, acquired its interest in the partnership. On or about July 14, 2017, Mr. Ornstein, acting on behalf of Longleaf, and Dr. Kirkpatrick, acting on his own behalf and on behalf of DESE Research and DESE Properties, executed a Membership Interest Purchase and Sale Agreement (DESE MIPSA). The DESE MIPSA stated that DESE Research owned or would own by the time of closing a 99% interest in petitioner. The DESE MIPSA also stated that DESE Research would assign 98% of its membership interests in petitioner to Longleaf. In exchange for a 98% interest in petitioner, Longleaf agreed to pay $816,000 to DESE Research in two payments. The first payment was a refundable earnest money deposit of $25,000, and the second payment for the remainder of the purchase price would be paid at closing. The DESE MIPSA established a “Due Diligence Period” of 120 days during which Longleaf would have “the right to evaluate the Subject Property . . . including . . . surface and sub-surface mineral rights related to said real estate, and to engage the services of accountants, attorneys, appraisers, forestry consultants, surveyors, etc.” The DESE MIPSA was amended twice. It was first amended on October 31, 2017, when the due diligence period was extended from 120 days to 300 days. The second amendment to the DESE MIPSA, dated June 27, 2018, was made just before the closing of the transaction. The second amendment to the DESE MIPSA substituted the OSI-affiliated entity Natural Aggregates Partners, LLC (Natural Aggregates), for the OSI- affiliated entity Longleaf, substituted DESE Properties for DESE Research, increased the Property from a 371-acre parcel to a 377.74-acre parcel, and changed the anticipated ownership interests in petitioner. The DESE MIPSA provided that after the closing of the transaction DESE Research and Dr. Kirkpatrick would each retain a 1% interest in petitioner, while the second amendment provided that DESE Properties would retain a 1.5% interest and Dr. Kirkpatrick would retain a 0.5% interest. The DESE MIPSA provided that Longleaf would hold a 98% interest after the transaction’s close, while the second amendment provided that Natural Aggregates would hold that 98% interest after the transaction’s close.  10 B. ECS Report, S&ME Report, Blethen Report, and Appraisal While the discussions and first steps of the transaction between DESE Research and OSI were ongoing, various reports were completed. On or about August 2, 2017, Longleaf hired a third-party company, ECS Southeast (ECS), to prepare a Phase I Environmental Site Assessment Report for approximately 371 acres of land in Madison County, Alabama. On or about September 1, 2017, ECS provided Longleaf with a report entitled “Phase I Environmental Site Assessment Report, 371 Acres Madison County AL, Meeks Road, Huntsville, Madison County, Alabama 35803, ECS Project No. 49-4963-H, for Longleaf Ventures LLC.” On or about April 18, 2018, OSI hired S&ME Inc. (S&ME), a geotechnical, environmental, and construction services company, to drill two bore holes on the Property at locations OSI selected and develop a report (S&ME Report). The S&ME Report provides the results of laboratory tests that were performed on a composite sample of crushed stone taken from the two bore holes on the Property. According to the S&ME Report, “shale lenses were extracted” from the material before the remaining material was crushed into a composite sample and tested. ALDOT only allows a maximum of 2% composition of shale in coarse aggregate that is used in asphalt and cement mixes. OSI hired Marvin Blethen to “analyze the feasibility of investing in a mining operation for crushed stone with potential uses for construction aggregate, road base, stabilized base, general fill, subgrade stabilization and general construction material.” OSI provided Mr. Blethen a draft of the S&ME Report. Mr. Blethen prepared a June 26, 2018, report titled “Technical Due Diligence, Prefeasibility Study, Business Plan and Valuation, Piton Holdings LLC, Madison County, Alabama” (June Blethen Report). The June Blethen Report concluded the Property contains just under 89,750,000 tons of “Proven Mineral Resources” and that the Property’s highest and best use is as a for-profit limestone mine. On the basis of a discounted cashflow (DCF) analysis that used a 15-year period and a 12% discount rate, the June Blethen Report stated that a hypothetical limestone mine on the Property had a value of $42,258,000. The DCF analysis is based on the marketing and the selling of 400,000 tons of limestone into the market in year 1, 600,000 tons in year 2, and 900,000 tons in year 3, followed by a 3% increase in annual production for the next 12 years.  11 On June 20, 2018, OSI engaged Clayton Weibel from Weibel & Associates to prepare an appraisal of the Property. On or about June 21, 2018, Mr. Weibel provided OSI an appraisal report (June Appraisal) for the Property stating that the fair market value of the Property before the conservation easement was $42,190,000, the fair market value after the conservation easement was $565,000, and the fair market value of the conservation easement was $41,625,000. The June Appraisal relied on the June Blethen Report and the S&ME Report. C. Closing of the DESE MIPSA On June 25, 2018, Mr. Kaynard sent a letter to Dr. Kirkpatrick’s attorney explaining the final closing documents and “the order in which they should be executed.” With the letter he enclosed a real estate sales validation form dated June 27, 2018, listing the “Actual Value” of the Property as $816,000. Mr. Kaynard noted that the Initial Company Agreement of petitioner called for Dr. Kirkpatrick to contribute $4,100 cash capital. Mr. Kaynard stated in his letter that the final closing matter was that Dr. Kirkpatrick needed to write a personal check made payable to petitioner for $4,100 for a 0.5% ownership interest. Mr. Kaynard’s letter explained that this additional $4,100 would be wired back to or a check would be cut to Dr. Kirkpatrick at closing. Between June 27 and 29, 2018, Dr. Kirkpatrick signed the closing documents, including the Initial Company Agreement. DESE Properties contributed the Property for a 99.5% interest in petitioner, and Dr. Kirkpatrick contributed $4,100 for a 0.5% interest in petitioner. OSI’s final wire to the closing attorney was for $795,100, which, along with the $25,000 earnest money deposit, brought the total consideration exchanged to $820,100: $816,000 for 98% of the partnership interests and an additional $4,100 repaying Dr. Kirkpatrick’s capital contribution. The Assignment of Membership Interests that was executed at the same time reflects that Natural Aggregates paid DESE Properties $816,000 as consideration for 98% of the partnership interests in petitioner. This transfer and each subsequent transfer of a membership interest in petitioner was memorialized by a membership interest purchase and sale agreement. Additionally, with each transfer of a membership interest, petitioner’s company agreement was amended to reflect the admission of the new member. With respect to the admission of new members, each iteration of petitioner’s company agreement contained the following identical provision:  12 Except as provided in Section 8.4, each of the Members may make a Disposition of all or any portion of such Member's Membership Interest only with the prior written approval of the Manager and then only after complying with this Section 8.2. If any Member desires to sell all or any portion of his Membership Interest, the selling Member shall by Notice to the Manager offer to sell such interest to the Manager who shall have the right to purchase the entire offered interest. D. 1908 Capital’s Involvement and Syndication On April 27, 2018, Mr. Kaynard emailed Messrs. Comerford and O’Toole of 1908 Capital about the Piton Holdings project. Mr. Kaynard stated that “Marvin Blethen has estimated an appraisal value of $40- 45M for this project.” This email predates the S&ME Report, the June Blethen Report, and the June Appraisal. On June 29, 2018, OSI provided 1908 Capital with the June Appraisal. On July 23, 2018, OSI sent 1908 Capital a draft financial projection for Piton Group. The draft used the value of the conservation easement on the Property from the June Appraisal to estimate the potential tax deductions that could be sold to investors. The draft provided that the final amount 1908 Capital would pay OSI would be determined by how much capital was raised in Piton Group. If Piton Group raised the maximum amount of $8,900,000, OSI would sell 98% of its membership interests in petitioner to 1908 Capital PG for $4,945,906. The draft indicated that 1908 Capital’s fee would be 25% of the capital raised and the fee was projected to be $2,044,169. On or about August 7, 2018, OSI provided to 1908 Capital a draft of the Private Placement Memorandum (PPM) for Piton Group. OSI and 1908 Capital exchanged several copies of the PPM before it was finalized. The finalized PPM, dated September 17, 2018, informed investors that Piton Group anticipated purchasing up to a “97% member equity interest in Propco . . . pursuant to the Membership Interest Purchase Option Agreement.” It presented investors with four options for the Property: (1) develop the Property as a limestone quarry; (2) lease the Property to a third party that would operate a quarry on the Property; (3) conserve the Property; or (4) hold the Property for long-term appreciation and future sale.  13 The PPM represented to potential investors that developing the Property into a limestone quarry “could be a beneficial and profitable” investment but warned investors that this strategy involved significant risk because the development strategy involves “a highly complex, expensive, and potentially dangerous process of mining.” It included additional warnings that petitioner would likely need to engage in significant borrowing or raising of capital if the development option was chosen. The PPM also pointed out that because of the possibility of there being a conservation easement on the Property, “only potential [i]nvestors who are not focused on maximizing the potential cash return from an investment in the membership interest in the Company should consider subscribing.” Additionally, the PPM explained that the “placement of a conservation easement may create a charitable tax deduction for the members” of petitioner. 1908 Capital sent numerous marketing emails to potential investors related to its 2018 SCE projects, including Piton Group. Many of the emails to investors included documents that represented to investors that the projected internal rate of return for the development option was “35%/15 years.” The same document also stated that the “Tax Incentive Option” would provide investors with a net tax benefit of 4.6:1, meaning that for every $1 contributed to Piton Group, the investor would receive a noncash charitable contribution deduction of approximately $4.60. 1908 Capital’s emails explicitly warned potential investors that “substantial additional investment would be required to undertake a mining operation.” IV. December Transfers of Membership Interests A. Early December Distribution According to Exhibit A of the Amended Company Agreement, petitioner had three members as of June 29, 2018. Natural Aggregates had a 98% interest. DESE Properties had a 1.5% interest. Dr. Kirkpatrick had a 0.5% interest. On December 3, 2018, Natural Aggregates distributed its 98% interest in petitioner to its partners, as follows: TOFT 49.995%, Province 49.995%, and Ornstein-Schuler LLC (OS LLC) 0.01%. Following this distribution Messrs. Ornstein and Schuler signed the First Amendment to the Amended and Restated Company Agreement of Piton Holdings, LLC.  14 B. 1908 MIPSA and Piton Group MIPSA On December 27, 2018, at 3:26 p.m. central time OSI received $4,945,906 from a bank account affiliated with 1908 Capital with a reference line “Purchase of OSI Membership Interest.” On December 28, 2018, at 3:23 p.m. central time 1908 Capital PG received a wire of $1,700,000 from the same bank account with a reference line stating “Purchase Membership Interest PG.” The same account wired $50,000 to 1908 Capital PG on January 9, 2019, at 3:31 p.m. central time with a reference line stating “Final MIPA2 Payment.” Piton Group agreed to purchase a 97% interest in petitioner from 1908 Capital PG. On its 2018 Form 8949, Sales and Other Dispositions of Capital Assets, 1908 Capital reported that it acquired “Piton Holdings LLC, 98 Units” on December 27, 2018, for $4,945,906 and sold its units on December 28, 2018, for $6,977,006. On January 3, 2019, Mr. Brown, an OSI attorney, emailed 1908 Capital the closing documents for 1908 Capital PG’s purchase of the membership interest from the three OSI-affiliated entities. The documents included (1) an undated Membership Interest Purchase and Sale Agreement between 1908 Capital PG, as purchaser, and OS LLC, TOFT, and Province, as sellers, (2) an undated Assignment of Membership Interest between TOFT, Province, and OS LLC and 1908 Capital PG, (3) an undated Second Amended and Restated Operating Agreement of Piton Holdings, LLC (Petitioner’s Second Amended Company Agreement), (4) an undated Membership Interest Purchase and Sale Agreement between 1908 Capital PG and Piton Group, (5) an undated Third Amended and Restated Operating Agreement of Piton Holdings, LLC, and (6) a Professional Services Agreement between 1908 Capital PG and Natural Aggregates. In the January 3 email Mr. Brown requested that 1908 Capital execute the documents attached to his email and scan copies back to him. In the email, he explained that the documents could be notarized in his office, and he instructed 1908 Capital not to date the documents because he “need[ed] to discuss dates with Matt K once he returns from vacation.”  15 1. The 1908 MIPSA On or after January 3, 2019, 1908 Capital PG, as purchaser, and OS LLC, TOFT, and Province, as sellers, executed the final Membership Interest Purchase and Sale Agreement with a stated effective date of December 19, 2018 (1908 MIPSA). In the 1908 MIPSA, TOFT, Province, and OS LLC purportedly agreed to sell to 1908 Capital PG an option to purchase between 95% and 98% of the membership interests in petitioner. The 1908 MIPSA states: The rights and obligations of the parties hereunder shall remain in full force and effect without regard to, and shall not be affected or impaired by, (i) any amendment or modification of or addition or supplement to the Company Agreement, [or] (ii) any action or inaction in respect of the Company Agreement, or any exercise or non-exercise of any right, remedy, power or privilege in respect of such document or this Agreement . . . . Further modification, amendment, or termination of the 1908 MIPSA could be accomplished only “by a written agreement between [1908 Capital PG] and [TOFT, Province, and OS LLC].” The 1908 MIPSA provided that the price for the 1908 purchase option was $50,468 per percentage of membership interest purchased. To exercise the purchase option, 1908 Capital PG was required to provide TOFT, Province, and OS LLC written notice of its election to exercise the option on or before December 27, 2018, and specify a date for closing. The 1908 MIPSA required 1908 Capital PG to satisfy two requirements at closing: (1) deliver the purchase price to the sellers, and (2) execute Petitioner’s Second Amended Company Agreement. Specifically, the 1908 MIPSA provided: Upon receipt of the Purchase Price, Sellers shall execute and deliver such documents, assignments, instruments and other items, and shall take such other action, as shall be necessary to transfer and assign the Company Interest to the Purchaser, including, but not limited to, executing and delivering the Second Amended and Restated Company Agreement.  16 On or after January 3, 2019, Mr. Comerford signed Petitioner’s Second Amended Company Agreement. Petitioner’s Second Amended Company Agreement purported to admit 1908 Capital PG as a member of petitioner with a 98% membership interest, having purchased all of TOFT, Province, and OS LLC’s interests. The preamble to the document contains a space to handwrite the effective date of the agreement, but it was left blank. The signature page of the document purports that it was notarized and executed on December 26, 2018. 2. The Piton Group MIPSA On or after January 3, 2019, Piton Group, as purchaser, and 1908 Capital PG, as seller, executed the final Membership Interest Purchase and Sale Agreement with a stated effective date of December 26, 2018 (Piton Group MIPSA). In the Piton Group MIPSA, Piton Group agreed to purchase from 1908 Capital PG a 97% interest in petitioner for $6,990,075. 4 The Piton Group MIPSA states the purchase was “subject to the payment of the Purchase Price to [1908 Capital PG].” On or after January 3, 2019, Mr. Comerford signed the Third Amended and Restated Company Agreement of Piton Holdings, LLC (Petitioner’s Third Amended Company Agreement), on behalf of 1908 Capital PG and Piton Group. The stated effective date of Petitioner’s Third Amended Company Agreement is December 26, 2018. Petitioner’s Third Amended Company Agreement purports to admit Piton Group as a new member with a 97% membership interest. V. Charitable Contribution and Petitioner’s Tax Return A. Charitable Contribution On December 27, 2018, at 3:03 p.m. central time, petitioner recorded a deed of conservation easement in favor of PCC with the Probate Judge of Madison County, Alabama. Two minutes later, at 3:05 p.m. central time, petitioner recorded a warranty deed conveying its fee simple interest in the Property to ACCP with the Madison County Probate Judge. 4 We acknowledge that the parties did not establish that Piton Group ever paid the full purchase price required under the Piton Group MIPSA for the 97% interest in petitioner. The parties do not dispute that Piton Group paid sufficient consideration for the 97% interest; therefore, we do not address this.  17 Petitioner claimed a $41,635,000 deduction for the donation of the conservation easement and a $565,000 deduction for the donation of the fee simple interest, for a total noncash charitable contribution deduction of $42,200,000. 5 Petitioner allocated the noncash charitable contributions as follows: Member Allocation Conservation Easement Fee Simple Percentage Donation Allocation Donation Allocation Piton Group 97% $40,385,950 $548,050 DESE Properties 1.5% 624,525 8,475 1908 Capital PG 1% 416,350 5,650 Dr. Kirkpatrick 0.5% 208,175 2,825 Petitioner did not allocate any of its noncash charitable contributions to Natural Aggregates, TOFT, Province, or OS LLC. B. Tax Return Appraisal Petitioner attached to its 2018 Form 1065 an appraisal (Return Appraisal) of the Property dated February 1, 2019, prepared by Mr. Weibel and Lucus M. Von Esh of Lucus Mason, Inc. The Return Appraisal concludes that the Property’s value before the conservation easement was $42,200,000, that the fair market value after the conservation easement was $565,000, and that the fair market value of the conservation easement is $41,635,000. The Return Appraisal also relies on the S&ME Report. Although the June Appraisal relies on the June Blethen Report, the Return Appraisal relies on a different report prepared by Mr. Blethen titled “Technical Due Diligence, Prefeasibility Study, Business Plan and Valuation, Piton Holdings LLC, Madison County, Alabama” that was dated December 1, 2018 (December Blethen Report). The December Blethen Report stated that a hypothetical mine on the Property had a value of $42,281,000 on the basis of a DCF analysis that was nearly identical to the DCF 5 The parties have stipulated that the after value of the Property is $640,000 and that petitioner is entitled to a noncash charitable contribution deduction of $640,000 for the donation of the fee simple interest.  18 analysis included in the June Blethen Report. The December Blethen Report similarly concluded that the Property contained nearly 89,750,000 tons of “Proven Mineral Resources” and that the Property’s “highest and best use at this time is as a for-profit limestone mine.” VI. Summary of Expert Testimony A. Petitioner’s Experts 1. Henry Fishkind Henry Fishkind works for Fishkind Litigation Services, a company that provides litigation support and expert analysis. He assists clients with evaluating market demand and pricing for mining operations such as Vulcan. We recognized Dr. Fishkind as an expert on aggregate economics and market forecasting. Dr. Fishkind’s report and testimony focused on the projected market demand for limestone for a hypothetical quarry operating on the Property. He concluded that there was significant excess (net) demand in 2017–18 averaging 3,976,668 tons per year that a quarry at the Property would be competitively positioned to serve. 2. John Joseph Howle Joseph Howle had a 38-year career in environmental compliance, including 29-plus years with Vulcan. We recognized Mr. Howle as an expert in permitting and environmental compliance for aggregate mining in Alabama. Mr. Howle was responsible for interacting with the Alabama Department of Environmental Management (ADEM), the regulatory agency that issues air and water permits in Alabama. Mr. Howle’s testimony focused on the permitting process for limestone mining in Alabama. Mr. Howle concluded that the ADEM review timeline for air and water permits is appro