Lontrac Enterprises, LLC, Lontrac Investors, LLC, Tax Matters Partner

United States Tax Court T.C. Memo. 2026-108 LONTRAC ENTERPRISES, LLC, LONTRAC INVESTORS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent __________ Docket No. 272-18. Filed October 22, 2026. __________ Ryan C. Pulver, for petitioner. Candace M. Williams, Ashley Vaughan Targac, Nicole M. Adibi, Caroline L. Sison, Matthew P. Lane, Mariam G. Abdelmalak, and John T. Arthur, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION URDA, Chief Judge: In a situation resembling the movie Groundhog Day, we once again consider a syndicated conservation easement transaction featuring the same old moves: Investors paid into a partnership for the promise of tax benefits exceeding three times each dollar invested; the partnership granted a conservation easement to a land trust and claimed a cartoonish charitable contribution deduction under section 170; 1 and the promoters of the easement strategy pocketed millions of dollars in fees. This case stands apart only for the sheer audacity of the numbers involved—the partnership here claimed a 1 Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C. or 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. Served 10/22/26  2 [*2] deduction of $74.5 million for an easement (i.e., a restriction on use) on property that had been sitting on the market for years, failing to find a buyer willing to pay $2.9 million. The stratospheric number was based on the claim that the property was suddenly very valuable as a mine although the rocks underlying the purported mining strategy were visible to the naked eye and the area was well mapped by the U.S. Geological Survey (USGS). Of course, the idea of mining was chimerical, simply a way to get at a wholly unmerited tax deduction. The Internal Revenue Service (IRS) disallowed the deduction and asserted a 40% penalty for gross valuation misstatement under section 6662(h). For the reasons explained below, we find that the value of the easement was $500,000, and the deduction is limited to that amount. We further find that the value of the easement was grossly overstated such that the 40% penalty applies. FINDINGS OF FACT The following facts are derived from the pleadings, stipulations of facts with attached exhibits, and the evidence admitted at trial. Lontrac Enterprises, LLC (Lontrac), is a Georgia limited liability company classified as a TEFRA 2 partnership at all relevant times. Lontrac Investors, LLC (Investors), is Lontrac’s tax matters partner. Both entities had their principal places of business in Georgia when the petition was filed. I. The Lontrac Property Lon Dillard is a lifelong resident of Blairsville, Georgia, who has been involved in a variety of businesses since the late 1990s, including the installation of geothermal heating and cooling systems, management of water systems, and drilling water wells. Acting through a corporation they owned, Mr. Dillard and his wife Tracy bought in 2006 a 309.6-acre parcel of land in Polk County, Tennessee, very close to the Tennessee-North Carolina border (Lontrac property). The Dillards paid $1.3 million for the Lontrac property, using $50,000 of their own funds and borrowing the remaining $1.25 million from a bank. The bank loan was secured by the property, and the Dillards personally guaranteed the debt. 2 Before its repeal, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, §§ 401–407, 96 Stat. 324, 648–71, governed the tax treatment and audit procedures for many partnerships, including Lontrac.  3 [*3] The Lontrac property was vacant mountainous land used primarily for recreational purposes. The property is surrounded by national forest and contains numerous streams and water features. Most prominently, it features about 1,900 feet of frontage on the Hiwassee River, which is classified as “exceptional Tennessee waters.” The Shadwick Branch, which also crosses through the Lontrac property, has received the same designation. A scenic tourist railroad, called the Hiwassee River Rail Adventure, runs through the Lontrac property. The railroad line, which is not a common carrier, 3 was built in 1890 and is owned by the Tennessee Overhill Heritage Association. A main attraction of the tourist experience is the Hiwassee Loop, where the railroad tracks cross over themselves as they spiral up a mountain. Only six such loops are found in North America, with the Hiwassee Loop, which begins on the Lontrac property, the only one east of the Mississippi River. According to Mr. Dillard, the owners of the railroad “really didn’t want the property developed.” In a September 2014 letter to Mr. Dillard, the executive director of the Heritage Association, described operations on the railroad as follows: [The Heritage Association] has an operating agreement in place with Tennessee Valley Railroad Museum (TVRM) in Chattanooga to operate trains and maintain the lines. There is a regular season for passenger trains and freight is hauled on the line as needed. TVRM owns and leases the rolling stock for both passenger and freight service. Freight shipments are transported to the CSX rail yard at Etowah, Tennessee where CSX transfers the trains on their lines to complete shipments. The following aerial map shows the Lontrac property (outlined in red), bordered by the Hiwassee River (in black) and the location of the railroad (in yellow): 3 A common carrier is defined as a “commercial enterprise that holds itself out to the public as offering to transport freight or passengers for a fee.” Carrier, Black’s Law Dictionary (12th ed. 2024). “A common carrier is generally required by law to transport freight or passengers without refusal if the approved fare or charge is paid.” Id.  4 [*4] When the Dillards bought the Lontrac property in 2006, their intention was to hold it for a year and then perhaps develop it or divide and sell it off. After the “Great Recession” hit, however, land prices dropped and development opportunities dried up. The Dillards, who had personally guaranteed the purchase loan, were struggling to make ends meet. In 2008 the Dillards listed the Lontrac property for sale for $4.68 million. Six months later, they lowered the price to $3.9 million, and in 2009, they dropped it to $2,964,000. The property remained on the market at that price for the next five years (through September 2014) with no takers. In December 2012 the Dillards formed Lontrac as a holding company for the property. They then transferred the Lontrac property to Lontrac for $10. At that time, Lontrac entered into an agreement  5 [*5] with the Dillards clarifying that it was not assuming the purchase loan and would not be responsible for paying the debt. II. Development of the Conservation Easement Transaction A. Exploration of Alternatives With no buyers interested in the Lontrac property, Mr. Dillard began to think up wheezes to recoup his investment or at least to cut his losses. In late 2012 or early 2013 he discussed his need to “do something” with the Lontrac property with Curtis Colwell, a local quarry operator with whom he had done business. Mr. Dillard was familiar with the mining industry as he owned a well-drilling company. When Mr. Dillard apprised Mr. Colwell of the presence of rock on the property, Mr. Colwell raised the possibility of using the property as a quarry or granting a conservation easement. In January 2013 Mr. Dillard’s well-drilling company drilled five test holes on the Lontrac property, ranging in depth from 31 feet to 73 feet. At that time, he was (unsuccessfully) searching for precious metals. Later in 2013 Mr. Dillard contacted Joel Warner, a geologist whom he knew, and asked him to view the previously drilled holes to provide information about mineable rock. As recorded in an “Executive Summary” to a report that Mr. Warner prepared in November 2013, the inquiry was related to a proposed easement on the Lontrac property. Mr. Warner toured the Lontrac property a few times and observed a type of hard rock known as metagreywacke in areas that had been blasted to make way for the railroad. He collected rock chip samples from exposed outcroppings, two of which were taken for abrasion testing. On the basis of the testing results, Mr. Warner concluded in November 2013 that “the quality of the rock (metagreywacke) proved to be very hard.” As Mr. Warner noted, however, “[c]ontinuous cores would have to be taken to verify the consistency and quality of the rock.” In 2014 Mr. Dillard reached out to Jim Adams, a lawyer that he knew. Mr. Adams, who was experienced in conservation easements, took the lead in turning Mr. Dillard’s easement dreams into reality.  6 [*6] B. Once Again, with Feeling Mr. Adams followed the same strategy seen over and over in the conservation easement context, forming Investors in 2014 with Mr. Adams and the Dillards as the original owners. Investors was meant to serve as a vehicle to recruit capital from high-income individuals interested in obtaining pro rata shares of the deduction generated from a donation of an easement over the Lontrac property to a qualified charitable organization. The capital raised would be used by Investors to buy a predominant interest in Lontrac and to pay fees to Messrs. Adams and Dillard. On September 30, 2014, Investors entered into a purchase agreement with Lontrac that allowed Investors to either (i) purchase the Lontrac property for $1 million or (ii) purchase a 98 to 99% interest in Lontrac based upon the $1 million price. C. Private Placement Memorandum Next, Mr. Adams worked with the law firm Morris, Manning & Martin, LLP (Morris Manning), to prepare a private placement memorandum for Investors. The November 2014 memorandum sought to raise $8.8 million in capital, which would translate to a 95% ownership stake in Investors, with Messrs. Adams and Dillard (the original owners) retaining the remainder of the interest. The memorandum anticipated purchasing a 99% interest in Lontrac for $990,000, with an eye to “mine,” “hold,” or “potentially conserve” the Lontrac property. As to the last of these options, the memorandum touted that “the value of the conservation deduction under consideration is in excess of $49 million,” with a table of projections increasing that number to $63.5 million. According to the calculations in the memorandum, for every $200,000 put into Investors, an investor would receive $610,791 in estimated tax benefits (on the basis of an assumed 45% total federal and state tax rate), an estimated return exceeding 305%. 4 According to the memorandum, the existing members of Lontrac, i.e., the Dillards, would use a portion of the $990,000 received from 4 Partnerships do not pay tax at the partnership level and, instead, their income, deductions, and other tax items flow through to their partners. See I.R.C. §§ 701 and 702. Thus, a conservation easement deduction by Lontrac would flow to Investors, and thence to its members.  7 [*7] Investors to satisfy the debt on the Lontrac property. The bulk of the remainder was destined for the pockets of Mr. Adams and the Dillards: (1) $5.7 million going to redeem the shares in Investors held by Mr. Adams and the Dillards; (2) about $1.4 million to Mr. Adams and Mr. Dillard as various management and advisory fees; and (3) $675,000 for legal, accounting, and appraisal services. D. Selecting an Appraisal Mr. Adams and Mr. Dillard thereafter recruited appraisers to value the conservation easement at the center of their plans. They solicited appraisals for a conservation easement covering approximately 288.8 acres of the Lontrac property from three individuals, Dale Hayter, Ronald Foster, and Duane Miller. 5 To start the appraisers on their way, Mr. Adams provided a “Mining Operations Feasibility & Market Analysis Report” prepared by Mr. Colwell, a “Hard Rock Quarry Potential Reserves” report from Mr. Warner, and a copy of the private placement memorandum. The three appraisers each determined pre-easement land values exceeding $60 million for the Lontrac property, with Mr. Hayter appraising the property at $61.5 million, Mr. Foster at $69,868,559, and Mr. Miller at $75 million. Lontrac ultimately chose to use Mr. Miller’s appraisal to support its claimed deduction, so we will focus on his work. Mr. Miller was familiar with the Lontrac property, having appraised it in both 2008 and 2010 for the bank that had financed the Dillards’ purchase. In 2008 Mr. Miller had opined that the highest and best use of the property was “holding for future residential single family development,” determining a value of $2,030,000. In 2010 he concluded that the value of the property had dropped to $1.56 million. The third time turned out to be the charm, with Mr. Miller deciding that the Lontrac property was worth $75 million given its potential use as a mine. As seen in an October 2014 email exchange, Mr. Miller did not pull the idea of mining from the ether but rather from an instruction given by Mr. Adams to “proceed with the preliminary 5 There seemed to be some uncertainty regarding the total acreage of the Lontrac property, as seen in the multiple drafts of Mr. Miller’s appraisal and comments from Lontrac’s attorneys. Although Mr. Hayter and Mr. Miller (in his final report) appraised a conservation easement of approximately 288.8 acres, Mr. Foster appraised a slightly bigger proposed conservation easement of 291.698 acres, ostensibly because of this confusion.  8 [*8] valuation of a mining operation . . . on the subject property.” Mr. Miller was apparently aware that Mr. Colwell had worked on a quarry proposal for the property and accordingly asked Mr. Adams to “[p]lease get me the Business Enterprise Work that Curtis has do[ne] on the subject as if it were a quarry. I will definitely need this for the Restricted Appraisal.” The next day, Mr. Adams forwarded Mr. Miller’s request to Mr. Dillard, writing: “We have got to get Curtis report in final form ASAP for a variety of reasons, including the message below.” Mr. Miller’s appraisal relied heavily on the reports of Mr. Colwell and Mr. Warner. Before describing those reports and Mr. Miller’s appraisal, we pause to note that Messrs. Miller and Colwell incorrectly assumed that granite was present on the Lontrac property, and they— and everyone who relied on their work—operated under the baseless assumption that the property could be used as a granite mine. As mentioned previously, Mr. Warner’s testing did not actually show granite, and Lontrac admits that Mr. Warner’s report does not state that he found granite on the property. Mr. Adams misunderstood Mr. Warner’s report, taking “metagreywacke” to be the same as granite. 1. Mr. Colwell’s Report Mr. Colwell’s report, finalized in October 2014, concluded that the Lontrac property was suitable for a granite quarry, which Mr. Colwell valued at over $66.5 million. He “determined, through talking with the appropriate government officials, that obtaining a mining permit for the granite mining operation on a near term basis is more likely than not and should not present a problem.” “The fact that the subject property is surrounded by national forest,” Mr. Colwell suggested, “eliminates the normal community objection to having a mining operation nearby.” Mr. Colwell concluded that the Lontrac property had “Reserves of Saleable Rock” of 77.6 million tons, assuming a quarry covering 125 acres with a depth of 150 feet and “shallow” overburden 6 of 30 to 50 feet. He opined that sales could include “all types of rock for construction 6 Overburden refers to weathered rock that has to be removed as waste before mining of underlying hard rock can begin.  9 [*9] including riprap, bases, drainage stone, paving stone, concrete stone, erosion stone,” and aggregate. 7 Mr. Colwell noted a general decline in aggregate sales, but he saw “indications that construction is beginning to witness a turn around with signs of increases in road, bridge, and dam projects.” On the basis of his internet research of projects planned by the Tennessee Department of Transportation (DOT) and his personal experience in the quarry business, he “expected sales for the Polk County Lontrac Quarry” to “initially be 950,000 tons and . . . increase to 1.5 million tons per year.” A Lontrac quarry would have “all the potential to absorb much of the markets encompassing an area of 75 miles,” including the cities of Knoxville and Cleveland, Tennessee. In particular, Mr. Colwell noted that a quarry operated by Vulcan Materials in Blairsville, Georgia, had received “a purchase order for 500,000 tons of riprap” 8 to be used at the Blue Ridge Dam, which he estimated is “approximately 35 miles south” of the Lontrac property. Mr. Colwell surmised that filling that order would have left Vulcan’s Blairsville quarry with insufficient capacity to serve existing customers, who would then have been forced to find new suppliers. Mr. Colwell suggested that a Lontrac quarry could also have supplied the riprap needed for the Blue Ridge Dam. And he identified railroad ballast as a potential market, writing that “granite is used exclusively for railroad ballast.” 9 Mr. Colwell also determined “that rail is available to transport the mining product to other markets needing granite,” referencing the “historical railroad” owned by the Heritage Association. He opined that the “rail line increases the serviceability to the mining industry and the sales of aggregate to markets that are normally cost prohibitive by truck.” 7 Aggregate, which features prominently in this case, refers to the combination of rock, sand, and gravel used for constructing roads, bridges, and buildings and for making concrete and asphalt, among other things. 8 “Riprap is a layer of large stones that protects soil from erosion in areas of high or concentrated flows.” See Env’t Prot. Agency, Stormwater Best Management Practice—Riprap (Dec. 2021), https://www.epa.gov/system/files/documents/2021- 11/bmp-riprap.pdf. 9 Railroad ballast is the layer of crushed stone that sits beneath and around railroad ties, forming the foundation that holds the track in place.  10 [*10] Mr. Colwell’s report included a discounted cashflow analysis that valued potential mining operations on the Lontrac property at $66,515,714. Mr. Colwell assumed gross revenue in the first year of operations of $14,725,000 (950,000 tons × $15.50 per ton). He then assumed that production would increase by 2% each year and that the sale price of aggregate would increase at the same annual rate. He set total costs at $6.50 per ton but did not separately itemize costs. In determining the present value of his projected future cashflows, Mr. Colwell used a discount rate of 15%. 2. Mr. Warner’s Report Mr. Warner’s report, prepared in October 2014 but revised several times thereafter, opined that the value of the Lontrac property, assuming 25 years of operating a granite/metagreywacke mine, was $70 million. Mr. Warner described the drilling that Mr. Dillard had undertaken in 2013, as well as the results of testing the rock chip samples that Mr. Warner had collected. Although Mr. Warner identified seven areas covering 110 acres of the Lontrac property as mineable, none of the drillholes were located within these areas. Mr. Warner determined “inferred reserves” of 47 million tons “based on 200 feet maximum depths” and opined that 950,000–1,000,000 tons per year could be produced. His report included the caveat that “[t]he term ‘inferred reserves’ is being used since no continuous cores have been taken. There is limited data for defining the extent and quality of the resource on this property, but geological field observations and topography are encouraging.” Mr. Warner relied on Mr. Colwell’s report for information about pricing and production cost. He noted that there was little competition, with the few nearby mines operating only a few days a week or occupying a small area. Like Mr. Colwell, he also assumed, “[b]ased upon conversations with the appropriate mining permitting authorities,” that the Lontrac property would be approved for mining. Despite the report’s confidence on this front, Mr. Warner was not able to obtain express support from the competent authorities. In November 2014 Mr. Warner wrote to the Tennessee Department of Environment and Conservation seeking a letter confirming that a quarry on the Lontrac property “would most likely be permitted.” An employee from the Division of Water Resources, Mining Section, refused the request shortly thereafter:  11 [*11] A review of our database shows that the Cumberland bean mussel (listed as endangered at both the state and federal level) occurs in this reach of the Hiwassee River. Also, both the hellbender and tangerine darter, found in this reach, are deemed in need of management. Two plant species (horse sugar—a species of special concern and Tennessee pondweed—listed as threatened by the state) are also found in this area. The response further stated that, “[i]n order to make a determination as to the likelihood that a mining operation could be permitted in this area, the division would have to have a specific proposal including siting, types of operation, areal extent, water treatment structures, and discharge points.” 3. Mr. Miller’s Appraisal Mr. Miller prepared multiple drafts of his appraisal starting in November 2014, ultimately determining that the pre-easement value of the Lontrac property was $75 million in an appraisal dated June 29, 2015. Consistent with his instructions, he opined that the highest and best use of the property would be a granite mine, relying on Messrs. Colwell’s and Warner’s analyses to conclude that granite mining was legally, physically, and financially feasible. Mr. Miller then employed a discounted cashflow analysis to reach the $75 million value for the Lontrac property, based on 25 years as a granite mine. Mr. Miller noted that the Lontrac property was “currently actively listed for sale in the local MLS[] in the amount of $2,964,000,” which reflected the property’s long-standing use “as recreational and timber land.” But he stated that this figure “was prior to the conclusion that the highest and best use for the subject property is granite mining.” Thus, he did not consider the active listing price to be relevant to the property’s pre-easement value. Mr. Miller also concluded that the Heritage Association’s railroad could be used to transport mined granite. He claimed to have spoken with the president of the Tennessee Valley Railroad Museum and the director of the Hamilton County Railroad Authority to confirm “the physical capacity of the tracks.” He therefore “assume[d] that the tracks including all bridges and overpasses are physically capable and structurally sound for the transport of the aggregate minerals from the subject proposed mine” and, further, that the railroad could transport  12 [*12] the volume of minerals “postulated in the discounted cash flow” method used in his valuation. Mr. Miller thought that, after the easement was granted, the highest and best use of the Lontrac property would be “recreation or timber management,” i.e., its existing use. Using the comparable sales approach, he determined that the value of the property after the easement was granted would be $493,000. Mr. Miller derived the value of the easement by subtracting the after-easement value from the before-easement value, i.e., $75 million minus $493,000. See Treas. Reg. § 1.170A-14(h)(3)(i) (providing for this method of valuing an easement when there is no record of comparable easement sales). He thus concluded that the value of the conservation easement was $74,507,000. 4. Retrofitting Mr. Warner’s Report The first draft of Mr. Miller’s appraisal was provided to Morris Manning in November 2014. An attorney from the law firm sent Mr. Adams an email listing a number of concerns. First and foremost, she noted that the “appraiser found an active listing for the subject . . . for around $3 million. This is problematic for the [original draft’s] before valuation of $67 million.” The attorney added that “[t]he appraiser’s before valuation relies heavily on the Colwell market analysis report,” but there were “several unaddressed issues with this report.” She specifically highlighted these points: (i) Mr. Colwell estimated demand largely based on Tennessee DOT projects, but “DOT has delayed $400 million worth of projects until 2016,” (ii) “Mr. Colwell uses limestone quarries to determine the value of granite,” yet, “[a]s he points out in his report, these are very different materials,” (iii) “Mr. Colwell estimates the quarry will mine 950,000–1.5 million tons per year, but does not provide support for whether this is feasible,” and (iv) “Mr. Colwell estimates that there are over 77 million tons of granite on the property, but Mr. Warner’s revised reserves report states there are only 47 million tons.” Mr. Adams shared the email (and a catty remark about the attorney’s attention to detail) with Mr. Dillard. Mr. Warner later revised his report to increase the “calculated reserves” from 47 million tons to over 79 million tons. Despite the purported increase of about 30 million tons of calculated reserves, Mr. Warner’s $70 million valuation nonetheless remained the same. To reach 79 million tons, Mr. Warner changed the “specific gravity” of the  13 [*13] rock to 2.62 and increased the density from 96 to 163 pounds/cubed feet. Mr. Warner deleted from the report his original statement that “[t]he specific gravity of rock samples was determined in the lab to be 2.77 and 2.75.” The new density number matched the number used by Mr. Colwell in his report. These were not the only significant changes to Mr. Warner’s report. In yet another iteration, Mr. Warner also cut the paragraph stating that “[t]he term ‘inferred reserves’ is being used since no continuous cores have been taken” and that “[t]here is limited data for defining the extent and quality of the resources on this property.” The Morris Manning attorney continued to raise concerns about Mr. Warner’s report, specifically the lack of support for Mr. Warner’s claim that a mine on the Lontrac property could produce one million tons a year. Mr. Dillard responded by email stating that this was not Mr. Warner’s “area of expertise” and that the “concerns are addressed” in Mr. Colwell’s report. E. Executing the Conservation Easement Plan During the months of October through December 2014, Messrs. Dillard and Adams put their scheme into motion. Deduction-hungry investors bought $8,800,100 of newly issued units in Investors, which then purchased a 99% interest in Lontrac for $990,000. The Dillards, in turn, used $750,000 of the $990,000 that they received from the sale to satisfy the debt that encumbered the Lontrac property. On December 29, 2014, Lontrac granted a conservation easement on 288.8 acres of the Lontrac property to the Foothills Land Conservancy. The easement deed states that the purpose of the easement is “to assure that the Property will be retained forever in its undeveloped, natural, scenic, forested and/or open land condition and to prevent any use of the Property that will impair or interfere with the Conservation Values of the Property.” The conservation purposes include preserving the property as “open space for the scenic enjoyment of the general public” and preserving a “natural habitat of fish, wildlife, plants or similar ecosystems.” The Commissioner does not dispute that the easement is a “qualified conservation contribution” under section 170(h).  14 [*14] III. Tax Reporting and IRS’s Adjustments On its partnership return for the taxable year ended December 31, 2014, Lontrac claimed a deduction of $74,507,000 for its donation of the easement. Lontrac attached to its return the appraisal prepared by Mr. Miller. The IRS selected the return for audit and assigned Revenue Agent Whit Tindall to the audit. He was supervised, first, by Janet Walsh, and then by Keith Garrison. On July 12, 2017, Mr. Garrison signed a Civil Penalty Approval Form, which approved the imposition of the following penalties: gross valuation misstatement, negligence, substantial understatement of income tax, and other applicable penalties under section 6662(b). On October 3, 2017, the IRS issued a notice of final partnership administrative adjustment (FPAA) to Investors, the tax matters partner of Lontrac. The FPAA disallowed Lontrac’s $74,507,000 deduction for the easement donation. It raised several technical challenges under section 170 that the Commissioner has since conceded. Regarding the value of the easement, the FPAA stated that “it has not been established that the value of the purported donation of a conservation easement is greater than 0.” Consistent with the Civil Penalty Approval Form, the FPAA also determined an accuracy-related penalty of 40% for a gross valuation misstatement and an alternative penalty of 20% for a substantial understatement of income tax, a substantial valuation misstatement, and/or negligence or disregard of rules and regulations. OPINION I. Burden of Proof Generally, the IRS’s adjustments in an FPAA are presumed correct, and the taxpayer bears the burden of proving them wrong. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Crescent Holdings, LLC v. Commissioner, 141 T.C. 477, 485 (2013). The Commissioner has the burden of proof with respect to “any new matter” not asserted in the FPAA. Rule 142(a). “[A] ‘new matter’ is one that reasonably would alter the evidence presented . . . .” Greenberg v. Commissioner, 10 F.4th 1136, 1172 (11th Cir. 2021) (alteration in original) (quoting Hurst v. Commissioner, 124 T.C. 16, 30 (2005)), aff’g T.C. Memo. 2018-74.  15 [*15] Section 7491 provides that the burden of proof on a factual issue may shift to the Commissioner if the taxpayer satisfies specified conditions. To trigger such a shift, a taxpayer must have “introduce[d] credible evidence with respect to [that] factual issue,” I.R.C. § 7491(a)(1), and must have “complied with the requirements under this title to substantiate any item,” I.R.C. § 7491(a)(2)(A), among other requirements. Although the parties raise arguments regarding the allocation of the burden on various points, the resolution of the issues in this case does not turn on which party bears the burden of proof. When each party has satisfied its burden of production, then the party supported by the weight of the evidence will prevail, and a shift in the burden of proof has real significance only in the event of an evidentiary tie. See Knudsen v. Commissioner, 131 T.C. 185, 189 (2008), supplementing T.C. Memo. 2007-340. We do not see an evidentiary tie in this case and are able to resolve the issues on the preponderance of the evidence. See id.; Schank v. Commissioner, T.C. Memo. 2015-235, at *16. II. Deduction for a Qualified Conservation Contribution A. In General Section 170(a) allows a deduction for a charitable contribution made within a taxable year. If the taxpayer makes a gift of property other than money, the amount of the contribution is generally equal to the fair market value of the property at the time of the gift. See Treas. Reg. § 1.170A-1(c)(1); see also TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th 1354, 1369 (11th Cir. 2021). As a general rule, no deduction is allowed for a contribution of less than a donor’s entire interest in property. I.R.C. § 170(f)(3)(A). Section 170(f)(3)(B)(iii) excepts from this broad prohibition a deduction for a contribution of a partial interest in property that constitutes a “qualified conservation contribution.” A “qualified conservation contribution” is defined as a contribution made (1) of a qualified real property interest, (2) to a qualified organization, (3) exclusively for conservation purposes. I.R.C. § 170(h)(1). Section 170(f)(11)(D) and (E) further provides that a charitable contribution deduction exceeding $500,000 must be accompanied by, inter alia, a qualified appraisal by a qualified appraiser. The Code defines both terms. A “qualified appraisal” is one that (1) meets requirements set forth by “regulations or other guidance prescribed by  16 [*16] the Secretary” and (2) “is conducted by a qualified appraiser in accordance with generally accepted appraisal standards and any regulations or other guidance prescribed.” I.R.C. § 170(f)(11)(E)(i). The term “qualified appraiser” means an individual who, inter alia, “meets such other requirements as may be prescribed by the Secretary in regulations or other guidance.” I.R.C. § 170(f)(11)(E)(ii)(III). B. Qualified Appraiser Issue Lontrac attached to its 2014 return the appraisal of Mr. Miller. The Commissioner argues that Mr. Miller was not a qualified appraiser based on an exception contained in Treasury Regulation § 1.170A- 13(c)(5)(ii). This exception provides that an appraiser is not qualified “if the donor [here, Lontrac] had knowledge of facts that would cause a reasonable person to expect the appraiser falsely to overstate the value of the donated property.” Id. The exception includes as an example the instance where “the donor and the appraiser make an agreement concerning the amount at which the property will be valued and the donor knows that such amount exceeds the fair market value of the property.” Id. The regulation focuses on a donor’s knowledge of facts about the appraiser. Paul-Adams Quarry Tr., LLC v. Commissioner, T.C. Memo. 2025-112, at *36. By using the phrase “falsely to overstate,” the regulation requires more than just evidence that the donor should have known that the appraiser grossly overstated the value of the property. For example, in Kaufman v. Commissioner, T.C. Memo. 2014-52, at *70– 71, supplementing 136 T.C. 294 (2011) and 134 T.C. 182 (2010), aff’d, 784 F.3d 56 (1st Cir. 2015), we interpreted the phrase “falsely to overstate” as “intended to convey a sense of collusion and deception as to the value of the property.” See also N. Donald LA Prop., LLC v. Commissioner, T.C. Memo. 2026-19, at *39. Thus, “the appraiser does not become disqualified simply because (1) the appraiser incompetently or carelessly overstated the value, and/or (2) the donor knew that the appraiser overstated the value, and/or (3) the donor knew facts about the property that caused the value to be overstated.” Seabrook Prop., LLC v. Commissioner, T.C. Memo. 2025-6, at *33. The donor in this case was Lontrac. In gauging its “knowledge,” we look to the knowledge of the persons with ultimate authority to manage the partnership, i.e., Messrs. Adams and Dillard. See, e.g., Ranch Springs, LLC v. Commissioner, 164 T.C. 93, 126 (2025); Paul- Adams Quarry, T.C. Memo. 2025-112, at *36.  17 [*17] 1. Mr. Miller’s Refusal to Testify In support of his argument that Mr. Miller was not a qualified appraiser, the Commissioner relies on Mr. Miller’s invocation of his Fifth Amendment right against self-incrimination at trial. The Commissioner urges us to draw a negative inference from Mr. Miller’s refusal to testify and thereby find that he colluded with Mr. Adams to falsely overstate the value of the easement. We decline to do so. In determining whether to draw a negative inference from the invocation of the Fifth Amendment to the U.S. Constitution, the U.S. Court of Appeals for the Eleventh Circuit, to which an appeal of this case ordinarily would lie, see I.R.C. § 7482(b)(1), has adopted the standard set forth in LiButti v. United States, 107 F.3d 110 (2d Cir. 1997). See Coquina Invs. v. TD Bank, N.A., 760 F.3d 1300, 1310–11 (11th Cir. 2014); see also Markell Co. v. Commissioner, T.C. Memo. 2014-86, at *23–24. In LiButti, 107 F.3d at 124, the U.S. Court of Appeals for the Second Circuit stated that “the overarching concern is fundamentally whether the adverse inference is trustworthy under all of the circumstances.” The Second Circuit identified the following four nonexclusive factors to be taken into account: (1) “the nature of the relevant relationships”; (2) “the degree of control of the party over the non-party witness”; (3) “the compatibility of the interests of the party and non-party witness in the outcome of the litigation”; and (4) “the role of the non-party witness in the litigation.” Id. at 123–24 (capitalization altered). In applying LiButti, the Eleventh Circuit has emphasized that “the admissibility of a nonparty’s invocation of the Fifth Amendment privilege and the concomitant drawing of adverse inferences should be considered by courts on a case-by-case basis,” and that “LiButti’s non- exclusive factors should be applied flexibly.” Coquina Invs., 760 F.3d at 1311. At the end of the day, the decision whether to draw an adverse inference in a particular case is confided to a trial court’s discretion. See id.; Gannett v. Carp (In re Carp), 340 F.3d 15, 23 (1st Cir. 2003) (“While the law does not forbid adverse inferences against civil litigants who refuse to testify on Fifth Amendment grounds, it does not mandate such inferences. When all is said and done, the trial court has discretion over whether a negative inference is an appropriate response to the invocation of the Fifth Amendment in a particular civil case.” (citation omitted)).  18 [*18] Although the Commissioner’s case is not without some appeal, we decline to draw an adverse inference here. In the Commissioner’s favor, we see alignment at the time of the transaction between Mr. Miller’s interest and Lontrac’s interest in having his valuation vindicated, a key point in this case. This consideration, however, strikes us as too thin a reed on which to base a negative inference. To the extent that alignment existed at one point, it has long since ceased: Lontrac would plainly prefer Mr. Miller to defend