No, I’m not reporting on highly-publicized trials involving political figures. Today we get to the nitty-gritty, sand-and-gravel mining non-operations of Excelsior Aggregates, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, et al., T. C. Memo. 2024-60, filed 5/30/24.

Dixieland Boondockery, of course, but here we have donations of the fee in the same year as deduction claimed, not merely an easement, so Judge Albert G. (“Scholar Al”) Lauber is able to adopt “(A) less nuanced analysis,” T. C. Memo. 2024-60, at p. 5, as the 501(c)(3) got the whole enchilada. 

To spare you suspense, in all three (count ’em, three) of these consolidated cases (by which the others in this 14-ring circus agreed to be bound), the appraisals were prepared by CW. But Judge Scholar Al had to try these cases in part because CW was unavailable. CW remains unavailable, because “the parties informed the Court that, if Mr. CW were called as a witness, he ‘is currently expected to invoke his Fifth Amendment privilege in these consolidated cases with respect to all matters.’ In a joint status report filed April 4, 2024, the parties represented that, ‘absent a grant of immunity, Mr. CW remains unavailable to testify.'” T. C. Memo. 2024-60, at p.4, footnote 4. (Name omitted). 

And the rest of the Big Scambies’ witnesses have a few wee problems.

“Some of petitioner’s fact witnesses were important players in the ‘syndicated conservation easement space,’ including the promoters who organized the transactions and helped market the deals to investors. Other witnesses had invested in easement deals or acted as professional advisers to the promoters. Many of these witnesses had a direct or indirect stake in the outcome of these cases. While generally showing good recall of many facts from the [relevant] period, they sometimes expressed inability to recall certain facts about matters that might be regarded as unhelpful to petitioner’s position. Because of these witnesses’ interest in the outcome and selective inability to recall pertinent facts, the Court has been required to make credibility determinations.” T. C. Memo. 2024-60, at pp. 5-6. (Footnote omitted, but it says that since the word “promoter” evokes Section 6700(a) dodgeflogger chops, Judge Scholar Al makes no determination thereof, as that isn’t before the Court).

If you’re interested in how to set up and flog a conservation easement dodge on Dixieland Boondocks, read T. C. Memo. 2024-60 from page 6 through page 16.

Then read this gem of trial testimony from a true promoter, a prime example of the mach gresser, mach veyniger school, not your father’s MAI.

“When asked at trial how he could have posited in advance a deduction-to-investment ratio of $4.389 to $1, before any appraisals had been performed, Mr. S said that appraisals were basically irrelevant to the tax write-off they were offering. The promised ratio of 4.389 to 1, he explained, was driven by ‘the market,’ that is, by the magnitude of the tax deductions being offered by other promoters of conservation easements.” T. C. Memo. 2024-60, at pp. 15-16. (Name omitted). And to get their numbers, the land would have to yield sand and gravel equal to the State’s entire production, so they subdivided the land and sold pieces to different syndicates of fewer sophisticates so as to conceal that their numbers were dodgy, duck SEC registration airspace, and make participation “more affordable.” T. C. Memo. 2024-60, at pp. 16-17.

So what the promoters bought for $9.5 million they claim was worth $177 million 13 months later. Yet CW’s numbers came out $4 million better.

IRS wheels out its experts. I won’t bore you with boreholes, burden you with overburden, discounted cash flow, preponderance-vs-BoP, willing buyer willing-seller, and the rest. And the claim that subdividing increased value, which might be true for residential development, is sunk by the above-referred-to trial testimony. The old-time Dixie mining fraternity testified this was true boondocks.

One of the Big Scambies’ experts did get the FMV of one property higher than IRS’ expert, so they get that one.

A colleague was one of counsel to the petitioners. Better luck next time.