The dispute centers on two easement deductions the agency rejected based on potential mining activity without adequate explanation, according to court filings.
An Alabama real estate developer has challenged the Internal Revenue Service's disallowance of two conservation easement deductions worth a combined $78 million, arguing the agency failed to adequately explain its reasoning.
The IRS rejected the deductions based on potential mining activity on the properties, according to court filings. The developer contends the agency did not provide sufficient justification for why that factor warranted disallowing the full value of the easements.
Conservation easement deductions have become a focus of IRS enforcement in recent years, with the agency scrutinizing valuations and the legitimacy of conservation purposes. Disputes often turn on appraisal methodology and whether the easement meaningfully restricts development or resource extraction.
The petitions were filed in tax court seeking to restore the $78 million in disallowed deductions. The cases are captioned under Hollow Oak and Singh Moore, according to Law360 court records.
The developer's challenge hinges on the adequacy of the IRS explanation rather than disputing the presence of mining potential. Tax court precedent requires the agency to articulate a clear rationale when disallowing deductions of this scale, particularly when property characteristics such as mineral rights are at issue.
The IRS has not yet filed a response to the petitions. The cases were docketed in September 2026, and no trial date has been set.
The Deployment Angle
Family Office Real Estate Daily Desk · our analysis, not the source's
Family offices holding conservation easements or considering syndicated easement transactions should treat this case as a signal to revisit appraisal documentation. If the IRS prevails on a minimal-explanation standard, audit risk rises. If the court sides with the developer and demands more rigorous agency justification, it creates a defensive template for future disputes.
The $78 million figure suggests these were large-acreage donations, likely generating deductions in the range of three to five times the donor's basis. Family offices that participated in similar structures between 2020 and 2024 should confirm their files contain explicit language addressing subsurface rights, mineral reservations, and any potential for resource extraction. If those issues were noted but not quantified in the appraisal, the risk of partial or full disallowance climbs.
Direct ownership of conservation-burdened land remains viable for families with multi-generational holding horizons, but syndicated easement funds—where a promoter aggregates investor capital to acquire and donate land—now carry execution risk that many sponsors underpriced. Any family office with an open position in such a fund should request copies of the appraisal and the IRS Form 8283, and should model a scenario in which the deduction is reduced or clawed back. The after-tax return may no longer justify the illiquidity.
For new easement strategies, the deployment lens shifts from tax arbitrage to genuine conservation intent paired with modest tax recovery. If a family controls land it intends to hold indefinitely and would restrict development regardless of tax treatment, an easement remains a sound estate-planning tool. If the primary motive is the deduction, this case suggests the IRS will continue to challenge aggressively, and the burden of documentation has risen materially.
