Lontrac Enterprises, a Georgia‑based partnership, bought an interest in a 310‑acre tract in Grundy County, Tennessee, in 2014. The land had been owned by the Dillard family since 2006, who listed it for sale at $2.9 million but never found a buyer. In December 2014, Lontrac granted a perpetual conservation easement over 288.8 acres to the Foothills Land Conservancy, touting a lucrative mining plan that never materialized.
On its federal tax returns, Lontrac claimed a $74.5 million charitable contribution deduction, arguing the easement’s value was tied to a proposed limestone mine. Investors bought a 95% stake for $8.8 million, expecting tax savings several times the cash invested. The partnership’s appraisal relied on speculative models and unverified engineering studies.
Chief Judge David Urda dismissed the claim, noting the land’s market value never exceeded $2.9 million and that the supposed mining plan was unsubstantiated. The court applied IRS valuation methods, concluding the easement was worth no more than $500,000. The overstatement exceeded the 200% threshold for a gross valuation misstatement under IRC §6662(h), leaving the 40% penalty intact.
This decision joins a series of Tax Court rulings that strike down inflated conservation easement deals across the country. The IRS has increasingly targeted such schemes, where developers sell rural land, impose development limits, and inflate appraisals to generate massive tax write‑offs for high‑net‑worth investors. Lontrac’s case underscores the judiciary’s willingness to enforce the statutory limits on charitable deductions.
For the Dillard family, the ruling reaffirms that the land’s true value remains modest, but the local community still grapples with the prospect of a dormant mining operation that could have altered the region’s landscape. The Court’s decision signals to investors that speculative valuations will not be tolerated, tightening the regulatory environment for future conservation easement transactions.