A $23 million tax deduction claimed by Savannah Shoals LLC for a conservation easement donation is under fire as the U.S. government pushes the Eleventh Circuit to uphold a lower court ruling that slashed the deduction to just $480,000.

At the heart of the dispute is whether the 103-acre Georgia property was truly suited for an aggregate quarry, as the partnership claimed, or if the land’s best use was for residential development. The government argues that Savannah Shoals failed to prove market demand for a quarry, rendering its high-value deduction unjustified.

Savannah Shoals’ Quarry Vision Clashes With Reality

According to the IRS and the U.S. Department of Justice, Savannah Shoals miscalculated its valuation by ignoring a fundamental question: Was there even a need for another quarry in the area?

“The partnership insisted on calculating the quarry’s potential profits but failed to consider whether the market even demanded one,” the government stated in its Friday brief.

The U.S. Tax Court previously ruled that there was no substantial demand for an aggregate quarry in 2017, the year Savannah Shoals donated the land to the Southeast Regional Land Conservancy Inc.. The government’s findings pointed to a saturated market, citing geological surveys and existing quarries better positioned near transportation hubs and larger populations.

Furthermore, the cost of transporting aggregate meant that any new quarry would have to rely on a local market within 25 miles—a region described as slow-growing with limited demand. Based on national aggregate consumption rates, the IRS estimated that the proposed quarry’s annual sales would max out at 250,000 tons—a far cry from the numbers Savannah Shoals projected.

IRS Expert Finds Quarry Would Have Lost Millions

The government brought in an IRS valuation expert who, using Savannah Shoals’ own cost estimates, concluded that the quarry’s value was a staggering -$5.1 million. Even if a quarry had been viable, the government said, the partnership’s valuation was wildly inflated.

“No comparable properties in the region were selling anywhere near the $224,000 per acre claimed by Savannah Shoals,” the filing stated.

The IRS also noted a major red flag—the property had been purchased in 2007 for just $12,000 per acre, and similar land in the area was now selling for less than $5,000 per acre. Even designated mining tracts in the region topped out at $7,000 per acre, making Savannah Shoals’ valuation appear unrealistically high.

Savannah Shoals Pushes Back Against IRS Expert Testimony

On appeal, Savannah Shoals contends that the Tax Court wrongly relied on the IRS’ real estate appraiser, arguing that he lacked experience in mining and should not have been permitted to testify on quarry valuation.

"Interpreting geological maps and extrapolating from them requires specialized knowledge that a general real estate appraiser lacks," Savannah Shoals argued in a December brief.

The partnership further criticized the Tax Court for accepting the IRS expert’s use of geological maps, alleging that he incorrectly assumed all land in the area had the same mining potential. Savannah Shoals claims that its specific tract of land was uniquely valuable due to its mineral composition.

Battle of the Experts: $2.9M vs. $30M in Minerals

The IRS introduced an additional expert specializing in mining and engineering, who estimated the land’s mineral value at $2.9 million. However, he dismissed the feasibility of a quarry, arguing that high start-up costs would prevent any reasonable return on investment.

By contrast, Savannah Shoals’ own experts insisted a quarry was viable, with one valuing the land’s minerals at $30 million—a dramatic difference that highlights the case’s complexities.

What’s Next?

The Eleventh Circuit will now decide whether to uphold the Tax Court’s ruling, a decision that could set a significant precedent for conservation easement tax deductions.

Savannah Shoals’ attorneys did not immediately respond to requests for comment. The U.S. Department of Justice, Tax Division, declined to comment.

Legal Teams

• Savannah Shoals is represented by:

  • Jerrika C. Anderson
  • John W. Hackney
  • Alan M. Shapiro of Chamberlain Hrdlicka White Williams & Aughtry

• The U.S. government is represented by:

  • Anthony T. Sheehan
  • Francesca Ugolini
  • Marjorie Rollinson of the U.S. Department of Justice, Tax Division

With millions at stake, this legal battle underscores the high-stakes nature of conservation easement tax strategies—and the potential consequences of overstating land values.