FOLLOW US

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.