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The Tax Court ruled that the LLC was a bona fide partnership
because all three members made substantial contributions
to the LLC, participated in its management, and shared
in its profits and losses.

of tax. Ten days after mailing the letter, under Sec. 170(h)(5)(A) was met, as this 2022, the government charged seven
the auditor sent the case to his im- issue had not been addressed in Pine individuals with conspiracy to defraud
mediate supervisor, who approved the Mountain Preserve, LLLP. The appellate the United States arising out of their
penalties in writing. Eventually, the IRS court also reversed the Tax Court’s promotion of fraudulent tax shelters
issued the taxpayers statutory notices of decision that the accuracy-related involving syndicated conservation
deficiency that described the proposed penalties could not be upheld against the easements.46 The indictment charged
tax changes and penalties resulting from taxpayers because the IRS did not meet that the syndicated conservation
the audit. Each partner timely petitioned the Sec. 6751(b) written supervisory easement transactions were abusive tax
the Tax Court for pre-assessment review approval requirement. The appellate shelters lacking in economic substance
of his deficiency. court followed Kroner,44 which found or a business purpose.
The Tax Court held that the tax- that the Tax Court erred in determining In another situation,47 a marketer
payers’ arguments failed on the merits in that case that the penalties’ approval of a syndicated conservation easement
because their retained rights under was untimely. scheme pleaded guilty to filing a false
the conservation deed rendered the Lastly, in another case, the IRS tax return that claimed a fraudulent
easement in violation of the granted- disallowed a charitable contribution charitable contribution of a conserva-
in-perpetuity requirement under Sec. deduction claimed for a conservation tion easement. The individual, a CPA
170(h)(2)(C).41 But it also disallowed easement made by an LLC because the and attorney, admitted that he knew the
the IRS’s asserted Sec. 6662 penalties, easement’s conservation purpose was tax shelter did not entitle him to a tax
holding that the letters and examination not protected in perpetuity.45 The IRS deduction; however, he claimed the false
reports constituted “initial determina- argued that the contribution did not charitable deduction on his personal tax
tions of assessment” under Sec. 6751(b). meet this requirement because the deed return for the years in question.
Because the IRS had mailed the letters had a “deemed consent” provision that In Equity Investments Associates, LLC,
without first obtaining supervisory ap- stripped the donee of its perpetual right the IRS was auditing an LLC related
proval of the penalties, the Tax Court to prevent uses of property that were not to a charitable contribution deduction
held that the government could never consistent with conservation purposes. for a conservation easement the IRS
assess those penalties. Both the taxpayers The IRS asked the court for summary deemed to be overvalued.48 At the same
and the IRS appealed the decision. judgment on this issue but was denied time, there was a criminal investigation
The Eleventh Circuit42 reversed because the argument raised material- of the owners and managers of the LLC
the Tax Court’s decision that the fact issues that were not suitable for related to the tax shelter that provided
taxpayers were not entitled to a summary judgment. the deduction. As part of its audit, the
charitable contribution deduction for a Tax shelter promoters and IRS issued a summons for information,
conservation easement donation, because others: The IRS is still conducting which the LLC ignored. The LLC
of the appellate court’s 2020 decision audits of taxpayers that took sought to quash the summons because
in Pine Mountain Preserve, LLLP.43 a charitable contribution for a the IRS is barred from issuing a sum-
However, the case was remanded to the conservation easement, but now mons with respect to any person if a
Tax Court for consideration of whether the government is also looking at Justice Department criminal referral is
the protected-in-perpetuity requirement the promoters of the tax shelters. In in effect. In this case, the LLC argued,

41. Carter, T.C. Memo. 2020-21. 46. Department of Justice Press Release 22-178.
42. Carter, No. 20-12201 (11th Cir. 9/14/2022). 47. Department of Justice Press Release 22-905.
43. Pine Mountain Preserve, LLLP, 978 F.3d 1200 (11th Cir. 2020). 48. Equity Investments Associates, LLC, No. 3:21-CV-170-GCM (W.D.N.C.
44. Kroner, No. 20-13902 (11th Cir. 9/13/22). 8/16/21).
45. Pickens Decorative Stone, LLC, T.C. Memo. 2022-22.

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