[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 20-11050 ________________________

Agency No. 005600-17

TOT PROPERTY HOLDINGS, LLC, TOT LAND MANAGER, LLC, TAX MATTERS PARTNER, Petitioners-Appellants,

versus COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

__________________________

Petition for Review of a Decision of the United States Tax Court _________________________

(June 23, 2021) Before LAGOA, ANDERSON, and MARCUS Circuit Judges. ANDERSON, Circuit Judge:

Whether the taxpayer in this case could properly claim a deduction turns on whether language in a deed was an unenforceable savings clause, dependent on a USCA11 Case: 20-11050 Date Filed: 06/23/2021 Page: 2 of 40

condition subsequent, or a valid interpretive clause. The deed at issue donated for conservation purposes an easement encumbering the taxpayer’s property. The Internal Revenue Code and related regulations permit deductions for the donation of such easements, but only if certain conditions are met to further the conservancy goal, including that the donee be granted a right to a specific proportion of the proceeds in the event the easement is judicially extinguished. The Internal Revenue Service disallowed the deduction claimed by the taxpayer in this case, and the Tax Court upheld that decision because the deed conveying the easement contained a formula for the distribution of proceeds that did not comply with the extinguishment proceeds requirement and the deed was not saved by purported interpretive provisions. On appeal, the taxpayer challenges this holding and also argues that the Tax Court’s approval of accuracy-related penalties (assessed in light of the disallowance of the deduction) was based on erroneous findings of fact regarding the property’s “highest and best use” before the easement began encumbering the property and was based on an erroneous view of the law with respect to whether the penalties were approved by a supervisor “in writing.”

We conclude that the Tax Court correctly determined that the taxpayer did not comply with the extinguishment proceeds requirement and that the deed was not saved by the disputed provisions because they constitute an unenforceable condition-subsequent savings clause. We also hold that the Tax Court did not

2 USCA11 Case: 20-11050 Date Filed: 06/23/2021 Page: 3 of 40

commit reversible error in approving the penalties assessed. As explained below, we affirm.

I. FACTS AND PROCEDURAL HISTORY

Rural property in between Nashville, Knoxville, and Chattanooga and the transactions related to its ownership sit at the center of this case. We explain those transactions, the reasons for tax liability, and the underlying tax proceedings.

A. Property Transactions

In 2005, George R. Dixson purchased 2,602 acres of rural, undeveloped real estate in Van Buren County, Tennessee, for about $1.9 million. In 2008, Dixon transferred 652 acres, which accounted for about $486,000 of the original purchase price, to two limited liability companies that he wholly owned.1 These 652 acres comprise the property at issue in this case. In November 2013, that 652 acres was transferred to TOT Property Holdings, LLC (“TOT Holdings”)—the taxpayer in this case—which, after the transfer, owned only the property and $100 cash. 2 In this opinion, we will interchang