The IRS is vigorously litigating cases involving conservation easements they believe are abusive.  One such case was Plateau Holdings, LLC v. Comm’r, T.C. Memo 2020-93 (Plateau I). In that case the Tax Court denied the entire deduction claimed based on a determination that the $25,449,000 value claimed was actually $2,691,200. A 40 percent penalty applied to the overvaluation amount (i.e. $22,757,800). In a subsequent action, Plateau Holdings, LLC v. Comm’r, T.C. Memo 2021-133 (Plateau II), the IRS also sought a 20 percent penalty for negligence on the lower valuation amount denied because the easement deed failed to protect the conservation purpose in perpetuity.  However, the taxpayer wasn’t required to pay the 20 percent penalty because the Tax Court concluded they were entitled to a defense against that penalty for acting with reasonable cause and in good faith.