## Facts

- Boltar, L.L.C. owned multiple parcels in Lake County, Indiana, including a southern parcel subject to an existing 50-foot utility easement and access limitations.
- In December 2003, Boltar donated a conservation easement affecting roughly 8 acres, restricting uses that would impair conservation values.
- Boltar claimed a 2003 charitable-contribution deduction of $3,245,000, supported by an appraisal asserting a fair market value of $3,270,000.
- Boltar’s appraisal asserted the property’s highest and best use was a 174-unit condominium project and calculated value using a stylized “foregone development opportunity” approach.
- The IRS issued an FPAA allowing only $42,400, concluding the appraisal did not properly perform a before-and-after valuation and that the highest and best use was delayed single-family residential development, given zoning, jurisdictional constraints, and the property’s landlocked/access issues.
- Before trial, the Commissioner moved in limine to exclude Boltar’s expert report and testimony under Fed. R. Evid. 702 and Daubert; the Commissioner’s separate attempt to add valuation-misstatement penalties was denied as untimely and prejudicial.

## Issues

1. Whether Fed. R. Evid. 702 and Daubert reliability and relevance standards apply in Tax Court bench trials, and whether Boltar’s expert appraisal and testimony should be excluded.
2. Whether the fair market value of the donated conservation easement exceeded the $42,400 allowed in the FPAA.

## Decision

- The court held that reliability and relevance standards for expert testimony apply in non-jury Tax Court trials and that the trial judge serves a gatekeeping role.
- The court granted the Commissioner’s motion in limine and excluded Boltar’s expert report and related testimony as unreliable and irrelevant.
- On valuation, the court sustained the FPAA’s $42,400 determination.

## Legal Principles

- Fed. R. Evid. 702 and Daubert apply in Tax Court bench trials; the absence of a jury does not eliminate the court’s obligation to exclude expert evidence that fails threshold reliability and relevance.
- For conservation-easement charitable deductions, valuation generally requires a proper before-and-after analysis of fair market value, using realistic assumptions.
- Highest-and-best-use conclusions must be supported by competent evidence that the proposed use is legally permissible, physically possible, financially feasible, and reasonably probable (including zoning, annexation/rezoning likelihood, encumbrances, and access).
- Appraisals that ignore material constraints, rely on erroneous jurisdiction/zoning assumptions, or fail to account for the effect on relevant contiguous property interests may be excluded and will not carry the taxpayer’s burden on valuation.

## Conclusion

The Tax Court excluded Boltar’s conservation-easement appraisal under Rule 702 and Daubert because it relied on speculative, unsupported development assumptions and improper valuation methods, and it sustained the IRS’s $42,400 easement valuation rather than Boltar’s multi-million-dollar claimed deduction.


Boltar, L.L.C. v. Commissioner, 136 T.C. 326 (2011)