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investigations of the merits of the investment programs he
promoted with persons knowledgeable about the book publishing
business. Petitioner's role as promoter, coupled with his
initial skepticism, placed him in the situation where he should
have done more than merely rely on discussions with individuals
who had no knowledge of the nontax aspects of the investment. On
this record, the Court holds that petitioners are liable for the
additions to tax for negligence for the years at issue.
Respondent is sustained on this issue.
Respondent determined that petitioners are liable for the
additions to tax for valuation overstatements under section
6659(a) on the underpayments of their Federal income taxes for
the years at issue attributable to the investment tax credits
claimed with respect to Series 162.
A graduated addition to tax is imposed when an individual
has an underpayment of tax that equals or exceeds $1,000 and is
attributable to a valuation overstatement. Sec. 6659(a), (d). A
valuation overstatement exists if the fair market value (or
adjusted basis) of property claimed on a return equals or exceeds
150 percent of the amount determined to be the correct amount.
Sec. 6659(c). If the claimed valuation exceeds 250 percent of
the correct value, the addition is equal to 30 percent of the
underpayment. Sec. 6659(b). In this case, respondent determined
that the overstatement percentage in petitioner's investment in
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Last modified: May 25, 2011