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included an additional reasonable cause and good faith exception
to the section 6662(e) penalty for transfer pricing valuation
misstatements. Finally, the substantial understatement penalty
does not apply to understatements attributable to (1) items
supported by “substantial authority” or (2) items that are
“adequately disclosed” on the return. Sec. 6662(d)(2)(B). With
respect to the section 6662 determinations, petitioners bear the
burden of showing that the penalty does not apply. Rule 142(a);
Tweeddale v. Commissioner, 92 T.C. 501, 505 (1989) (citing Bixby
v. Commissioner, 58 T.C. 757, 791 (1972)).
Negligence includes any failure “to make a reasonable
attempt to comply with the provisions of this title”. Sec.
6662(c). A taxpayer may not be negligent where the taxpayer
relies in good faith upon an appraisal in reporting a
transaction. Petitioners argue that they relied in good faith
upon Bain’s $20 million appraisal of the trademark rights that
DHL conveyed. Petitioners point out that Bain was well known to
them and had worked on strategy and planning in connection with
the UPS discussions, assisted in the UPS negotiations, and
prepared the PLP costing model used by DHL and the PRISM costing
model used by DHLI. Petitioners claim that they relied on Bain’s
background and expertise and that the reliance was reasonable, so
they were not negligent in reporting the $20 million gain from
the trademark sale.
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