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an underpayment that takes into account all deductible expenses,
including expenses for trustee's fees, attorney's fees, and
deficiency interest that were incurred after the filing of the
estate tax return. Respondent challenges the estate's ability to
compute its underpayment by deducting the latter expenses.
Respondent asserts that the estate must compute its underpayment
based solely on the expenses which were reported on its estate
tax return.
We agree with petitioner. Section 6663(a) imposes a
75-percent penalty on the portion of "any underpayment of tax
required to be shown on a return [that] is due to fraud".1 The
term "underpayment" is defined by section 6664(a) to mean
the amount by which any tax imposed by this
title exceeds the excess of--
(1) the sum of--
(A) the amount shown as the
tax by the taxpayer on his return,
plus
(B) amounts not so shown
previously assessed (or collected
without assessment), over
(2) the amount of rebates made.
1 Sec. 6663(a) provides:
SEC. 6663(a). Imposition of Penalty.--If any part of
any underpayment of tax required to be shown on a
return is due to fraud, there shall be added to the tax
an amount equal to 75-percent on the portion of the
underpayment which is attributable to fraud.
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