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In this case, petitioners did not have “ample evidence
discrediting the estimate” of zero tax liability and in fact had
some evidence supporting it. Petitioner received a letter from a
licensed contractor prior to filing the Form 4868, which stated
that the cost of constructing a canal similar to the Canal would
be $107,134.50. Given that a copy of this letter was ultimately
attached to their tax return as filed, we believe petitioners
estimated the value of their contribution of the Canal using
replacement cost. Petitioners thus made an effort to locate
evidence which, although incorrectly used, was sufficient for
purposes of their Form 4868 estimate, particularly in light of
the fact that valuing this property involved complicated legal
issues and posed a genuine challenge for both experts who
testified in this case. Accordingly, petitioners are not liable
for the addition to tax under section 6651(a) for 1990.
III. Accuracy-Related Penalties
In the notice of deficiency, respondent determined that
petitioners were liable for accuracy-related penalties under
section 6662(h) for both 1990 and 1992. Section 6662(h) applies
when there is a substantial valuation overstatement in which the
value of any property claimed on a tax return is 400 percent or
more of the value determined to be correct. See sec.
6662(h)(2)(A), (e)(1). However, no penalty is imposed unless the
portion of the underpayment attributable to substantial valuation
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