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overstatement exceeds $5,000. See sec. 6662(e)(2). If section
6662(h) applies, the accuracy-related penalty under section
6662(a) is applied using a 40-percent, rather than a 20-percent,
rate. See sec. 6662(h)(1). In this case, the value of the Canal
claimed on petitioners’ tax return, $111,750, is 400 percent or
more of the value determined to be correct, $5,950. Further, the
portion of the underpayment attributable to substantial valuation
overstatement exceeds $5,000. Thus, section 6662(h) applies.
However, petitioners might be relieved of the penalty under
section 6662(h) if section 6664(c), the reasonable cause
exception, applies.
Section 6664(c) provides in relevant part as follows:
(1) In general.--No penalty shall be imposed
under this part with respect to any portion of an
underpayment if it is shown that there was a reasonable
cause for such portion and that the taxpayer acted in
good faith with respect to such portion.
(2) Special rule for certain valuation
overstatements.--In the case of any underpayment
attributable to a substantial or gross valuation
overstatement under chapter 1 with respect to
charitable deduction property, paragraph (1) shall not
apply unless--
(A) the claimed value of the property was
based on a qualified appraisal made by a qualified
appraiser, and
(B) in addition to obtaining such appraisal,
the taxpayer made a good faith investigation of
the value of the contributed property.
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