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exhaustion, wear and tear, and obsolescence in respect of
property is the adjusted basis for determining gain or loss on
the sale of such property as provided in section 1011. Section
1011(a) provides generally that the adjusted basis for
determining gain or loss shall be, as pertinent here, the basis
determined under section 1012. Section 1012 provides generally
that the basis of property is its cost.
On this record, petitioner did not establish that she
acquired an interest in the emus. Moreover, the record does not
establish that petitioner acquired an interest in the emus by
gift. The Court, therefore, sustains respondent on this issue.
The final issue is whether petitioner is liable for
penalties under section 6662(a) for the years 1993 and 1994.
Section 6662(a) provides that, if that section is applicable to
any portion of an underpayment in taxes, there shall be added to
the tax an amount equal to 20 percent of the portion of the
underpayment to which section 6662 applies. Under section
6664(c), no penalty shall be imposed under section 6662(a) with
respect to any portion of an underpayment if it is shown that
there was a reasonable cause and that the taxpayer acted in good
faith with respect to such portion of the underpayment.
Section 6662(b)(1) provides that section 6662 shall apply to
any underpayment attributable to negligence or disregard of rules
or regulations. Negligence is defined as lack of due care or
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Last modified: May 25, 2011