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Section 6659 provides for an addition to tax for
underpayments attributable to valuation overstatements. A
valuation overstatement exists if, among other conditions, the
adjusted basis of property claimed on the return equals or
exceeds 150 percent of the correct basis. See sec. 6659(a), (c).
As to the year at issue, the addition to tax equals 30 percent of
an underpayment attributable to a valuation overstatement of 250
percent or more, unless the underpayment in tax is less than
$1,000 in which case the addition to tax does not apply. See
sec. 6659(b), (d). An addition to tax under section 6659 may
apply to an underpayment by an individual partner, where the
overvaluation is made on the partnership return. See Weis v.
Commissioner, 94 T.C. 473, 489 (1990).
Petitioner does not deny that respondent correctly
determined that she had an understatement of tax attributable to
a valuation overstatement within the meaning of section 6659.
Petitioner asserts that respondent should waive the resulting
addition to tax pursuant to section 6659(e). Section 6659(e)
authorizes respondent to waive all or part of an addition to tax
for valuation overstatement if a taxpayer establishes that he or
she had a reasonable basis for the adjusted bases or valuations
claimed on a return and that the claim was made in good faith.
Respondent's refusal to waive a section 6659 addition to tax
is reviewable by this Court for abuse of discretion. See Krause
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Last modified: May 25, 2011