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The penalty applies to all property included in the gross
estate under section 2031 or transferred for less than adequate
and full consideration under sec. 2512(b). See Estate of Owen v.
Commissioner, 104 T.C. 498, 505-506 (1995) (applying section
6660, which was the precursor of section 6662(g)).
In the cases at hand, we determine whether the percentage
threshold for a substantial or gross valuation understatement has
been reached by individually comparing the book value of the
subject interests in the disputed companies claimed on the 1993
and 1994 gift tax returns and the estate tax return97 with our
determinations of the correct values of those interests. The
table below shows reported value as a percentage of actual value
97The way in which the transactions were reported (as sales
on the gift tax returns and as cash proceeds in the living trust
on the estate tax return) might raise a question about whether
there was an understatement of value of property “claimed on any
return of tax imposed by subtitle B”. However, petitioners
raised no such question. Indeed, they contend that they
disclosed the value of the transferred interests at book value,
according to the terms of the buy-sell agreements. Petitioners’
brief states:
the Estate reported on the Estate Tax Return an amount
equal to the book value price of the interests owned by
Dave True as of the date of his death. In calculating
their gift tax, Dave and Jean True valued the interests
that they sold at book value so there was no gift to
report. Therefore, the accuracy-related penalty
mathematically should be calculated based on the
difference between the correct value of the property
and the book value used to calculate the tax as
reported.
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