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As the table indicates, the subject interests in Belle
Fourche were valued on the estate tax return and the 1994 gift
tax return at less than 25 percent of the correct value, which
result in gross valuation misstatements under section 6662(h).
The subject interest in Eighty-Eight Oil was valued on the 1993
gift tax return at more than 25 percent, but less than 50 percent
of the correct value, which results in a substantial gift tax
valuation understatement under section 6662(g). Finally, the
subject interests in Black Hills Trucking were valued on the
estate tax return and the 1994 gift tax return at less than 25
percent of the correct value, resulting in gross valuation
misstatements under section 6662(h).98
Unless the reasonable cause exception to the accuracy-
related penalties applies, the 40-percent penalty will apply to
the portion of any underpayment of estate tax or 1994 gift tax
attributable to the gross valuation understatement of the subject
interests in Belle Fourche and Black Hills Trucking. Moreover,
the 20-percent penalty will apply to the portion of any
underpayment of 1993 gift tax attributable to the substantial
valuation understatement of the subject interest in Eighty-Eight
Oil.
98The gift loan derived from the deferred payment
transaction was not property “claimed on any return of tax
imposed by subtitle B” and is therefore not subject to the
valuation understatement penalties.
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