- 331 -
89 T.C. 912 (1987), affd. 862 F.2d 540 (5th Cir. 1988; sec.
1.6664-3(d), Income Tax Regs.
In the cases at hand, the same methodology should apply to
compute the portions of the underpayments attributable to the
substantial and gross valuation understatements, identified
above, that were reported on the 1993 and 1994 gift tax returns
and on the estate tax return.
Finally, we hold that the reasonable cause exception to the
accuracy-related penalties does not apply to the cases at hand.
The facts of record indicate that petitioners did not exercise
ordinary business care and prudence in attempting to assess the
proper estate and gift tax liabilities for the years in question.
In having the 1993 gift tax return prepared, Dave True did
not engage a professional appraiser to value the transferred
interests in the True partnerships. Instead, he wanted to test,
through litigation, the ability of the buy-sell agreements to fix
Federal gift tax value. Petitioners claimed to rely on the
decisions in the 1971 and 1973 gift tax cases, which held that
book value equaled fair market value, when they valued the
subject interests in the cases at hand at book value. We find
that such reliance was not reasonable; petitioners did not engage
counsel to advise them of the legal effects of those cases on
future transfers pursuant to the buy-sell agreements. Moreover,
the opinions of the District Court in the 1971 and 1973 gift tax
cases did not address whether the buy-sell agreements were
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