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Mr. Walker died on August 31, 2001, while his refund claim
for 1997 was pending. On July 24, 2002, respondent disallowed
the refund claim that was filed by Mr. Walker for 1997 and sent
to petitioner a notice of deficiency for 1997 and 1998. The
notice of deficiency determined that petitioner’s total tax
liabilities were $11,221 for 1997 and $52,017 for 1998.
Consequently, respondent determined deficiencies of $9,104 and
$32,949 in petitioner’s Federal income taxes for 1997 and 1998,
respectively, and accuracy-related penalties of $1,821 and $6,590
under section 6662(a) for 1997 and 1998, respectively. The
deficiencies were based on petitioner’s failure to report the
gain on the sale to Parker Development of the 25-percent interest
in the Happy Valley property that had been transferred to her
from Mr. Walker in September 1997. The accuracy-related
penalties were imposed because the underpayment of tax on
petitioner’s 1997 and 1998 returns was determined to be
attributable to petitioner’s negligence or disregard of the rules
or regulations under section 6662(b)(1) or, alternatively, to a
substantial understatement of income tax under section
6662(b)(2).
The “Whipsaw” Position
This case is related to a refund action that is pending
before the U.S. Court of Federal Claims, Walker Family Trust v.
United States, No. 02-1454 T. The Walker Family Irrevocable
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