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III. Valuation Overstatements
In general, section 6659(a)11 imposes an addition to tax on
any portion of an underpayment of income tax by an individual
which is “attributable to a valuation overstatement”. A
“valuation overstatement” exists “if the value of any property,
or the adjusted basis of any property, claimed on any return is
150 percent or more of the amount determined to be the correct
amount”. Sec. 6659(c)(1). The amount of the addition to tax
varies depending upon the size of the discrepancy in the
valuation. Sec. 6659(b). Respondent determined that the entire
amount of the deficiency in each year in issue is attributable to
a valuation that was more than 250 percent of the correct
valuation, resulting in an addition to tax of 30 percent in each
year. See id.
Petitioner’s only arguments concerning this issue were made
in the context of her objections to the application of the
section 6621 tax motivated interest, an issue that is discussed
below. First, petitioner argues that “Respondent concluded in
11References to sec. 6659 are to sec. 6659 as in effect with
respect to returns that were filed after Dec. 31, 1981, and that
were due before Jan. 1, 1990. See Economic Recovery Tax Act of
1981, Pub. L. 97-34, sec. 722(a), 95 Stat. 341; OBRA 1989 sec.
7721, 103 Stat. 2395. We note that, where a valuation
overstatement on a return filed after Dec. 31, 1981, gives rise
to an underpayment for a year prior to 1981 by operation of a
carryback, then that underpayment is attributable to the
overstatement on the return filed in the later year, and sec.
6659 is applicable with respect to the resulting underpayment in
the earlier year. Nielsen v. Commissioner, 87 T.C. 779 (1986).
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