- 14 -
an underpayment for a taxable year that is attributable to
valuation overstatements is $1,000 or greater. Sec. 6659(d).
The amount of the addition to tax varies depending upon the size
of the discrepancy in the valuation. Sec. 6659(b). The
Secretary has the discretion to waive the section 6659 addition
to tax if the taxpayer shows that there was a “reasonable basis
for the valuation” and that the claim was “made in good faith.”
Sec. 6659(e).
With respect to petitioners’ taxable year 1989, section
6662(a) imposes a 20-percent accuracy-related penalty on the
portion of an underpayment attributable to any one of various
factors, one of which is a “substantial valuation misstatement
under chapter 1”. Sec. 6662(b)(3). A “substantial valuation
misstatement under chapter 1" exists “if * * * the value of any
property (or the adjusted basis of any property) claimed on any
return of tax imposed by chapter 1 is 200 percent or more of the
amount determined to be the correct amount”. Sec. 6662(e)(1).
The penalty applies only if an underpayment for a taxable year
that is attributable to substantial valuation overstatements by
an individual taxpayer is greater than $5,000. Sec. 6662(e)(2).
The section 6662(a) penalty is increased to 40 percent in the
case of “gross valuation misstatements”, which occurs where the
overvaluation described above is 400 percent or more, rather than
200 percent or more, of the correct amount. Sec. 6662(h)(2)(A).
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011