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The section 6662(a) penalty is not imposed on any portion of an
underpayment where a taxpayer has “reasonable cause for” and
“acted in good faith with respect to” such portion. Sec.
6664(c)(1).
In the notice of deficiency, respondent determined that the
entire amount of the deficiencies in 1984, 1985, and 1987, and
$7,382 of the deficiency in 1988, is attributable to valuations
that were more than 250 percent of the correct valuation,
resulting in an addition to tax of 30 percent in each year. See
sec. 6659(b). Respondent further determined that the entire
amount of the deficiency in 1989 is attributable to a valuation
that was more than 400 percent of the correct valuation,
resulting in an penalty of 40 percent for a gross valuation
misstatement in that year. Sec. 6662(a), (e), (h).
Respondent concedes that petitioners are not liable for the
valuation overstatement additions to tax in 1987, 1988, and 1989
on the portions of the deficiencies attributable to the
disallowance of the Schedule F deductions for boarding fee
expenses, because no valuations were involved with these claimed
deductions.
Petitioners have presented no evidence concerning the
valuations underlying the general business credits and the
Schedule F depreciation deductions. Insofar as the deficiencies
are attributable to the disallowance of those items, we therefore
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