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substantial valuation overstatement; they cannot both be applied
to the incorrect valuation of the same property. Sec.
6662(h)(1). Thus, because petitioners are liable for the 40
percent penalty with respect to the gross valuation misstatement
in 1989, they are not liable for the 20 percent penalty for a
substantial valuation overstatement.
B. Negligence
With respect to petitioners’ taxable years 1984, 1985, and
1987, section 6653(a) would impose two additions to tax on
underpayments attributable to negligence or intentional disregard
of rules and regulations. The first addition to tax is equal to
5 percent of the entire amount of an underpayment if any part of
the underpayment is due to negligence or intentional disregard of
rules or regulations.6 The second addition to tax is equal to 50
percent of the interest due on only that portion of the
underpayment that is attributable to negligence or intentional
disregard of rules or regulations.7 Respondent determined that
petitioners are liable for both of the additions to tax with
6For petitioners’ taxable years 1984 and 1985, this addition
to tax is imposed under sec. 6653(a)(1). For petitioners’
taxable year 1987, this addition to tax is imposed under sec.
6653(a)(1)(A).
7For petitioners’ taxable years 1984 and 1985, this addition
to tax is imposed under sec. 6653(a)(2). For petitioners’
taxable year 1987, this addition to tax is imposed under sec.
6653(a)(1)(B).
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