- 17 -
a cost basis of $317,733 (adjusted by $139,230 for depreciation).
Petitioners stipulated and were deemed to admit that they did not
incur these expenses. Respondent determined that petitioners’
adjusted basis for the assets giving rise to these expense
deductions was zero, resulting in a valuation misstatement of 400
percent or more of the correct amount for purposes of section
6662(h). See sec. 1.6662-5(g), Income Tax Regs. As stated
above, petitioners bear the burden of proving that respondent’s
determinations under section 6662 are incorrect. Petitioners did
not appear for their trial and did not introduce any evidence to
contest these determinations. Consequently, we sustain the
imposition of a 40-percent penalty under section 6662(h) for a
gross valuation misstatement with regard to the portion of the
underpayment of tax attributable to the items described in this
paragraph. See Zirker v. Commissioner, 87 T.C. 970, 979-980
(1986).
Petitioners contend that an accuracy-related penalty should
not be imposed because they acted with reasonable cause and in
good faith for purposes of the “reasonable cause exception” of
section 6664(c)(1). The determination of whether a taxpayer
acted with reasonable cause and in good faith is made on a case-
by-case basis, taking into account all the pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Generally,
the most important factor is the extent of the taxpayer’s effort
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011