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constitutes a fair and appropriate valuation of TPC and of the
estate’s interest in TPC.
Accuracy-Related Penalty
Generally, a 20-percent penalty is imposed on “any portion
of an underpayment of tax required to be shown on a return” where
the underpayment constitutes a substantial estate tax valuation
understatement. Sec. 6662(a) and (b)(5).
For purposes of section 6662, an estate tax valuation
understatement is treated as substantial where property required
to be reported on an estate tax return is reported at a value
50 percent or less than the value eventually determined by the
court. Sec. 6662(g)(1). Where property is reported at a value
less than 25 percent of the value eventually determined by the
court, the penalty imposed under section 6662 is increased from
20 percent to 40 percent. Sec. 6662(h).
We have determined the value of the estate’s 20-percent
interest in TPC to be $13,525,240. Because the value reported by
the estate for its 20-percent interest in TPC ($1.8 million) is
less than 25 percent of the value determined herein ($13,525,240
x .25 = $3,381,310), unless an exception to the application of
the section 6662 penalty applies, the estate would be liable for
a 40-percent penalty on its understated valuation.
Under section 6664, an exception is provided to the
imposition of a section 6662 accuracy-related penalty where a
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