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reasonable attempt to ascertain the correctness of a deduction
that would seem to a reasonable and prudent person “too good to
be true” under the circumstances. Sec. 1.6662-3(b)(1)(ii),
Income Tax Regs. Disregard of the rules or regulations “includes
the provisions of the Internal Revenue Code, temporary or final
Treasury regulations * * * and revenue rulings or notices * * *
issued by the Internal Revenue Service and published in the
Internal Revenue Bulletin.” Sec. 1.6662-3(b)(2), Income Tax
Regs.
A substantial valuation misstatement generally constitutes a
“gross valuation misstatement” if the value or adjusted basis of
any property claimed on a return is 400 percent or more of the
amount determined to be the correct value or adjusted basis.
Sec. 6662(h)(2).
The accuracy-related penalty under section 6662(a) will not
apply to any part of a taxpayer’s underpayment of tax if, with
regard to that part, the taxpayer establishes reasonable cause
and that the taxpayer acted in good faith. Sec. 6664(c).
Petitioner arranged its own lease strip deal and claimed
over $4.2 million in tax benefits for 1995, 1996, and 1997. As
we have held, petitioner did not have a valid nontax business
purpose for entering into the lease strip deal. In seeking
substantial deductions vastly greater than economic outlay,
petitioner was indifferent to the deal’s lack of economic
substance and economic profit potential. This is plainly shown
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