- 48 -
underpayment did not result from Madison’s lack of economic
investment in the recyclers or from Madison’s overall sham
nature, nor has petitioner shown that section 6659 is otherwise
inapplicable.
2. Section 6659(e)
Under section 6659(e), the Commissioner may waive all or
part of the addition to tax for valuation overstatement based on
a showing by the taxpayer that there was a reasonable basis for
the valuation or adjusted basis claimed on the return and that
such claim was made in good faith. The Commissioner’s decision
to grant or deny the waiver is discretionary and is reviewable
only for an abuse of discretion, such as where the denial of the
waiver is arbitrary, capricious, or unreasonable. See Krause v.
Commissioner, 99 T.C. at 179; Haught v. Commissioner, T.C. Memo.
1993-58.
Respondent contends that petitioner may not challenge the
section 6659 penalty because petitioner “has not asked
respondent to waive all or a portion of that addition”. In the
alternative, respondent contends that petitioner failed to show
that there was a reasonable basis for the valuation or adjusted
basis he claimed on his return. Petitioner contends that he
first learned of respondent’s imposition of the section 6659
addition to tax in the notice of deficiency and that he was
unable to request a waiver through administrative channels
Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 NextLast modified: May 25, 2011