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substantial or gross valuation misstatement on a return is made
on a property-by-property basis. Sec. 1.6662-5(f)(1), Income Tax
Regs. There is no disclosure exception to this penalty. Sec.
1.6662-5(a), Income Tax Regs.189
On its 1997 partnership tax return, SMP reported a $150
million basis in the $150 million receivable that it purportedly
sold to TroMetro. As a result of this basis reporting, SMP
claimed a $147,486,000 loss ($2,514,000 sale price minus $150
million adjusted basis). SMP reported a $63,489,061 basis in the
79.2-percent Corona membership interest that it sold to Imperial.
As a result of this basis reporting, SMP claimed a $62,237,061
loss ($1,252,000 sale price minus $63,489,061 adjusted basis).
SMP reported a $11,864,117 basis in the additional 14.65-percent
Corona membership interest that it sold to Imperial. As a result
of this basis reporting, SMP claimed an $11,647,367 loss
($216,750 sale price minus $11,864,117 adjusted basis).
We have concluded on alternative grounds that SMP obtained a
zero basis in the $974 million in receivables from Generale Bank
and the $79 million receivable from CLIS. Because the $79
189 The substantial or gross valuation misstatement penalty
applies only if the portion of the underpayment for the taxable
year attributable to substantial valuation misstatements exceeds
$5,000 ($10,000 in the case of a corporation other than an S
corporation or a personal holding company). Sec. 6662(e)(2). In
the case of a partnership, this dollar limitation is applied at
the partner level. Sec. 1.6662-5(h)(1), Income Tax Regs.
Consequently, we do not decide whether the dollar limitation
applies in these partnership-level proceedings.
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