-270-
Petitioner argues that the section 6662(h) gross valuation
misstatement penalty is inapplicable to the adjustments in these
cases. Petitioner contends that section 6662(h) has limited
application and applies only where the misstatement of adjusted
basis is attributable to an overvaluation of property. Petitioner
contends that the misstatements of basis in these cases are not
attributable to any overvaluation but instead are attributable to
the operation of the partnership basis rules. Stated
differently, petitioner’s position essentially is that section
6662(e) and (h) cannot apply where the alleged gross valuation
misstatement penalty is not directly attributable to an erroneous
overvaluation. We disagree.
Section 6662(e) and (h) refers to an underpayment that is
attributable to a “valuation misstatement”. The statute defines
“valuation misstatement” to include overstatements of “adjusted
basis”. Specifically, a substantial or gross valuation
misstatement occurs where “the value of any property (or the
adjusted basis of any property)” claimed on any tax return is at
least 200 percent (for a substantial valuation misstatement or
400 percent (for a gross valuation misstatement) of “the amount
determined to be the correct amount of such valuation or adjusted
basis (as the case may be)”. Sec. 6662(e)(1)(A) (emphasis
added). Consequently, Congress did not limit the definition of a
“valuation misstatement” to instances involving inflated
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