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with CDR, Generale Bank, and CLIS solely for tax purposes.
Moreover, in determining that the SMHC receivables were worthless
when they were contributed to SMP, we have relied on an extensive
examination of the values of the assets in SMHC. Consequently,
to whatever extent Gilman may require an indirect nexus to an
overvaluation of property, we conclude that such a nexus exists
in these cases.
We conclude that SMP’s 1997 and 1998 partnership tax return
and Corona’s 1997 partnership tax return contain gross valuation
misstatements for purposes of section 6662(e) and (h).
C. 20-Percent Accuracy-Related Penalties
Respondent determined, alternatively, that 20-percent
accuracy-related penalties apply under section 6662(a) with
respect to the adjustments to SMP’s 1997 and 1998 partnership tax
return and Corona’s 1997 partnership tax return. Respondent
asserts two grounds for imposing these penalties: negligence and
substantial understatement of income tax. We address each of
these grounds below.
1. Negligence
Section 6662(a)(1) imposes a 20-percent accuracy-related
penalty on any portion of an underpayment of tax required to be
shown on a return which is attributable to negligence or
disregard of rules or regulations. For purposes of section 6662,
the term “negligence” includes any failure to make a reasonable
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