-22-
exclude the gain of approximately $16.9 million at the time they
filed their return.16
Conclusion
After careful consideration of the facts and circumstances
of this case, we sustain respondent’s deficiency determination
but find that petitioners are not liable for the accuracy-related
penalty under section 6662(a).
To reflect the foregoing,
An order and decision
will be entered for respondent
as to the deficiency but for
petitioners as to the penalty.
16Petitioners also urged us to conclude that the penalty
portion of the deficiency notice was null and void because
respondent “automatically” asserted the accuracy-related penalty
without first considering whether any exceptions applied.
Petitioners, therefore, are essentially asking us to peer behind
the deficiency notice, which we generally do not do and will not
do in this case. See Scar v. Commissioner, 814 F.2d 1363, 1368
(9th Cir. 1987), revg. 81 T.C. 855 (1983); Edwards v.
Commissioner, T.C. Memo. 2002-169, affd. on unrelated issue 119
Fed. Appx. 293 (D.C. Cir. 2005); Corcoran v. Commissioner, T.C.
Memo. 2002-18 (and cases cited therein), affd. 54 Fed. Appx. 254
(9th Cir., 2002). Specifically, petitioners’ reliance on Scar,
is misplaced. Scar explicitly states that the Commissioner need
not explain how the determinations were made. This Court and the
Court of Appeals, for the Ninth Circuit have limited the
invalidation of a deficiency notice under Scar to circumstances
where the deficiency notice reveals on its face that the
Commissioner failed to make a determination. See Clapp v.
Commissioner, 875 F.2d 1396, 1402 (9th Cir. 1989); Campbell v.
Commissioner, 90 T.C. 110 (1988); Edwards v. Commissioner, supra.
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