- 16 -
valuation or adjusted basis”. Sec. 6662(e)(1)(A). In other
words, there is a gross valuation misstatement when the value or
basis claimed on a return is 400 percent or more of the correct
value or basis.
Respondent determined that the full amounts of petitioner’s
underpayments of tax were attributable to gross valuation
misstatements. For 1994, petitioner’s underpayment was
attributable to the disallowance of the Schedule F deductions for
depreciation, “the cost basis of purchased cattle that died”
(cost basis deduction), interest, and “sharecropboard” expenses.
For 1995, petitioner’s underpayment was attributable to the
disallowance of the Schedule F deductions for depreciation,
interest, and “sharecropboard” expenses. Because the interest
and sharecropboard expenses did not depend on valuation or basis
statements, any underpayments of tax resulting from their
disallowance cannot be based on gross valuation misstatements.
See Jaroff v. Commissioner, T.C. Memo. 2004-276. However, the
depreciation and cost basis deductions depended on petitioner’s
reported bases in cattle. Therefore, 40-percent penalties may
apply to petitioner’s underpayments resulting from the
disallowance of the depreciation and cost basis deductions if the
bases petitioner reported were gross valuation misstatements.
See id.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011