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On his 1994 return, petitioner reported a “cost basis of
purchased cattle that died” of $76,558 and a cost basis in his
“registured [sic] cattle” of $880,423. On his 1995 return,
petitioner reported a cost basis in his “registured [sic] cattle”
of $625,100. As stated above, petitioner bears the burden of
proof with respect to the section 6662(h) penalties. Therefore,
petitioner bears the burden of proving that the reported bases
were not gross valuation misstatements.
Petitioner does not argue that the reported bases were
correct or were less than 400 percent of the correct bases (and
thus not gross valuation misstatements). Instead, “It is
Petitioner’s position that he never received the benefits and
burdens of ownership of the purported cattle--if such cattle even
existed, thus the overvaluation penalty cannot apply.”
Petitioner’s position is without support.
If we accept petitioner’s assertion that he never received
the benefits and burdens of ownership of the cattle, or that the
cattle never existed, then his bases in the cattle would be zero.
See Zirker v. Commissioner, 87 T.C. 970, 978-979 (1986) (finding
that no actual sale of cattle took place and the correct adjusted
basis of cattle was zero); Massengill v. Commissioner, T.C. Memo.
1988-427 (same as Zirker), affd. 876 F.2d 616 (8th Cir. 1989).
This conclusion is supported by petitioner’s concession that he
was not entitled to cost basis or depreciation deductions. If
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