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Petitioners have therefore satisfied neither the open space
requirement nor the historic preservation subdivision
requirements of the third requirement for qualification as a
deductible conservation easement. Accordingly, petitioners are
not entitled to a deduction for a qualified conservation easement
under section 170(h) because the attempted grant did not satisfy
the conservation purposes required under section 170(h)(4)(A).
C. Penalty
Respondent determined that petitioners were liable for a 20-
percent accuracy-related penalty under section 6662(a) due to (1)
negligence or disregard of rules or regulations, (2) a
substantial understatement of income tax, or (3) a substantial
valuation overstatement, and, to the extent that a portion of the
underpayment was attributable to a gross valuation misstatement,
an increased penalty of 40 percent under section 6662(h).
Respondent has conceded, for the purposes of this case, that if
we find that petitioners have not made a qualified conservation
contribution under section 170(h) that the gross valuation
misstatement penalty does not apply, and that only the negligence
or substantial understatement penalty applies. Because we have
found that petitioners have not made a qualified conservation
contribution, we consider only whether petitioners are liable for
either the negligence or substantial understatement penalty.
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