- 9 -
than $30,447,106 as claimed, and that a series of alternative
accuracy-related penalties under section 6662 applied. As to
these items, respondent determined in the FPAA that: (1) The
basis of the property distributed by DIP was zero because DIP
failed to substantiate the basis and, alternatively, the outside
bases of DIP’s partners were not adjusted under section 752 on
account of the short sale liability; (2) DIP’s claimed short-term
capital loss and interest expense were disallowed for lack of
substantiation; (3) DIP was a sham and was disregarded, and all
transactions it engaged in were treated as engaged directly by
the partners; (4) under section 1.701-2, Income Tax Regs., DIP’s
partners were not treated as partners; (5) under section 1.701-2,
Income Tax Regs., contributions to DIP had to be adjusted to
reflect clearly the income of DIP and its partners; and (6) the
40-percent accuracy-related penalty under section 6662(a),
(b)(3), (e), and (h) was imposed because any underpayment of tax
resulting from adjustment of DIP’s basis in the stock was due to
a gross valuation misstatement; the 20-percent accuracy-related
penalty under section 6662(a), (b)(1), and (c) was imposed
because any underpayment of tax arising from the adjustment of
DIP’s basis was due to negligence or disregard of rules and
regulations; or, alternatively, the 20-percent accuracy-related
penalty under section 6662(a), (b)(2), and (d) was imposed
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: November 10, 2007