Gary W. McDonough - Page 2

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                       MEMORANDUM FINDINGS OF FACT AND OPINION                        

               LARO, Judge:  This is an affected items proceeding arising             
          from disallowed partnership losses claimed for 1989 and 1991 by             
          Timeshare Breeding Service 1989-1, J.V. (TBS 89-1), a cattle                
          partnership organized, promoted, and operated by Walter J. Hoyt             
          III (Hoyt).2  Petitioner was a partner in TBS 89-1, and he                  
          reported his distributive shares of its reported losses on his              
          1989 and 1991 Federal income tax returns.  Respondent determined            
          that petitioner is liable for the following accuracy-related                
          penalties with respect to his reporting of those disallowed                 
          Accuracy-related penalties                                                  
          Year      Sec. 6662(a)  Sec. 6662(h)                                        
          1989           -0-      $3,577.20                                           
          1991        $5,669.40      -0-                                              

               2 Respondent’s disallowance of these losses was upheld in              
          Durham Farms #1, J.V. v. Commissioner, T.C. Memo. 2000-159, affd.           
          59 Fed. Appx. 952 (9th Cir. 2003).                                          
               3 For 1989, respondent determined that the accuracy-related            
          penalty under sec. 6662(h) applied to the portion of petitioner’s           
          underpayment resulting from a disallowed depreciation deduction             
          claimed by TBS 89-1.  For 1991, respondent determined that                  
          petitioner had an underpayment attributable to one or more of the           
          following under sec. 6662(a) and (b):  (1) Negligence or                    
          disregard of rules or regulations; (2) substantial understatement           
          of income tax; (3) substantial valuation misstatement.  Because             
          respondent in his posttrial opening brief addresses only the                
          first two elements, we consider respondent to have waived any               
          argument that petitioner’s underpayment for 1991 was attributable           
          to a substantial valuation misstatement.                                    

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