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suspect tax claims as to put a reasonable taxpayer under a duty
of inquiry, a good faith investigation of the underlying
viability, financial structure, and economics of the investment
is required. Roberson v. Commissioner, T.C. Memo. 1996-335
(citing LaVerne v. Commissioner, 94 T.C. 637, 652-653 (1990),
affd. without published opinion 956 F.2d 274 (9th Cir. 1992),
affd. without published opinion sub nom. Cowles v. Commissioner,
949 F.2d 401 (10th Cir. 1991), and Horn v. Commissioner, 90 T.C.
908, 942 (1988)), affd. without published opinion 142 F.3d 435
(6th Cir. 1998).
c. Substantial Understatement of Income Tax
An understatement of income tax is substantial if the amount
of the understatement exceeds the greater of 10 percent of the
tax required to be shown on the return or $5,000. Sec.
6662(d)(1). An understatement is the excess of the amount of tax
required to be shown on the return over the amount of tax
actually reported on the return. Sec. 6662(d)(2).
d. Gross Valuation Misstatements
Section 6662(h) provides that a taxpayer may be liable for a
40-percent penalty on any portion of an underpayment of tax
attributable to gross valuation misstatements. No penalty is
imposed under that section, however, unless the portion exceeds
$5,000. Sec. 6662(e)(2). A gross valuation misstatement denotes
any substantial valuation misstatement, as determined under
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