Gary W. McDonough - Page 21

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          than 400 percent of the amounts determined to be the correct                
          adjusted bases.  See Keller v. Commissioner, T.C. Memo. 2006-131;           
          Jaroff v. Commissioner, T.C. Memo. 2004-276; see also Zirker v.             
          Commissioner, 87 T.C. 970 (1986).  In that petitioner’s resulting           
          underpayment of tax for 1989 exceeded $5,000, we conclude that              
          petitioner’s underpayment of 1989 tax resulting from the                    
          disallowance of his reported cost bases and depreciation                    
          deduction was attributable to a gross valuation misstatement of             
          over $5,000.  See Massengill v. Commissioner, 876 F.2d 616 (8th             
          Cir. 1989), affg. T.C. Memo. 1988-427; Zirker v. Commissioner,              
          supra; Jaroff v. Commissioner, supra.  We thus also conclude that           
          petitioner is liable for the 40-percent accuracy-related penalty            
          under section 6662(h) for 1989, rather than the 20-percent                  
          accuracy-related penalty set forth in section 6662(a), unless he            
          meets the section 6664(c) exception for reasonable cause and good           
          faith, in which case no penalty will apply.                                 
               Petitioner’s posttrial briefs contain no discussion of                 
          Massengill, Zirker, or Jaroff, arguing instead that Gainer v.               
          Commissioner, 893 F.2d 225 (9th Cir. 1990), affg. T.C. Memo.                
          1988-416, and Todd v. Commissioner, 862 F.2d 540 (5th Cir. 1988),           
          affg. 89 T.C. 912 (1987), establish that the accuracy-related               
          penalty under section 6662(h) cannot apply if an asset such as              
          the cattle at issue does not exist.  We disagree with                       
          petitioner’s argument.  The deductions in the two cases                     

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