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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