Gary W. McDonough - Page 22

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          petitioner relies on were disallowed because the relevant assets            
          were not placed in service during the years that were the subject           
          of those cases; the disallowance did not result from an asset’s             
          valuation or basis.  Here, valuation or basis was a deciding                
          factor in determining whether the benefits and burdens of                   
          ownership passed to TBS 89-1.  Moreover, as we stated in Keller             
          v. Commissioner, supra, in rejecting an argument similar to that            
          of petitioner:                                                              
                    If we accept petitioner’s assertion that he never                 
               received the benefits and burdens of ownership of the                  
               cattle, or that the cattle never existed, then his                     
               bases in the cattle would be zero.  See Zirker v.                      
               Commissioner, 87 T.C. 970, 978-979 (1986) (finding that                
               no actual sale of cattle took place and the correct                    
               adjusted basis of cattle was zero); Massengill v.                      
               Commissioner, T.C. Memo. 1988-427 (same as Zirker),                    
               affd. 876 F.2d 616 (8th Cir. 1989).  This conclusion is                
               supported by petitioner’s concession that he was not                   
               entitled to cost basis or depreciation deductions.  If                 
               petitioner’s correct bases are zero, then the bases                    
               claimed on his returns are considered to be 400 percent                
               or more of the correct amount, and are thus gross                      
               valuation misstatements.  See sec. 1.6662-5(g), Income                 
               Tax Regs.; see also Zirker v. Commissioner, supra at                   
               b.  Negligence/Disregard of Rules or Regulations                       
               Respondent alleged in his answer that petitioner was liable            
          for 1991 for an accuracy-related penalty under section 6662(a)              
          because his underpayment of tax for that year was attributable to           
          negligence or disregard of rules or regulations.  Petitioner                
          argues that he is not liable for such an accuracy-related penalty           
          because he acted reasonably in joining TBS 89-1 and in monitoring           

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