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assets existed but 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 TBS 90-1 was
entitled to depreciation expense and other deductions claimed
with respect to the cattle. Moreover, as we stated in Keller v.
Commissioner, supra, in rejecting an argument similar to that of
petitioners:
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
978-979.[4]
4. Claimed Defense to the Accuracy-Related Penalty
We understand petitioners to argue that their underpayment
of tax for 1992 resulted from an honest mistake of fact. In
support thereof, petitioners discuss the case of Bales v.
4 Petitioners argue that the Court may sustain respondent’s
determination only if respondent establishes that some cattle
existed and the value of that cattle. We disagree for the
reasons stated in this quotation and elsewhere in this paragraph.
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