Charles A. and Marian L. Derby, et al. - Page 70




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               B.  Analysis                                                           
               On brief, respondent specifically acknowledges that, if we             
          deny petitioners' charitable contribution deductions for reasons            
          other than their overvaluation of the transferred intangibles,              
          "the penalty is not applicable", citing Gainer v. Commissioner,             
          893 F.2d 225 (9th Cir. 1990), affg. T.C. Memo. 1988-416.                    
               In Gainer, the issue was whether the taxpayer was liable for           
          the overstatement penalty under circumstances in which his                  
          depreciation deduction and investment tax credit with respect to            
          an equipment purchase were denied because:  (1) The equipment was           
          not placed in service during the taxable year, (2) the equipment            
          was overvalued, and (3) the promissory note given in connection             
          with the purchase was nonrecourse so that he was not at risk.  We           
          refused to apply the penalty on the ground that the deduction and           
          credit were disallowed because the equipment had not been placed            
          in service during the tax year.  Therefore, the underpayments were          
          not "attributable to" any overstatement of value.42  The Court of           
          Appeals for the Ninth Circuit affirmed, reasoning as follows:               
               Even if Gainer had correctly valued the container, the                 
               underpayment of tax would be the same because the                      
               container was not placed in service.  Thus, Gainer's                   
               actual tax liability, after adjusting for failure to                   
               place the container in service, was no different from                  


               42 Sec. 6662(b)(3), like its predecessor provision (sec.               
          6659) considered in Gainer, imposes an addition to tax on                   
          underpayments "attributable to" any "substantial valuation                  
          misstatement" (referred to, in sec. 6659, as "a valuation                   
          overstatement").                                                            





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