Accuracy - Valuation Misstatement - Audit Techniques Guide | irstaxattorney.com



Accuracy-Related Penalties: Up Introduction Accuracy Related Penalty Negligence of Rules Substantial Understatement Valuation Misstatement Fraud Penalty Reasonnable Cause Annoucement 2002-2 Policy Statements Audit Techniques	Audit Techniques Guide Chapter 5: Substantial Valuation Misstatement In General For the accuracy-related penalty to apply in the case of a substantial valuation misstatement, the portion of the underpayment attributable to a substantial valuation misstatement must exceed $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company). A substantial valuation misstatement exists if the value or adjusted basis of any property claimed on a return is 200 percent or more of the amount determined to be the correct amount of such value or adjusted basis. IRC § 6662(e)(1)(A). See IRC § 6662(e)(1)(B) relating to substantial valuation misstatements relating to IRC § 482 property. If the value or adjusted basis of any property claimed on a return is 400 percent or more of the amount determined to be the correct amount of such value or adjusted basis, the valuation misstatement constitutes a "gross valuation misstatement.” IRC § 6662(h)(2)(A). If there is a gross valuation misstatement, then the 20 percent penalty under IRC § 6662(a) is increased to 40 percent. IRC § 6662(h)(1). There is no disclosure exception to this penalty. See Treas. Reg. § 1.6662-5(a). The only exception is reasonable cause and good faith under IRC § 6664.

Audit Techniques Guide

Chapter 5: Substantial Valuation Misstatement