Valuation misstatement penalties require a value claimed on a return

Plain-English summary

Taxpayers overvalued property, but did not claim that property value on a return. The resulting underpayment instead arose from disallowed interest expense deductions. Chief Counsel advised that, under IRC § 6662(e)(1), neither the substantial valuation misstatement penalty nor the gross valuation misstatement penalty could apply in those circumstances.

Ruling snapshot

• Question: Could valuation misstatement penalties apply when the overvalued property's value was not claimed on a return?
• Outcome: Advice given, neither penalty applied
• Key authorities: IRC §§ 6662(e)(1) and 6662(h)(1)

Full text (IRS public release)

ID: CCA-120514-14
UILC: 6662.00-00

Number: 201504012
Release Date: 1/23/2015
From:
Sent: Monday, December 05, 2014 14:04
To: --------------------------
Cc: ------------------
Bcc:
Subject: Re: 6662(h)(1) penalty question

Where the value of the property the taxpayers overvalued was not claimed on a return, neither the substantial valuation misstatement penalty nor the gross valuation misstatement penalty may be applied to the underpayment resulting from the disallowed interest expense deductions, pursuant to §6662(e)(1).

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Best,

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