(e) Substantial valuation misstatement under chapter 1The author thinks that the argument may not be as dry as its tax subject might suggest at first blush. I think that the author is enamored of the lawyer for the taxpayer in the case.
(1) In general. For purposes of this section, there is a substantial valuation misstatement under chapter 1 if—
(A) the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 150 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be), * * * *
The objective facts is that the current circuit split is 8-2. And, even judges within the 2 minority circuits have questioned the validity of those circuit's minority holding. While the Supreme Court does not just pick the majority circuit holding, that large a split has to have some effect.
And, of course, the merits seem to me to be in the Government's favor. Congress clearly intended the penalty to apply to basis overstatements. The genre of tax shelters in which these cases arise clearly have egregious basis overstatements. Why should the penalty not apply just because the shelters were so bad that they would fail on any number of grounds other than basis overstatement. At the end of the day they had basis overstatements. The penalty should apply, in my judgment.