Internal E-mail Memo Accompanies Private Letter Rulings

A brief internal e-mail memo accompanied this week’s release of private letter rulings. The subject of the memo reads “6662(h) penalty post-Aug 17, 2006.” Section 6662(h) imposes penalties on misstatements of gross valuation.

The memo implicitly references Section 6663(c)(2). This Section was amended as part of the Pension Protection Act of 2009, effective August 17, 2006. Section 6663(c)(2) states that a penalty will not be imposed for underpayment if the taxpayer can show “reasonable cause” and that he “acted in good faith.” Reg. Sec. 1.6664-4(h) has yet to be revised to implement this change. As it stands now, the Reg. disallows the “reasonable cause/good faith exception” unless a qualified appraisal supports the claimed valuation.  

In the memo, an attorney in the Chief Counsel’s office states that when the property in question is charitable deduction property, “there is no reasonable cause/good faith exception with respect to the 40% gross valuation penalty.”

See CCA 201202026 – No “Reasonable Cause” Exception for Gross Valuation Misstatement of Charitable Contribution, Charitable Planning, Jan. 16, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.