Free Response to Motion - District Court of Federal Claims - federal

Case 1:06-cv-00123-FMA
Internal Revenue Service
30 East 7th Street St Paul, Minnesota 55101

Document 8-2

Filed 06/15/2006

Page 1 of 11

Department of the Treasury
Refer

To:

Ese Stop 4020BK
T axpayø ldnlio Number.

11-31622
N3me 01 Pain.shp:

Evergreen Traing, LLC

Pap ldelify Number:
13-4087394

Dele: SIP 2 6 2005

Ta. YOT Ened December 31,1999 & 2000
Dale FPAA Ma~ed 11 T3x MaUers Parter:

SEP 2 6 2005
PelOR to Coti GN rnvcstcnu.LLC

2060 Nintl AVtIUt

Rol:cako NY. i 1719

Bil Kahnke 41-03606

Conta Hou
8:00 am 104:30 pm

Cont:i Telephe Nur'
(651) J12~7909

NOTICE OF FINAL P ARTNERSHlP A.DMINISTRA TIVE A.DJUSTMENT
to send a Notice of The law requies us Final Parership Administrative Adjustment (FPAA) to the parership named above, for the ta year shown above, and to each p~rtr who is entitled to receive this notice.

We are proposing adjustents to the parters.hip items of

the parership and tax yea shown above. We will

send the exannation report outlning these adjustments to the Tax Matters Parer (IMP) ofthe partnership.
the parer who are not entitled to receive this notice. Any partner who wants a copy of should request it from the TMP. Iftb.e IM is unable to provide you with a copy of

(The TMP is the parter designted by the partnership to deal with the IRS.) He/she is also authorized to act for examination report the

the exanation repor

pleas contact the person named in the heading of this Jetter.

Taxable Years Ending Before August 6,1991:

The adjustments to the partership items reported on the parersJup tax return may cause an increase or decrease to the ta liabilty on your individua return. Ponn 870-P, Ágreementlo Assessment aid Collection 0/ Deficiency in Tax for PartntrÛlip Adjustments, is a smmar of the proposed adjustments to the partership
-retu. You can compute your shre of

the proposed adjustments by multiplying each adjusted partership item

by your percentage interest for that partership item.
Taxble Years Ending After August 5, 1997:
The adjustments to the parershp items reported on the partership tax retu may cause an increase or

decease in the tax liability on your individual return. The adjusents may include partership level

detertions regardig penalties and additions to ta tht relate to adjustments to parership items.
Form 810-PT. Agreement/or Partership Items and Partnership Leel Deterinations a. ro Penalties.
Addilions ro Tar, and Additional Amounts, is a suaiy of

the proposed adjustments to the partership return.

You can compute your share ofthe proposed adjustments by multiplying each adjusted parerhip item by

your percentage interest for that parership item.
Letter 1830 (00) (Rev. 3-2001)
Caliog Number 61242U

Case 1:06-cv-00123-FMA
Youh,ave three options available.

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Filed 06/15/2006

Page 2 of 11

to you:

1. If you 2gree with the adjustments:
Si~ and return the enclosed Fonn 870-PlFonn &70-PT. When you sign Form 870-PlFomi 870.PT, you are

agreeing to pay any additional tax and interest resultmg from the adjustments to the parnership return. For tax yea~ ending after Augut 5,.1997, you are also agreeing to any parership leve! determination as to penalties,
additions to ta and additional amountnhat relate to adjustments to parership items, if any. In addilion, you are waiving your rightS to parcipate. in any administrative' or judicial proceeding affecting panership items and in parerp level determnations as to penalties, additions to ta and additional amounts tht reJa~ to adjustments to parerip items for the ta year in question. This is a binding settlement only if you sign and
ret Form 870-PlFonn 870-PT and we sign on behalf of th Co¡nissioner of Internal RevenueSe~ce.
When we sign the agreeent form, Ihe one-year extension of

the period oflimitations on assessments wil begin under Internl Revenue Code section 6229(f). Once the agreement is signed by both paies,1r.ou may not
fie a claim to change the item in queston or claim a refund/credii based on a readjustment.

Note: If

you are the TMP of

the partership, see ihe section ofthislelter.entitied, "For the Tax Matters Partner

ofihe Partnership".

2. If you do not agree with tJe adjustments:
If you are the TMP of the parnership and w~t 10 contest the adjustments in court. you must fie this letter. Durg this 9Q-day perod. no other parer may

within 90 days froßl the date of

a petition file a petition for

. judicial review. You can file yourpeiilion for readjustment of

partnership items with:

1. the United States Tax Court; Federal Claims; or 3. the District Court of the Uiùted Staies, in the distrcl of ihe partnership's principal place of business.
2. the UIÙted States Court of

from the

A petition ril~d by the IMP precludes all other actions, If the IMP doen't fie a petition by the 90th day date the FPAA wa mailed, ány parter or any 5 percent group entitled to receive this notice may

petition one of these court. A "5 percent group" includes any group ofpartets who together have an inteest
before tbe.1

of five perenl or more in profits of the partership. The petition must be fied after the 90th day, but on or SOth day from the date the FPAAwas mailed to the TMP. rfmore than one petition is fied in Tax

. . Cour the fit petition tied will go forward. AIl other petitions (tven those riJed ealier in' one of the other
. courts) wil be dismissed. irno one 'files a petition in Tax Court, th first petition fied in one of

the other cour wil go forwrd and subsequent.petitions wil be disissed.' .
. Petitions filed with the Uniied States Tax Cour must be mailed to:

United States Tax Coùrt 400 Second Street, NW Washington, DC 20217
Attch Ùopy ofthis Jetter to the petiiion.' The time in which you must fie a p.etition.with Ihecour is fixed
by law and the court cannot consider your case if your petition is fied late. If this letter is addressed to

both a

. h'usband and wife and both '\-ant to petition the Tax Court both must sign the petition or each must fie a

se~arate signed petition.
letter 1830 (DO) (Rev. 3-2001)

C;I1Jo Nur -61242U

Case 1:06-cv-00123-FMA
When a parner (including each member of a 5

Document 8-2

Filed 06/15/2006

Page 3 of 11

percent group that files a petition) fieÙ petition in either the

approprite Distnct Court or the Cour of Federal Claims, the parter fiing the petition must deposit the amount
that the parner's tax liability would be increased if the treatment ofthe partership items on the parts return were made consistent with the treatment of parership ites under the FP AA If you reprted the partneiship

; items the way the partership reported them 'on its retu you can generally determne the amount to depoit by taking your pro rata share of the parnership adjustments into account in recomputing your tax. You must deposit the appropri~le ;iount with the IRS on or before the day you file yoUr petition;

3. Ifýou do' nothing: .

. . .

any ofthecourts listed in this letter, the FP ÁA becomes fmal. and we will bil .you for any additional tax plus interest .tht you may owe under the FP AA. Yau wil not be . permitted to contest the treabnent oftbe partnership items of the partership under the FPf\A in any refud claim or suit. The law allows the Servce to bil you after 150 days from the mailing date of the PPAA to the TMP.. If a petition for re3djustment is not filed in

However, if a peiition is fied in tle Tax Court and ihe Tax Court upholds the adjustments in whole or in
par. we wil not bil you until the Tax Court decision is final. .
¥óu iiîay wish to contact the TMP of

the partnership or your tax advisor .to discuss this.~atter.

If you have any questions, please wrte to the person whose nae and address are shown in the heading this letter. If

you wrte, attch a copy or ths le.tter to help identify yôùr account. Also, include your telephone

of

. number and the most convenient time for us to call you in ca we need additional informtion. .
Iryou prefer, you may call the IRS contact person at ,the t~lephone number shov,ii iIi the heading of

letter. If this number is outside your locl callng area, there wil be a long distace charge to you.
'I you for your cooperation.

, .

this

~~
Sincerely,

Kevin Harrs ~£.

Tecluícal Services Teritory Manager, Midwest Ara

Enclosure:"
Foim 870-PlFoon 87o.PT
Copy of

this lett

letter 1830 (00) (ReV'. 3.2001)

Caia Nub.1l12.2U

Case 1:06-cv-00123-FMA

Document 8-2

Filed 06/15/2006

Page 4 of 11

FOR iRE TAX MATIERS PARTNER OF THE PARTNERSHIP
If

you are the Tax Matters Partner (TMP), you are entitled to make an agreement to bind Don-notice parters

to the treatment of the parnership item as shown on the enclosed schedule of adjustments. You must add the

following statement above the signature blocks on the Pon 870-P or Fomi 87O-PT: .
. "The undersigned Tax Matters Parter is signg this offer on behalf of himself (hers'elf) ard all other
partrs whom he (sbe) bas the authonty to bind; a final agreement reSlting from the co-signature of

. .

the

Commissioner of Internl Revenue will. be bindig on all such other parers."
As the TMP, you may submit a petition, as descnbed above for the parership on behalfot all

parters.

of

the IRS 'contact person at the telephone number shown in the heading If you have any qùestions. you can. call this letter. Thank you for your cooperation.

leUer 1830 (DO) (Rev. 3-2001)
C3ia Number

612A2U .

Case 1:06-cv-00123-FMA

Document 8-2

Filed 06/15/2006

Page 5 of 11

o Bpal1lll 0I1Ie TrBa!ury - Iniemsl Revenue Service

Fonn 870-PT
(Re. 8-2004)

Agreement for Partnership Items and Partnership Level

Determinations as to Penalties, Additions to Tax. and Additonal Amounts
Name of Partnership:

IN REPLY REFER TO:

Ese Stop 4020
Tax Year(s) Ende:

Taxayer(s) name(s). addres and zip code:

Evergreen Trading, LLC

GN Investments, LlC
206 Ninth Avenue Ronkonkoma, NY. 117i9

Taxpayer Identifying Number:

Decembr 31, 1999 Decmber 31, 2000

13-087394
Name of Tax Mane PanrT:

AN Investments, LLC - 12/31/1999
Taxpa~r Id9Ttifying Number: 11-3516229

Sentinel Advisors, LLC - 12/3112000

Offer of Agreement to Partnership Items and Partnership Level Determinations as to

Penalties, Additions to Tax, and Additional Amounts
&

Waiver of Restrictions on Assessment for Partnership Items, Penalties, Additions to Tax, and

Additional Amounts
Under sections 6224(c) and 7'21 of the Interna Rever.e Coe (lAC) of 1986, the Commissione of the Intemal Revenue Serce and the undrsgned laxpayer(s) agree to the determinatin of partnership item and pannership level determinations as to penallies. addtins to tax, and additional amount that relate to adjustents 10 partnershp items as shown on the attched schedule of adjustments.

The undersigned 18xpayer(s), in accrdance with IRC sections 624(b) and 6213(d). also waive the restrictions provided by IRC sections 6225(a) and 6213(a) and consent to the asessment and collection of any deficency
attributable to partnership items. penalties, additions 10 tax, and additional amounts that relate to partnership items, as determined in this agreement, plus any interest provided by law.

Ths agreement is conditional and will not beome effective or final until lhis agreement fOTm is retumed to the Commissioner and is signed 00 his or her behalf. The one-year exension of the period of limitations on assessments under IRC secon 6229(1) will not begin to run until lhe date the Commissioners representative signs this form on the Commissionots behalf. If Uiis is a partal agreement. the penod of limitations for assessing any ta -attributable to the setted items shall be delermined as if this agreement had nol been entered inlo.

level determinations as to penalties, addtions tò ta and additioiaJ amounts that relate to adjusments to partnership
items under this agreement wiU not be reopened in the absenc of frud. malfeasance, or misrepresenlation of fact

!f this part 01 this agreement form is signed for the Commissioner, the treatment of partnership items an partership.

In addition, no claim for an adjustmnt of partership items, refund or credit based on any change in the treatmet of

partership ilems or partership level determinations as to penahies. additions to la, and additional amount may be
fied or prosected_
Sinature of Taxpayer

Date Signe

Signature of Taxpayer

DatlJ Signed

By (Sigriture and Title)

Date Signed

FOR INTERNAL

Date acced for Cossioner
Offce

SignlUr6
Tide

REVUE
USE ONLY

~18log _81 57:iiSA

_.lrsov

(Sê inSSrulicns for S"iginii AgIMmonl)

form 87O- (ri. &-200(1

Case 1:06-cv-00123-FMA

Document 8-2

Filed 06/15/2006

Page 6 of 11

. INSTRUCTIONS FOR SIGNlNG FORM B70-PT

1. If a JOINT RETURN OF A t-USBAND AND WIFE was filed and boUl spouses intend to agree, boUl spous~ should sign Form.a7o-PT. One spouse may sign as agent for the other if acting undr a

signing spouse. .
poer of attorney, which, ¡fno previously fied, must. accompany signature of

this form. The IRS may accept the only one spOuse at its discretio. However, the agreement will only be binding on the

2. If the taayer is a copclion, tle waiver must be signed with the ~6rporal9 name followed by the .

signature and tilé of the. offcer authorized to sign For 87o-PT.' .

3. Your attomey or agent may sign for you if this action is specifically authorized by

attorney, which if not prevfously fied, mus accompany this form. .
4. If this offer is signed by

a trust, lhe agreement must be signed with the lrust name, followed by th '. signature and title of the person authorized to sìgn~n behalf of thelrust..
be signec in the name of the common parent of the cO!lo'idated group for the consolidated reurn
year. The common parent corporation signs the agreement in it own name. The signature and tiUe of a current officer of the common parent corporation, who is authrized to bind the corporalion. should be displayed in the signature block.

'. .

a power

of

5. If this offer Is with respect to the tax liabilty for the 'consolidated return year, the agreement should

6. If the Tax Malters Partner signs this ofer, please include the title with the signaiure.

7. If this offer is signed by a Tax Matters Parner that is a subsidiary corporatin, then an offc;er aulhonzed to sign this agreement for the year(s) indicated on the form must sign for the parent . corporal/on. An authonzed offcer for the subsidiary corporation snould also sIgn if the Tax Maners Parer is binding non-notice partners under the agreement. See Treas. Reg. 1.1502.77(a)(3)(v):

. " .

C1talø9 Ni. S7' SA

...r..oo

(511 im¡1nlins 'or Siging Agr~menll

fomi 87o.PT tRIh. e.201

Case 1:06-cv-00123-FMA

Document 8-2

Filed 06/15/2006

Page 7 of 11

Departrrent ol ihe rreUU-lnl&rnal Revenue Servle~

AgreelJentfor Partnership Items and Partnership level DetermInations as to Penalties, Additons to Tax, and Additonal Amounts
SCHEOUlE OF ADJUSTMENTS
NAE OF PARTNERSHIP

TAX VE(S) ENDED

Evergreen Trading, LlC .'
12/31/19S9
TAXPAYER IDENTIFYING

12/1lOOO

NUMBER 13-4087394 .

DETAIL OF ADJUSTMENTS TO ORDINARY INCOME

TOTAl ADJUSTMENTS TO ORDINARY INCOME

OTHER ADJUSTMENTS

I, '" I,.
-0- . , ,

,-"'~-' -_. - ---~-- -..-

.~

A. Othrr IlItomc: (Loss)
(1) ADJUSTMENT

.

38.829,037 (37,905.25) .
-() "I ~- .,,'-.".. :.. --, -,"~---' - -- '; ... . .". ,- ~.J
291,910
(291.910)

. (2) AS REPORTED

(3) CORRE
. B. Other Deductons .
(1) ADJUSTMEN
(2) AS REPORTD

I . _
.(
683,301

(38,829,037)

37,905,225

(683,301)
-0-

(3) CORRECTED

-0-

REMAS
. . Reference Exhiil A aUached.
Accuracy Penalties under IRC Section 6662 are included as a partership level determination. See Exhibit A Paragraph 10 for a descrption or the penaltes. .

~"""9'.imbr 57315"

-_.""

For 87O-PT (Rev. a-ZlJJ

Case 1:06-cv-00123-FMA

Document 8-2

Filed 06/15/2006

Page 8 of 11

Form 870-PT,. Other Adjustments (Continued) .
NAME OF. PARTNERSHIP

Page_ol_
1211/2000
_ :..~___.L.:._~~._;..

TAX YEA(S) ENDED

Everreen Trading, LLC .

1211/1999
TAXAYER IDENIFYNG NUMBER 13-4087394

C C1piw Contnbutioi
. (1)AOJUSTENT
(2) AS REPORTED
(3) CORRECTED

\ _-;'," ',"".._ - ',-- r-:' ....~. ~ ~~7:.--(2,900.439)

(2.500\

2,900,439 2 SOO

-0- -0.... ..._..... ~.. __ _~.. _ .. r.._ ...._ .~_~__
-0.

D. Distrbutions orMonev

, ¡" . :.. . t, r' l' I". \. .. ....' ~J ~ ..'" . 1 ":

(i) ADJUSTEm
.

159 300

(2) AS REPORTED
(3) CORRECTED'

-0-

'/1593001
.0-

~'.~.~:. :.:;-~~~. ~': ...~ ....:~..~(~' '_~'~:Á ~~ ~~~ .~:. ~!i:

.0-

Other than Man

-0(2) AS .REPORTED

314

-0.
(3) CORRECTED

-0-

-I)
-0-0- ."

. F. OutSide Pai1rshiD Basis

~:'~ ....~ :"1,'," -.~~_'.~;_71 :' "~:'.- . ::~:'.~-":~~ . ,'.'. ~'..:.

(i) AOJUSTME!'
(2) AS REPORTED
. (3) GOARECTED

(79,299,5131

79.299.513

G.

., ....~..
r

,....

-0-.

.- .

"

.,....... .- ."

.o. .-- ---..- ....-..
,
, "

,

: .., ..'-'.

(1) ADJUSTEN
(2) AS REPORTED
# .

(3) CORRECTED
H.

_....._.
(1) ADJUSTMENT
.

" ,., .' ' - . - " '" .. . , " - .. ..--~--

'.
..
., .

,..

- ,

-,

_. .

-

. _.. ..

-

.'

- ._.

(2) AS REPORTED .
,(3) C.DRRECTED
'.1.

.. ..--_. , I. -

, ,.

, ¿ -- - ..

-.

-. ,

-

,.

. ~~. . l

.. _... .

(1) ADUSEN .
(2) AS REPORTED

(3)CORRECTED
c:ii.lo HUIDet fi31SA

_Jr.go

. .' . FOI 17o-PT (R. "2O/

Case 1:06-cv-00123-FMA

Document 8-2

Everareen Tradina.tlC

..

Filed 06/15/2006

Page 9 of 11

EXHIBIT A

. 1. It is dete(mined that neither Evergreen Trading, LtC nor its purported parters have esblished the existence of Evergreen Trading, LtC as
partne~hip as a matter of fact.
. 2. Even if EvergreehTrad~ng, LtC existed as °a partnersip, the purprted

. partership Was formed and availed of solely for purposes of tax avoidance . . by artifcially overstating basis in the partership interests of its purported
partners. The formation of Evergreen Trading,lLC, theacquisiton of any interest in the purprted partership by the purported p.arter. tle purcase of

Offsetting optins, the transfer of offsetting options to a' partnership in return . 0
for a partership interest, the purchase of ass'ets by the partership, and distñbution of

those assets to the purprted parters in complete liquidation of the partnership interests, and the subsequent salè of those assets to generate at a loss, all within a period of less than slx months, had no

the

. business,purpsè other than tax avoidance, lackecJ economic substnce, and,
in fact and sub~nce; constitutes an economic .sham for federal income' tax . . purposes. : AccOrdingly, the partnership' and the transactns descñbe . above.sliall be disregarded in full and any purported losses resultng from these transactions are not allowable as deductions are not allowed for federal income tax purpses.

3. It is datermined that Evergreen Trading,LLC was:a sham, lacked economic
.

substance and, under § 1.701-2 ofthe Income Tax Regulations, was formed.
value of its partners' aggrega1e fede~1 tax liability in a manner that is
with the intent of Subchapter K of the'

'. anä availed of in connection with a trnsacton or transa'ctions in taxable year 1999, a póncipal purpse of which was to reduce substantially the present
. inconsistent

Internal Revenue Code. It

. is consequently determined that: .
. a.. the Evergreen Trading,'LLC is disregarded and that all transactions
. engaged in by

the purported partership are treated as engaged in directy by its purported parters. This includes the determination that . .

. the assets p.urportedly acquired by Evergreen Trading, LLC, including . but not limited to for~ign currency options, were acqùired direct by the purported

parters. .' . ..... . . . . .
(s),' pu~ortedly contribute?

b. the foreign currency option

to or assumed

by Evergreen T rading~ LLC, are tr.eated as never having been .'

contributed to or assumed by saiEfaieF9hip and any gains or losses

purportedly realized by Evergreen Trad.ing,LLC on the option(s) are
treated as having been realized l:yits.partners. c. contributions to Evergreen Trading; LLC will be adjusted to reflect

clearly the partnerhip's or purported partners' income. .

Case 1:06-cv-00123-FMA

Document 8-2 Filed 06/15/2006 Everqreen Trådinq. LtC . EXHIBIT A'

Page 10 of 11

4. .It is determined that the Euro short positions (written call options) transferred
to Evergreen Trading, lLC constitute liabilties for

amounts 9f $26,433.171" for each of the'three parters, but not below the fair . ."!arket value of the purported partnership interest.

. Regulation.§1.752-6T.the assumption of which by Evérgreen Trading, LLC. shall reduce the. purported parters' bases in Ëvergreen Trading, LLC in the

purposes öf Treasury .

. 5. It is determined that trding losses of $38,837.363 claimed by Evergreen Trading, LLC are part of stradle positiòns as governed by § 1092 and as . such are nondeductble lossès ¡"the 1999 tax year.' Limitations imposed by § 1092 inclUde the limittion that deductible trading losses incurred as part of . straddle positions are Iimiled to only thOse amounts in excess of
unrecogniZed traing gains. .
6.' ltis determined that neither Evergreen partners' entered

. .

Trading; LLC nor its purprted

into the optin(s) pòsitons or purchase the foreign currency

or stock with.a profit motive for purposes of § 165(c)(2).. .
7.' it is deteriined lh~t& even if the 'foreign currÊmcy.option(~) are treated as

haVing been contributed to' Evergreen Trad~ng, LlC, the amount treated as contributed by the partners under section 722 of the. Internal Revenue Code is

reduce.by the amounts received by the contrbuting parters from the contemporaneous sales of the call option(s) to the same counter-party.
. Thus,.the basis of the cOntrbuted option(s) is reduced, both in the

the contruting partners and Evergreen Trading,'LlC. Consequently, any

hands of

correspondi"ng claimed increases in the outside. basis in Evergree'n Trading, LLC. resulting from the contributions of the foreign currency option(s) are

disallowed.

8.' It is determined that the adjusted b¡ises of the long qill positions (purchased
. call

their respec.ive partership interests in an amount greater.than zero (-0).

options), 'zero coupon notes, and other contributions purportedly CQntributed by the partners to Evergreen Trading, LiC has not been established under l.R.C. § 723. It is consequently determined that the partners ofEvergreen' Trading, LlC have not established adjusted bases in

9. . It is further determiied tlal, in tieease of a sale, exchange. or liquidation of Evergreen Trading, LLC partners' partnership interests" neiherthe purprted
partners' partership interests were greater than z"ro for

determining gain. or loss to such parters from the sale, exchange, or liquidation of such partmÚship interest

partnership nor its purported parterS have .established that the bases of the purposes of

2

Case 1:06-cv-00123-FMA

Document 8-2 Filed 06/15/2006 Evenirèeo Tradinci, LlC

Page 11 of 11

10: Accracy-Related Penalties

. .: EXHIBIT A

It is determined that the'adjuStents of partnership itef!s of Evergreen.
. Trading, llG are attribÜlab/e to a tax shelter for which no sùbslantial authorit
has been established for the pOsition'

was no . showing of reasonable belief by the part!lership or its párters that the

taken, and for which there

positin takèn was more likely than not the correct treatment of the tax shelter
.

and related transaCtions. In addition, all of thë underpåyments of tax resulting . from those adjustments of parterhip items are. attnbutble to, at a minimum, (1) substantial understatements of income tax, (2) gross' valuation

misstalemenf(s).or (3) negligence or disregarded. rules or regulations.' There
has nåt been a s~owing by the parte~hip' orany of its

. was reasonable cause for any of the rE!5ultng underpayments, ttat the .

parters tht there

partership' ~r any of its parters acted in goo faith, orthat any other exceptions to the penalty apply. . It is therefore detennined that at a
. Revenue Code applies' . of partership items

minimum, the accuracY-related pénalty under Seciori t)662(á)6fthe Internal to all underpayments of taxattibutablè.lo adjustments
of Evergreen Trading, LlC: The.penalty shall be

imposed on the Components of underpayment as follows: . .

A. å 40 percent penalty shall be ìmposed ori thepoi1io~ of any underpayment .'attbulable to the gross valuation misstatement as provided by Sections
6662(a), 6662(b)(3), 6662(e), and 666(h) of the.

S. a 20 percet penalty shall be imposed on the portion .of the underpayment.

Internal Revenue Code.

attnbutable ta ~egligence or disregar~ of rules and regulations as proided . by Sectons 6662(a), 6662(b)(1). 6662(c) of the Internal Revenue Coe.. c. a 20 percent penalty shall be imposed on the underpaymentattbufable to . the substantial understatement of income tax as prov~ded by s~ctons 6662(a), 6662(b)(2), and 6662(d) of the Internal Revenue Code. D. a 20 percent penalty shall beimposed on the underpayment attributable to
the.substntial valuation misstatement as provided bySections 6662(a),

6662(b)(J), and 6662(e) of the Internal Revenue Code.
. It shóld ;,ot be inferred by the determination of the Accuracy Related

in this. notice that fraud penalties wil not be sought on any portion of.an

Penalty

und~rpayment subsequenUy determined lo.be'àtlribulable 10 fraud or that prose~tion for crminal offense.s will not .be sought under IRG § 7201, 7206 or other provisions of federal law if determined to be appropriate~

3