                                           JEFFREY K. AND KRISTINE K. BERGMANN, PETITIONERS v.
                                                   COMMISSIONER OF INTERNAL REVENUE,
                                                               RESPONDENT
                                                        Docket No. 20894–05.                   Filed October 11, 2011.

                                                   Ps participated in a transaction promoted by KPMG, LLP
                                                (KPMG), that was the same as or substantially similar to a
                                                tax avoidance transaction described in Notice 2000–44, 2000–
                                                2 C.B. 255. R served KPMG with a summons concerning
                                                transactions described in Notice 2000–44, supra. The parties
                                                dispute whether the summons terminated the period for Ps to
                                                file a qualified amended return (QAR) under sec. 1.6664–
                                                2(c)(3), Income Tax Regs. Ps concede they are liable for a 20-
                                                percent accuracy-related penalty under sec. 6662(a), I.R.C., if
                                                they failed to file a QAR. R asserts Ps are liable for a 40-per-
                                                cent accuracy-related penalty for a gross valuation
                                                misstatement (gross valuation penalty) under sec. 6662(h),
                                                I.R.C., if Ps failed to file a QAR. The parties dispute whether
                                                Ps’ concession that they were not entitled to the deductions
                                                that gave rise to the 2001 tax underpayment precludes Ps’
                                                underpayment from being attributable to a gross valuation
                                                misstatement within the meaning of sec. 6662(h), I.R.C. Held:
                                                The period to file a QAR terminated before Ps filed the
                                                amended return. Held, further, Ps’ tax underpayment was not
                                                attributable to a gross valuation misstatement. Ps are there-
                                                fore not liable for the gross valuation penalty.

                                       Ronald B. Schrotenboer, Kenneth B. Clark, and Brad A.
                                      Bauer, for petitioners.
                                       Gerald A. Thorpe, for respondent.
                                         KROUPA, Judge: Respondent determined deficiencies in and
                                      accuracy-related penalties under section 6662(a) 1 for peti-
                                      tioners’ Federal income taxes for 2001 and 2002. Respondent
                                      has since conceded that petitioners are not liable for the 2001
                                      and 2002 deficiencies in tax and the 2002 accuracy-related
                                      penalty. Petitioners concede they had a tax underpayment
                                      for 2001 if they failed to file a qualified amended return
                                      (QAR) under section 1.6664–2(c)(3), Income Tax Regs. They
                                      further concede they are liable for a 20-percent accuracy-
                                      related penalty of $41,196 if they failed to file a QAR. There
                                      remain two issues for decision. The first is whether peti-
                                      tioners filed a QAR for 2001. We hold they did not. The
                                        1 All section references are to the Internal Revenue Code (Code) in effect for the year at issue,

                                      unless otherwise indicated.


                                      136




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                                      second is whether petitioners are liable for a 40-percent gross
                                      valuation penalty rather than the 20-percent penalty peti-
                                      tioners concede. We hold they are liable for the 20-percent
                                      accuracy-related penalty.

                                                                          FINDINGS OF FACT

                                        Some of the facts have been stipulated and are so found.
                                      We incorporate the stipulation of facts and the accompanying
                                      exhibits by this reference. Petitioners resided in Pleasanton,
                                      California, at the time they filed the petition.
                                      Background
                                        Petitioner Jeffrey K. Bergmann (Bergmann) worked at
                                      KPMG, LLP (KPMG). KPMG is and has long been one of the
                                      largest audit and tax service providers to many of the world’s
                                      largest corporations. Bergmann worked in KPMG’s Stratecon
                                      group as a tax partner from 2000–2001. Stratecon focused on
                                      designing, promoting and implementing aggressive tax plan-
                                      ning strategies for high-net-worth individuals. Bergmann
                                      met David Greenberg (Greenberg) while working in the
                                      Stratecon group. Bergmann and Greenberg both worked on a
                                      tax planning strategy known as the Short Option Strategy
                                      (SOS).
                                        SOS involved entering into a foreign exchange option trans-
                                      action, in which investors entered into two substantially off-
                                      setting option contracts with a bank, a long contract and a
                                      short contract. 2 The investor, upon entering into an SOS
                                      transaction, would transfer the long contract to a partnership
                                      or limited liability company (LLC), which would assume the
                                      investor’s obligation under the short contract. Usually a
                                      short time thereafter, the investor would withdraw from the
                                      partnership or LLC and receive a liquidating distribution. The
                                      investor’s liquidating distribution would consist primarily of
                                      foreign currency. When computing gain or loss on the sale of
                                      the foreign currency, the investor would report a basis in the
                                      foreign currency equal to the purportedly paid premium to

                                         2 The long contract obligated the bank to pay the client a certain amount if on the determina-

                                      tion date the exchanges equaled or exceeded the exchange rate indicated in the contract. The
                                      short contract obligated the client to pay the bank a certain amount if on the determination
                                      date the exchanges equaled or exceeded the exchange rate indicated in the contract.




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                                      acquire the long contract and would not treat the short con-
                                      tract as a liability for purposes of section 752.
                                         Starting around 2000, Greenberg began organizing and
                                      coordinating transactions that were the same as or substan-
                                      tially similar to SOS transactions (SOS-like transactions) for
                                      KPMG clients (clients) and KPMG partners (partners). Green-
                                      berg assisted at least seven partners, including Bergmann,
                                      with SOS-like transactions during 2000–2001. Greenberg per-
                                      formed substantially the same acts in organizing and coordi-
                                      nating SOS-like transactions for clients and partners. He
                                      would design planning strategies for clients and partners. He
                                      would also coordinate the brokerage and legal services
                                      required to effect the SOS-like transactions for clients and
                                      partners.
                                         Greenberg structured and facilitated Bergmann’s entry
                                      into an SOS-like transaction in 2000 (2000 transaction) and
                                      again in 2001 (2001 transaction). The 2000 transaction was
                                      the same as or substantially similar to a transaction
                                      described in Notice 2000–44, 2000–2 C.B. 255 (transactions
                                      generating losses by artificially inflating basis) (Notice 2000–
                                      44).
                                         Bergmann did not compensate Greenberg or KPMG for the
                                      2000 transaction and the 2001 transaction. Bergmann con-
                                      firmed, however, in a letter to his brokerage service provider,
                                      Deutsche Bank Alex Brown (DB Alex Brown), a subsidiary of
                                      Deutsche Bank AG, that he had obtained qualified tax advice
                                      on the 2000 transaction from his accountant KPMG and
                                      specifically Greenberg. He also stated in the letter that DB
                                      Alex Brown should contact his accountant KPMG and specifi-
                                      cally Greenberg if any questions or issues arose with the
                                      2000 transaction.
                                      Respondent’s             Investigation              of   KPMG          for    Section       6700
                                      Liability
                                        Respondent sent a letter to KPMG in October 2001, noti-
                                      fying KPMG that he was considering imposing penalties on
                                      KPMG for promoting abusive tax shelters. Respondent later
                                      notified KPMG by letter in February 2002 that he was con-
                                      ducting an examination to determine KPMG’s liability for
                                      organizing various tax shelters from 1994 to the present.




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                                         Respondent clarified the scope of his investigation on
                                      March 19, 2002, by serving two summonses on KPMG,
                                      requesting documents, records and testimony relating to its
                                      tax shelter activities. These summonses explicitly state they
                                      concern an examination of KPMG for liability under section
                                      6700 (regarding a promoter penalty), among other provisions
                                      of the Code. One of the summonses narrows the investiga-
                                      tion’s scope by defining the transactions to which it applies.
                                      Specifically, the summons defines the transaction at issue as
                                      one that is the same as or substantially similar to a trans-
                                      action described in Notice 2000–44 (Notice 2000–44 sum-
                                      mons).
                                         KPMG provided respondent a list of clients it believed had
                                      engaged in the transactions described in Notice 2000–44 in
                                      response to the Notice 2000–44 summons. The list did not
                                      include Bergmann. More than two years later, KPMG provided
                                      respondent a revised list. The revised list included
                                      Bergmann’s 2000 transaction but not his 2001 transaction.
                                      Petitioners’ Federal Income Tax Return for 2001
                                        Petitioners timely filed a Federal income tax return for
                                      2001 (original return). Petitioners claimed a $346,609 ordi-
                                      nary loss for the 2000 transaction. Petitioners also claimed
                                      a $295,500 long-term capital loss for the 2001 transaction.
                                      Petitioners filed an amended Federal tax return for 2001 in
                                      March 2004 (amended return). Petitioners removed the
                                      losses attributable to the 2000 transaction and the 2001
                                      transaction on the amended return and reported and paid
                                      $205,979 of additional tax. They did not concede, however,
                                      that the losses were improperly reported. Nor did they fore-
                                      close themselves from taking another position on another
                                      amended return. 3 Respondent credited the tax payment to
                                      petitioners’ account. A year after receiving the amended
                                      return, respondent informed petitioners that the 2001 return
                                      was being audited.
                                        Respondent subsequently issued the notice of deficiency in
                                      which he determined deficiencies in petitioners’ Federal


                                        3 Petitioners have since conceded that they were not entitled to any deductions attributable

                                      to the losses generated by the 2000 transaction and the 2001 transaction.




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                                      income taxes and accuracy-related penalties for 2001 and
                                      2002. 4
                                        Petitioners timely filed a petition.

                                                                                  OPINION

                                        We are asked to decide for the first time whether the
                                      Commissioner must impose a promoter penalty under section
                                      6700 (relating to abusive tax shelters) to terminate the time
                                      to file a QAR under section 1.6664–2(c)(3)(ii), Income Tax
                                      Regs. (the promoter provision). Petitioners essentially argue
                                      that respondent failed to establish that KPMG is liable for a
                                      promoter penalty under section 6700 and therefore the time
                                      to file a QAR never terminated. If petitioners failed to file a
                                      QAR, we need to decide whether they are liable for the gross
                                      valuation penalty for 2001.
                                      I. Whether Petitioners Filed a QAR
                                         We begin by explaining the general rules for filing a QAR.
                                      A taxpayer can avoid having an underpayment and the
                                      imposition of an accuracy-related penalty by filing a QAR. A
                                      QAR treats additional tax reported on an amended return as
                                      tax reported on the original return. Sec. 1.6664–2(c)(2),
                                      Income Tax Regs. A QAR is an amended return that is filed
                                      before certain terminating events. Respondent contends that
                                      the period to file a QAR terminated under the promoter provi-
                                      sion before petitioners filed the amended return. Respondent
                                      does not contend that the period to file a QAR terminated
                                      under any of the other subdivisions of section 1.6664–2(c)(3),
                                      Income Tax Regs. Accordingly, we focus our attention on the
                                      promoter provision.
                                         Under the promoter provision, the period to file a QAR
                                      terminates when the IRS first contacts a person concerning
                                      liability under section 6700 (a promoter investigation) for an
                                      activity with respect to which the taxpayer claimed a tax
                                      benefit. Sec. 1.6664–2(c)(3)(ii), Income Tax Regs. Petitioners
                                      argue that respondent must establish that the person con-
                                        4 The Court assumes that respondent determined that the partnership involved in the 2000

                                      transaction was a small partnership within the meaning of the small partnership exception, see
                                      sec. 6231(a)(1)(B)(i), and that it was not subject to the unified partnership audit and litigation
                                      procedures of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97–248,
                                      sec. 402(a), 96 Stat. 648. Even if that determination were erroneous, the TEFRA provisions
                                      would not apply. See sec. 6231(g)(2).




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                                      tacted about a promoter investigation is in fact liable for a
                                      promoter penalty under section 6700 (the penalty require-
                                      ment). We do not find any penalty requirement in the pro-
                                      moter provision. 5 Respondent need not have found KPMG
                                      liable for the promoter penalty under section 6700. We there-
                                      fore reject petitioners’ argument.
                                         We focus now on the facts. The period to file a QAR will
                                      have terminated for petitioners when respondent first con-
                                      tacted KPMG about a promoter investigation if the promoter
                                      investigation covered either the 2000 transaction or the 2001
                                      transaction. 6 We now turn to these issues.
                                           A. Whether KPMG Was Under Investigation Before Peti-
                                              tioners Filed the Amended Return
                                        Petitioners filed the amended return for 2001 on March 15,
                                      2004. This is the dispositive date by which respondent had
                                      to contact KPMG concerning a promoter investigation.
                                      Respondent served KPMG with two summonses on March 19,
                                      2002. These summonses explicitly stated that they concerned
                                      the liability of KPMG under section 6700. We find that
                                      respondent contacted KPMG about a promoter investigation
                                      before petitioners filed the amended return. We now consider
                                      whether the promoter investigation covered either the 2000
                                      transaction or the 2001 transaction.
                                           B. Whether Respondent’s Investigation of KPMG Covered
                                              the 2000 Transaction or the 2001 Transaction
                                        Petitioners argue that Greenberg acted in his individual
                                      capacity, not on behalf of KPMG, when he organized and
                                      coordinated petitioners’ 2000 transaction and 2001 trans-
                                      actions and therefore the promoter investigation of KPMG
                                      cannot cover the 2000 transaction and the 2001 transaction. 7
                                      We agree that respondent’s investigation of KPMG may cover
                                      only transactions that KPMG promoted. Accordingly, we first
                                        5 A U.S. District Court also rejected the argument that the promoter provision includes the

                                      penalty requirement. See Sala v. United States, 100 AFTR 2d 2007–5097, 2007–2 USTC par.
                                      50,567 (D. Colo. 2007). We note that this decision is not binding on us. See infra pp. 143–144.
                                        6 The 2000 transaction and the 2001 transaction are the activities at issue, as these are the

                                      transactions from which petitioners claimed losses (tax benefits) on the original return and
                                      which were later eliminated on the amended return.
                                        7 We find petitioners’ argument curious, given they indicated in a letter to DB Alex Brown

                                      that it should contact their accountant KPMG and specifically Greenberg if any questions or
                                      issues arose in connection with the 2000 transaction.




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                                      address whether Greenberg’s acts are attributable to KPMG.
                                      If they are, we then decide whether any of the summonses
                                      served on KPMG cover the 2000 transaction or the 2001 trans-
                                      action.
                                           1. Whether Greenberg’s Acts Are Attributable to KPMG
                                        The parties agree that California agency and partnership
                                      law controls. Partners are agents of the partnership for the
                                      purpose of its business under California law. Cal. Corp. Code
                                      sec. 16301 (West 2006). An act by a partner that is appar-
                                      ently within the usual course of partnership business is
                                      binding on the partnership unless the partner had no
                                      authority to act and the person dealing with the partner
                                      knew the partner had no authority to act. See id.; Owens v.
                                      Palos Verdes Monaco, 191 Cal. Rptr. 381, 385 (Ct. App.
                                      1983). The apparent scope of partnership business depends
                                      on the conduct of the partners and the partnership. See
                                      Blackmon v. Hale, 463 P.2d 418 (Cal. 1970).
                                        We now look to the scope of KPMG’s partnership business.
                                      The conduct of KPMG’s Stratecon group and the conduct of
                                      Greenberg are relevant to determining the scope of KPMG’s
                                      partnership business. Stratecon was responsible for
                                      designing, promoting and implementing tax strategies,
                                      including SOS-like transactions. Greenberg was hired specifi-
                                      cally to work in this group. Greenberg regularly organized
                                      and coordinated SOS-like transactions for clients and for at
                                      least seven partners during the years at issue. He performed
                                      substantially the same acts in organizing and coordinating
                                      SOS transactions for both clients and partners. On the basis
                                      of KPMG’s conduct and Greenberg’s conduct, we find that the
                                      scope of KPMG’s partnership business included organizing and
                                      coordinating SOS-like transactions for both clients and part-
                                      ners.
                                        Now we must determine whether the 2000 transaction and
                                      the 2001 transaction were within the scope of KPMG’s part-
                                      nership business. Simply put, they were. First, the 2000
                                      transaction and the 2001 transaction were SOS-like trans-
                                      actions, the same transactions Greenberg promoted to clients
                                      and partners. Second, Greenberg assisted petitioners with
                                      the 2000 transaction and the 2001 transaction during the
                                      period that he worked in the Stratecon group and assisted




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                                      clients and partners with SOS-like transactions. We find that
                                      the 2000 transaction and the 2001 transaction were within
                                      the scope of KPMG’s partnership business and specifically
                                      within the scope of Greenberg’s responsibilities as a KPMG
                                      partner.
                                         Finally, we look at whether KPMG expressly limited Green-
                                      berg’s apparent authority to organize and coordinate SOS-like
                                      transactions for partners. Petitioners relied solely on
                                      Bergmann’s testimony to show that Greenberg was not
                                      authorized to organize and coordinate SOS-like transactions
                                      for partners. Bergmann testified that partners, to the best of
                                      his knowledge, were not permitted to perform services with-
                                      out obtaining a fee. We find Bergmann’s after-the-fact testi-
                                      mony to be self-serving. We are unable to place any weight
                                      on this testimony.
                                         The record shows that there was no limitation on Green-
                                      berg’s apparent authority. Petitioners failed to introduce any
                                      agreement (e.g., a partnership agreement) that in fact limits
                                      Greenberg’s apparent authority. Additionally, Greenberg
                                      organized and coordinated SOS-like transactions for at least
                                      six other partners during this same period. Moreover,
                                      nothing in the record indicates that KPMG ever objected to
                                      Greenberg’s assisting partners.
                                         We find that KPMG did not limit Greenberg’s apparent
                                      authority. Accordingly, we further find that Greenberg was
                                      acting as agent for KPMG with respect to the 2000 transaction
                                      and the 2001 transaction. Consequently, we turn our atten-
                                      tion to whether the summonses served on KPMG cover either
                                      the 2000 transaction or the 2001 transaction.
                                           2. Whether at Least One of the Summonses Covers the 2000
                                              Transaction or the 2001 Transaction
                                        Respondent’s promoter investigation of KPMG will cover
                                      petitioners’ 2000 and 2001 transactions only if it was ‘‘con-
                                      cerning’’ an ‘‘activity’’ from which petitioners claimed a tax
                                      benefit. The parties disagree on the degree of specificity
                                      respondent must use to reference an ‘‘activity’’ in a summons
                                      for the summons to ‘‘[concern]’’ an ‘‘activity.’’ Petitioners
                                      argue that the promoter provision must be interpreted nar-
                                      rowly and that the summons must specifically identify an
                                      activity; e.g., the ‘‘Deerhurst Program.’’ Petitioners rely upon




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                                      Sala v. United States, 552 F. Supp. 2d 1167, 1204 (D. Colo.
                                      2008), revd. on another issue 613 F.3d 1249 (10th Cir. 2010).
                                      In Sala, the taxpayer participated in a foreign currency
                                      investment known as the ‘‘Deerhurst Program.’’ Id. at 1175.
                                      The court in Sala held that the Government’s contacting
                                      KPMG concerning a promoter investigation did not terminate
                                      the period to file a QAR because KPMG was not specifically
                                      contacted regarding ‘‘Deerhurst’’. Id. at 1204. Decisions of
                                      U.S. District Courts are not binding on this Court. See Fried-
                                      man v. Commissioner, T.C. Memo. 2010–45. We are therefore
                                      not bound by the decision in Sala.
                                        Respondent argues that a summons will cover a trans-
                                      action if it refers to (at least) the type of transaction that the
                                      taxpayer participated in; e.g., ‘‘a transaction that is the same
                                      or substantially similar to a transaction described in Notice
                                      2000–44.’’ We agree. Petitioners read the promoter provision
                                      too narrowly. We agree with respondent that a summons will
                                      cover a transaction if it refers to the type of transaction in
                                      which the taxpayer participated.
                                        Here, the Notice 2000–44 summons refers to all trans-
                                      actions that are the same as or substantially similar to a
                                      transaction described in Notice 2000–44. The 2000 trans-
                                      action is the same as or substantially similar to a transaction
                                      described in Notice 2000–44. Thus, the Notice 2000–44 sum-
                                      mons refers to the type of transaction in which petitioners
                                      participated. We therefore find that the Notice 2000–44 sum-
                                      mons covers the 2000 transaction.
                                        We note that respondent’s interpretation of the promoter
                                      provision and our conclusion that the Notice 2000–44 sum-
                                      mons covers the 2000 transaction are consistent with the
                                      purpose of the promoter provision. The purpose of the pro-
                                      moter provision is to encourage taxpayers to voluntarily dis-
                                      close abusive tax shelters. See T.D. 9186, 2005–1 C.B. 790.
                                      Respondent’s interpretation effects this purpose by termi-
                                      nating the period to file a QAR when disclosure would no
                                      longer be voluntary, as in this case.
                                        Petitioners could reasonably conclude that respondent
                                      would discover their 2000 transaction once KPMG was served
                                      the Notice 2000–44 summons. Accordingly, disclosure after
                                      the Notice 2000–44 summons was served on KPMG would not
                                      have been voluntary. In stark contrast, under petitioners’
                                      interpretation, the Notice 2000–44 summons would not




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                                      terminate the period to file a QAR and would thus allow peti-
                                      tioners to file a QAR when disclosure would no longer be vol-
                                      untary.
                                         We ultimately conclude that the amended return peti-
                                      tioners filed was not a QAR since it was filed after respondent
                                      issued KPMG the Notice 2000–44 summons. Consequently,
                                      the additional tax stated on the amended return is not
                                      includable in the amount of tax shown on the original return.
                                      Petitioners therefore had an underpayment of tax for 2001
                                      equal to the additional tax reported on the amended return.
                                      II. Whether Petitioners Are Liable for the Gross Valuation
                                          Penalty
                                         We now must focus on whether petitioners are liable for a
                                      40-percent gross valuation penalty under section 6662(h). A
                                      taxpayer is liable for the gross valuation penalty on any por-
                                      tion of an underpayment attributable to a gross valuation
                                      misstatement. Sec. 6662(h). The parties dispute whether
                                      petitioners’ concession that they were not entitled to the loss
                                      deductions that gave rise to the 2001 underpayment (losses
                                      at issue) precludes the imposition of the gross valuation pen-
                                      alty.
                                         We have held that when the Commissioner asserts a
                                      ground unrelated to value or basis of property for totally dis-
                                      allowing a deduction or credit and a taxpayer concedes the
                                      deduction or credit on that ground, any underpayment
                                      resulting from the concession is not attributable to a gross
                                      valuation misstatement. See McCrary v. Commissioner, 92
                                      T.C. 827, 851–856 (1989). We have extended our holding to
                                      situations where the taxpayer does not state the specific
                                      ground upon which the concession of the deduction or credit
                                      is based so long as the Commissioner has asserted some
                                      ground other than value or basis for totally disallowing the
                                      relevant deduction or credit. See Rogers v. Commissioner,
                                      T.C. Memo. 1990–619; see also Schachter v. Commissioner,
                                      T.C. Memo. 1994–273.
                                         In this case, petitioners conceded ‘‘on grounds other than
                                      regarding the value or basis of the property’’ that they were
                                      not entitled to deduct any portion of the losses at issue. Peti-
                                      tioners argue that there is a ground other than value or basis
                                      for conceding the losses at issue in full because respondent




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                                      has consistently alleged that the 2000 transaction and the
                                      2001 transaction lacked economic substance and were
                                      engaged in solely for tax avoidance purposes. We agree. Both
                                      the economic substance and tax avoidance doctrines, if
                                      successfully employed, would result in the total disallowance
                                      of the losses at issue without regard to the value or basis of
                                      the property used in the 2000 transaction and the 2001
                                      transaction. See Leema Enters., Inc. v. Commissioner, T.C.
                                      Memo. 1999–18, affd. sub nom. Keeler v. Commissioner, 243
                                      F.3d 1212 (10th Cir. 2001). Nevertheless, we have held that
                                      the gross valuation penalty applies when an underpayment
                                      stems from deductions or credits that are disallowed because
                                      of lack of economic substance. See Petaluma FX Partners,
                                      LLC v. Commissioner, 131 T.C. 84, 104–105 (2008), affd. in
                                      pertinent part, revd. in part and remanded 591 F.3d 649
                                      (D.C. Cir. 2010).
                                         Petitioners argue that under Court of Appeals for the
                                      Ninth Circuit precedent the gross valuation penalty may not
                                      be imposed when a deduction or credit may be disallowed
                                      because of tax avoidance or lack of economic substance. Peti-
                                      tioners further argue that this is the case even when the
                                      deduction or credit stems from a tax avoidance scheme
                                      lacking economic substance that involves overvaluation of
                                      property. We follow the Court of Appeals decision squarely
                                      on point when appeal from our decision would lie to that
                                      court absent stipulation by the parties to the contrary.
                                      Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d
                                      985 (10th Cir. 1971). This case is appealable to the Court of
                                      Appeals for the Ninth Circuit. That court, recognizing that in
                                      many Federal circuits the gross valuation penalty applies
                                      ‘‘when overvaluation is intertwined with a tax avoidance
                                      scheme that lacks economic substance’’, held that it was con-
                                      strained under its own precedent from applying the gross
                                      valuation penalty in that situation. Keller v. Commissioner,
                                      556 F.3d 1056, 1061 (9th Cir. 2009), affg. in part, revg. in
                                      part and remanding T.C. Memo. 2006–131. Because this case
                                      is appealable to the Court of Appeals for the Ninth Circuit,
                                      we follow that court’s precedent.
                                         Accordingly, we conclude that the underpayment for 2001
                                      is not attributable to a gross valuation misstatement and
                                      that petitioners are not liable for a 40-percent gross valu-
                                      ation penalty. Petitioners are liable, however, for the 20-per-




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                                      cent accuracy-related penalty of $41,196 on the basis of their
                                      concession.
                                         We have considered all arguments the parties made in
                                      reaching our holdings, and, to the extent not mentioned, we
                                      find them irrelevant or without merit.
                                         To reflect the foregoing,
                                                                           Decision will be entered for respondent.

                                                                               f




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