AC499 DB 7

Under IRC 6662(h), this penalty is increased to 40% in the case of a gross valuation overstatement. The IRC 6662 penalty only applies to filed returns and does not apply to any portion of an underpayment that is subject to a fraud penalty. Net operating loss carrybacks, capital loss carrybacks and all credit carrybacks cannot be used to reduce the underpayment subject to the penalty. Interest will accrue on the penalty from the due date of the return, including extensions. (http://www.irs.gov/irm/part8/irm_08-017-007.html)

Fraud Penalty IRC 6663 imposes a fraud penalty at the rate of 75% on the portion of any underpayment attributable to fraud for returns due after 12/31/89 (without regard to extensions). This penalty only applies to filed returns. Net operating loss carrybacks, capital loss carrybacks and all credit carrybacks are not used to reduce the underpayment subject to the penalty. The accuracy-related penalty, IRC 6662, cannot apply to any portion of an underpayment on which the fraud penalty is imposed. IRC 6651(f) coversthe fraud penalty that applies to failure to file cases. On late filed returns the delinquency penalty under IRC 6651 and the fraud penalty under IRC 6663 can apply on the same return. Interest will accrue on the penalty from the due date of the return,
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