T.C. Memo. 2009-289



                         UNITED STATES TAX COURT



          JEFFREY K. AND KRISTINE K. BERGMANN, Petitioners v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 20894-05.                Filed December 16, 2009.



        Ronald B. Schrotenboer and Brad Bauer, for petitioners.

        Gerald A. Thorpe, for respondent.



                           MEMORANDUM OPINION


        KROUPA, Judge:   This matter is before the Court on

petitioners’ motion for summary judgment filed pursuant to Rule

121.1    Respondent determined deficiencies in petitioners’ Federal
                                 -2-

income taxes and accuracy-related penalties under section 6662

for 2001 and 2002.    This motion solely concerns the return for

2001 with respect to which respondent determined a $10,521

deficiency and a $79,334 gross valuation misstatement penalty

under section 6662(h).

     Petitioners ask this Court to grant them summary judgment on

two issues.   The first is whether, as a matter of law,

petitioners filed a “qualified amended return” for 2001 and are

therefore not liable for a valuation misstatement penalty under

section 6662.   The second issue is whether petitioners are not

liable for the valuation misstatement penalty as a matter of law

on the ground that they may have conceded the deficiency.    We

will deny petitioners’ summary judgment motion for both issues as

we do not have enough facts to make a proper determination.

                             Background

     The following facts have been assumed solely for resolving

the pending motion.    Petitioner Jeffrey K. Bergmann, a partner at

KPMG, engaged in a series of currency options transactions

commonly known as Son of BOSS tax shelter transactions2 in 2000

     1
      All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code in effect for the year at issue, unless otherwise
indicated.
     2
      Son of BOSS transactions purport to allow a taxpayer to
reduce or eliminate capital gains by creating artificial losses
through the transfer of assets laden with significant liabilities
                                                   (continued...)
                                -3-
and 2001.   Petitioners claimed $346,609 of ordinary losses and

$295,500 of capital losses attributable to these transactions on

their return for 2001 (original return).

     Respondent began investigating KPMG to determine whether the

firm promoted tax shelters to its private clients and partners

during the tax year at issue.   Respondent served summonses on

KPMG in 2002 requesting documents and testimony relevant to

determining KPMG’s liability for penalties for promoting abusive

tax shelters under section 6700.   The summonses issued to KPMG

covered Son of BOSS transactions, but respondent did not then

contact petitioners about their claimed losses.

     Petitioners subsequently filed an amended Federal tax return

for 2001 in March 2004 (amended return).   Petitioners removed the

losses attributable to the Son of BOSS transactions on the

amended return and reported $205,979 of additional tax.

Petitioners specifically stated in the amended return, however,

that they are not conceding the correctness of the positions

asserted in Notice 2000-44, 2000-2 C.B. 255 and Notice 2002-21,

2002-1 C.B. 7303 or foreclosing the possibility that they might

file another amended return reflecting a different filing

     2
      (...continued)
to a partnership. See Kligfeld Holdings v. Commissioner, 

(2007).
     3
      These notices alert taxpayers that losses generated from
certain transactions that lack actual economic consequences are
not allowable for Federal tax purposes.
                                -4-

position.   Respondent credited the additional tax payment to

petitioners’ account.

     Respondent sent petitioners a letter a year after receiving

the amended return, informing petitioners that their return for

2001 was being examined.   Respondent thereafter issued the

deficiency notice for 2001 determining the deficiency and the

gross valuation misstatement penalty under section 6662(h) with

respect to the Son of BOSS transactions they had claimed on their

original return.   Respondent did not consider the amended return

when determining the penalty amount.     Petitioners timely filed a

petition and thereafter filed the motion for summary judgment at

issue.

                            Discussion

     We are asked to decide whether summary judgment is

appropriate.   Summary judgment is intended to expedite litigation

and avoid unnecessary and expensive trials.    See, e.g., FPL

Group, Inc. & Subs. v. Commissioner, 

, 74 (2001).       A

motion for summary judgment will be granted if the pleadings,

answers to interrogatories, depositions, admissions, and other

acceptable materials, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that a

decision may be rendered as a matter of law.    See Rule 121(b);

Elec. Arts, Inc. v. Commissioner, 

, 238 (2002).     The

moving party has the burden of proving that no genuine issue of
                                 -5-

material fact exists and that it is entitled to judgment as a

matter of law.   See, e.g., Rauenhorst v. Commissioner, 

, 162 (2002).   We grant summary judgment cautiously and

sparingly, and only after carefully ascertaining that the moving

party has met all requirements for summary adjudication.    See

Associated Press v. United States, 

, 6 (1945).

Underpayment of Tax Penalty Under Section 6662

     Petitioners move for summary judgment on the issue that they

are not liable for an accuracy-related penalty under section 6662

for having an “underpayment.”4   A taxpayer may correct an earlier

underpayment by filing a “qualified amended return,” which may

have the effect of preventing or reducing liability for the

accuracy-related penalty by substituting the tax shown on the

amended return for the tax shown on the return as originally

filed.   Sec. 1.6664-2(c)(2), Income Tax Regs.   Accordingly, if

the amended return for 2001 is a “qualified amended return,” then

there would be no underpayment of petitioners’ tax to which the

penalty would apply.   Respondent argues that the amended return

does not qualify as a “qualified amended return.”

     A “qualified amended return” is an amended return filed

after the due date of the return for the taxable year and before


     4
      An “underpayment” is the difference between (i) the correct
tax, and (ii) the tax shown on the return plus any amount not so
shown that was previously assessed (less any rebates). Sec.
6664(a).
                                  -6-

the earlier of certain events.    See sec. 1.6664-2(c)(3), Income

Tax Regs.    At issue here is whether petitioners filed the amended

return before respondent contacted “any person described in

section 6700(a)” concerning examination of a section 6700(a)

activity from which petitioners directly or indirectly claimed a

benefit on the original return.    See sec. 1.6664-2(c)(3)(ii),

Income Tax Regs.   If respondent contacted such a person

concerning such an activity before petitioners submitted the

amended return, then the return would not be a “qualified amended

return,” and the accuracy-related penalty may still apply.    The

parties disagree whether KPMG is a “person described in section

6700(a).”5   We now turn to that issue.

“Person Described in Section 6700(a)”

     Respondent claims to have contacted a “person described in

section 6700(a)” by serving summonses on KPMG.    Petitioners urge

this Court to find that KPMG is not a “person” under this

section, and thus, the summonses sent to KPMG would not bar their

amended return from being a “qualified amended return.”

     A “person” for section 6700 purposes is one who is involved

in promoting tax shelters or similar investment plans or


     5
      Respondent also argues that even if this Court finds that
KPMG is not a “person,” it could be proven at trial that Mr.
Bergmann and David Greenberg, a former KPMG partner, were
constructively contacted when respondent served summonses on
KPMG, thereby satisfying the “person described in sec. 6700(a)”
requirement.
                                -7-

arrangements and who, in connection with such promotions,

knowingly makes or furnishes (or causes others to make or

furnish) false or fraudulent statements as to the potential tax

benefits or a gross valuation overstatement.   See sec.

6700(a)(2)(A) and (B).   The flush language of section 6700(a)

provides that such a person must pay a $1,000 penalty for each

described activity.   Petitioners urge this Court to find that

KPMG is not a “person described in section 6700(a)” because

respondent failed to produce evidence that a penalty was assessed

against KPMG with respect to petitioners’ Son of BOSS

transactions.   Respondent asserts that we should not make a

negative inference from his inability to provide evidence on

whether KPMG is a “person described in section 6700(a).”

Respondent is unable to confirm whether KPMG was assessed a

penalty because that information constitutes KPMG’s “return

information,” which respondent is prohibited from disclosing

under section 6103.   Nor have petitioners requested this Court to

issue an order compelling such information to be disclosed, which

is a limited exception to the non-disclosure rule.6

     We have carefully considered the materials the parties

submitted in connection with petitioners’ motion for summary


     6
      We further find that petitioners, not respondent, have the
burden to show that no penalty has been assessed against KPMG for
the type of transaction petitioners claimed on the original
return.
                                 -8-

judgment.   We are unable to conclude, on the facts presented to

the Court at this juncture, whether KPMG qualifies as a “person”

under section 6700(a) and thus, whether petitioners’ amended

return is a “qualified amended return.”   We find genuine issues

of material fact remain concerning this issue.   See Sala v.

United States, 

, 1204 (D. Colo. 2008) (the

relevant inquiry is whether the third party was contacted

regarding the taxpayers’ particular transactions).     These

material facts include those respondent noted in his response to

petitioners’ reply memorandum.   Specifically, factual disputes

exist whether KPMG is a “person described in section 6700(a),”

and if it is, whether and when respondent first contacted KPMG

concerning promotion of tax shelter transactions with respect to

which petitioners directly or indirectly claimed tax benefits on

the original return.   These material facts need to be further

developed before the Court can determine whether the amended

return is a “qualified amended return.”   Accordingly, petitioners

are not entitled to summary judgment on this issue.7




     7
      Petitioners also argue that they did not take a false or
fraudulent position on their return to support their claim of
filing a “qualified amended return.” We find, however, a trial
is necessary to fully consider whether petitioners filed a
“qualified amended return.” We therefore need not address this
issue at this time.
                                    -9-

The Valuation Misstatement Penalty of Section 6662

       Petitioners also move for a summary judgment that no

valuation misstatement penalty applies to them as a matter of

law.       A taxpayer is liable for an accuracy-related penalty in the

amount of 20 percent of any part of an underpayment attributable

to a substantial valuation misstatement.8      See sec. 6662(a) and

(b)(3).       The Commissioner may increase the penalty to 40 percent

where the tax underpayment is attributable to one or more gross

valuation misstatements.9

       Petitioners argue they are entitled to summary judgment and

that respondent may not impose the valuation misstatement penalty

when the deductions giving rise to the penalty are disallowed in

toto.       See Keller v. Commissioner, 

(9th Cir.

2009).10      Petitioners claim that they have conceded the

deductions, which are the basis of respondent’s determination of

a penalty, by filing the amended return.       This Court has



       8
      A “substantial valuation misstatement” occurs if, among
other things, the reported value or adjusted basis of property is
200 percent or more of its correct value or adjusted basis. Sec.
6662(e).
       9
      A “gross valuation misstatement” occurs if the reported
value or adjusted basis of property is 400 percent or more of its
correct value or adjusted basis. Sec. 6662(h)
       10
      Petitioners were residents of California. We therefore
follow precedent from the Court of Appeals for the Ninth Circuit
to the extent such precedent is on point. See sec.
7482(b)(1)(A); Golsen v. Commissioner, 

(1970), affd.

(10th Cir. 1971).
                                 -10-

determined that it will not conduct a trial solely to address the

valuation misstatement issue where the taxpayer has conceded the

deficiency on other grounds.     See McCrary v. Commissioner, 

, 854-855 (1989); Schachter v. Commissioner, T.C. Memo.

1994-273.   Accordingly, petitioners assert that a valuation

misstatement penalty may not be imposed and that this Court

should dispose of the issue on summary judgment.

     Respondent counters that petitioners have yet to concede

that they are not entitled to the loss deductions attributable to

the Son of BOSS transactions.    As noted above, petitioners stated

in the amended return that they are not conceding the correctness

of the positions taken in the amended return.        We cannot find,

therefore, that petitioners have conceded that the transactions

lacked economic substance and that no deductions are allowable.

Accordingly, we find it premature to rule at this time that the

valuation misstatement penalty under section 6662(h) does not

apply.

     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,


                                             An appropriate order will

                                        be issued.