Cases: United States v. Kaun, 827 F.2d 1144 (7th Cir. 1987); Sage v. United States, 908 F.2d 18 (5th Cir. 1990); United States v. White, 769 F.2d 511 (8th Cir. 1985)
(a) Imposition of penalty Any person who—
Amended 1984, 1989, 2004, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141 substituted “$1,000” for “the $1,000” in concluding provisions.
- 2004 Pub. L. 108-357 Pub. L. 108–357 inserted at end of concluding provisions “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7734(a)(3), added concluding provision and struck out former concluding provision which read as follows: “shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.”
- 1984 Pub. L. 98-369 Pub. L. 98–369 substituted “20 percent” for “10 percent”.
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(A) organizes (or assists in the organization of)—
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(i) a partnership or other entity,
(ii) any investment plan or arrangement, or
(iii) any other plan or arrangement, or
(B) participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and
Amended 1989
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7734(a)(1), inserted “(directly or indirectly)” after “participates”.
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(2) makes or furnishes or causes another person to make or furnish (in connection with such organization or sale)—
Amended 1989
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7734(a)(2), inserted “or causes another person to make or furnish” after “makes or furnishes” in introductory provisions.
(A) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or
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(B) a gross valuation overstatement as to any material matter,
shall pay, with respect to each activity described in paragraph (1), a penalty equal to $1,000 or, if the person establishes that it is lesser, 100 percent of the gross income derived (or to be derived) by such person from such activity. For purposes of the preceding sentence, activities described in paragraph (1)(A) with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) shall be so treated. Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.
(b) Rules relating to penalty for gross valuation overstatements
(1) Gross valuation overstatement defined For purposes of this section, the term “gross valuation overstatement” means any statement as to the value of any property or services if—
(2) Authority to waive The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith.
(c) Penalty in addition to other penalties The penalty imposed by this section shall be in addition to any other penalty provided by law.