
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC6700]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
  CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
                                PENALTIES
 
                   Subchapter B--Assessable Penalties
 
                       PART I--GENERAL PROVISIONS
 
Sec. 6700. Promoting abusive tax shelters, etc.


(a) Imposition of penalty

    Any person who--
        (1)(A) organizes (or assists in the organization of)--
            (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
        (2) makes or furnishes or causes another person to make or 
    furnish (in connection with such organization or sale)--
            (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 known is 
        false or fraudulent as to any material matter, or
            (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 the $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.

(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--
            (A) the value so stated exceeds 200 percent of the amount 
        determined to be the correct valuation, and
            (B) the value of such property or services is directly 
        related to the amount of any deduction or credit allowable under 
        chapter 1 to any participant.

                       (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.

(Added Pub. L. 97-248, title III, Sec. 320(a), Sept. 3, 1982, 96 Stat. 
611; amended Pub. L. 98-369, div. A, title I, Sec. 143(a), July 18, 
1984, 98 Stat. 682; Pub. L. 101-239, title VII, Sec. 7734(a), Dec. 19, 
1989, 103 Stat. 2403.)


                               Amendments

    1989--Subsec. (a). Pub. L. 101-239, Sec. 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.''
    Subsec. (a)(1)(B). Pub. L. 101-239, Sec. 7734(a)(1), inserted 
``(directly or indirectly)'' after ``participates''.
    Subsec. (a)(2). Pub. L. 101-239, Sec. 7734(a)(2), inserted ``or 
causes another person to make or furnish'' after ``makes or furnishes'' 
in introductory provisions.
    1984--Subsec. (a). Pub. L. 98-369 substituted ``20 percent'' for 
``10 percent''.


                    Effective Date of 1989 Amendment

    Section 7734(b) of Pub. L. 101-239 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to activities 
after December 31, 1989.''


                    Effective Date of 1984 Amendment

    Section 143(c) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section and section 7408 of this 
title] shall take effect on the day after the date of the enactment of 
this Act [July 18, 1984].''


                             Effective Date

    Section 320(c) of Pub. L. 97-248 provided that: ``The amendments 
made by this section [enacting this section] shall take effect on the 
day after the date of the enactment of this Act [Sept. 3, 1982].''

                  Section Referred to in Other Sections

    This section is referred to in sections 6701, 6703, 7408, 7422 of 
this title; title 28 section 1509.
