26 U.S.C. § 6700 — Promoting abusive tax shelters, etc.

(a) Imposition. A person who (1)(A) organizes or helps organize a partnership^* or other entity, an investment plan or arrangement, or another plan or arrangement, or (B) directly or indirectly takes part in selling an interest in one of them, and (2) in connection with that organization or sale makes, supplies, or causes another person to make or supply (A) a materially false or fraudulent statement about a deduction, credit, income exclusion, or other tax benefit from holding the interest or taking part in the plan, or (B) a gross valuation overstatement, owes for each activity a penalty of $1,000 or, if the person proves it is less, 100 percent of the gross income from the activity. Each organization concerning each entity or arrangement is a separate activity, and each sale is separate. If the activity involves a statement under (2)(A), the penalty is 50 percent of the activity’s gross income. (b) Gross valuation overstatements. (1) “Gross valuation overstatement” means a property or service value statement where (A) the stated value exceeds 200 percent of the correct value and (B) the value directly relates to a participant’s chapter 1 deduction or credit. (2) The Secretary^* may waive all or part of the penalty for such an overstatement if the valuation had a reasonable basis and was made in good faith. (c) Other penalties. This penalty is in addition to every other lawful penalty.