reasonable and ordinarily prudent person would have taken under
the circumstances. Accordingly, petitioner is liable for the
addition to tax due to negligence for taxable year 1984.
Respondent is sustained on this issue.
Issue 6. Valuation Overstatement
Respondent determined that petitioner’s underpayment in 1984
is, in part, attributable to a valuation overstatement. Section
6659 provides for an addition to tax on an underpayment of $1,000
or more attributable to a valuation overstatement.
A valuation overstatement is defined to include a claim on a
return of a valuation of 150 percent or more of the correct
valuation. Sec. 6659(c); see Leuhsler v. Commissioner, 963 F.2d
907, 911 (6th Cir. 1992), affg. T.C. Memo. 1991-179. The amount
of the addition to tax equals the product of the applicable
percentage, as determined under section 6659(b), and the
underpayment of tax resulting from the overvaluation. Sec.
6659(a).1
We have determined that petitioner’s claimed investment tax
credit in 1984 was based upon a gross overvaluation of the
subject master. Petitioner claimed an investment tax credit
based on the master’s purported value of $496,000. We have
determined, however, that the master’s actual value equaled
1Sec. 659 was enacted to discourage taxpayers from investing
in abusive tax shelters that rely on the significant
overvaluation of shelter assets in order to produce the desired
losses that serve to reduce the investors’ tax liabilities. See
H. Rept. 97-201, at 243 (1981), 1981-2 C.B. 352, 398.
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