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If the claimed valuation exceeds 250 percent of the correct
value, the addition is equal to 30 percent of the underpayment.
Sec. 6659(b).
Petitioners claimed an operating loss and investment tax
credits based on purported values of $1,066,666 for each Sentinel
EPE recycler. Petitioners stipulated that the fair market value
of each recycler was not in excess of $50,000. Therefore, if
disallowance of petitioners' claimed tax benefits is attributable
to the valuation overstatement, petitioners are liable for the
section 6659 addition to tax at the rate of 30 percent of the
underpayment of tax attributable to the tax benefits claimed with
respect to Hyannis.
Section 6659 does not apply to underpayments of tax that are
not "attributable to" valuation overstatements. See McCrary v.
Commissioner, 92 T.C. 827 (1989); Todd v. Commissioner, 89 T.C.
912 (1987), affd. 862 F.2d 540 (5th Cir. 1988). To the extent
taxpayers claim tax benefits that are disallowed on grounds
separate and independent from alleged valuation overstatements,
the resulting underpayments of tax are not regarded as
attributable to valuation overstatements. Krause v.
Commissioner, 99 T.C. 132, 178 (1992) (citing Todd v.
Commissioner, supra), affd. sub nom. Hildebrand v. Commissioner,
28 F.3d 1024 (10th Cir. 1994). However, when valuation is an
integral factor in disallowing deductions and credits, section
6659 is applicable. See Illes v. Commissioner, 982 F.2d 163, 167
(6th Cir. 1992) (section 6659 addition to tax applies if a
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