Leon and Belle Atkind - Page 18

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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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