Leon and Belle Atkind - Page 24

                                                - 24 -                                                  
            and the appraisal in the promotional materials was unreasonable.                            
            The record does not establish an abuse of discretion on the part                            
            of respondent but supports respondent's position.  We hold that                             
            respondent's refusal to waive the section 6659 addition to tax is                           
            not an abuse of discretion.  Petitioners are liable for the                                 
            section 6659 addition to tax at the rate of 30 percent of the                               
            underpayment of tax attributable to the disallowed credits for                              
            1981.  Respondent is sustained on this issue.                                               
            Issue 3.  Sec. 6621(c) Tax Motivated Transactions                                           
                  Respondent determined that interest on deficiencies accruing                          
            after December 31, 1984, would be calculated under section                                  
            6621(c).  The annual rate of interest under section 6621(c)                                 
            equals 120 percent of the interest payable under section 6601                               
            with respect to any substantial underpayment attributable to tax-                           
            motivated transactions.  An underpayment is substantial if it                               
            exceeds $1,000.  Sec. 6621(c)(2).                                                           
                  The term "tax motivated transaction" includes "any sham or                            
            fraudulent transaction."  Sec. 6621(c)(3)(A)(v).  In this case,                             
            petitioners stipulated that the Hyannis transaction lacked                                  
            economic substance.  Transactions devoid of economic substance                              
            are sham transactions for purposes of section 6621(c)(3)(A)(v).                             
            Friendship Dairies, Inc. v. Commissioner, 90 T.C. 1054, 1068                                
            (1988); Cherin v. Commissioner, 89 T.C. 986, 1000 (1987).                                   
            Therefore, by definition the Hyannis transaction is tax motivated                           
            under section 6621(c)(3)(A)(v).  Moreover, the term "tax                                    
            motivated transaction" includes any section 6659(c) valuation                               

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011