- 25 - overstatement. Sec. 6621(c)(3)(A)(i). In 1981, petitioners claimed a value for the recyclers in excess of 150 percent of the true value of the recyclers. Therefore, petitioners had a valuation overstatement as defined in section 6659(c). For section 6621(c) interest to apply, the underpayment of taxes must be "attributable to" a tax-motivated transaction. Where a valuation overstatement or other category of tax- motivated transaction is an integral part of, or inseparable from, the ground for disallowance of an item, section 6621(c) increased interest applies. See McCrary v. Commissioner, 92 T.C. at 859. Petitioners stipulated that the Hyannis transaction lacked economic substance and conceded respondent's disallowance of their claimed deductions and credits related to Hyannis. By virtue of its lack of economic substance and the overvaluation of the Sentinel EPE recyclers, the Hyannis transaction is by definition a sham transaction. Moreover, we have already found that the valuation overstatement of the recyclers was an integral part of the ground for disallowance of the items related to Hyannis. Accordingly, respondent's determination as to the applicable interest rate for deficiencies attributable to tax- motivated transactions is sustained, and the increased rate of interest applies for the taxable year in issue. To reflect concessions and our conclusions, Decision will be entered under Rule 155.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Last modified: May 25, 2011