Leon and Belle Atkind - Page 25

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            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.                                         

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