Albert R. and Phyllis F. Dworkin - Page 21

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            Issue 2:  Sec. 6659 Valuation Overstatement                                                    
                  Respondent determined that petitioners are liable for the                                
            section 6659 addition to tax on the portion of their 1981                                      
            underpayment attributable to valuation overstatement.  In                                      
            respondent's notice of deficiency, the addition to tax under                                   
            section 6659 was applied to the entire amount of the disallowed                                
            loss and credits, resulting in a section 6659 addition to tax in                               
            the amount of $21,296.  Respondent subsequently reduced the                                    
            section 6659 addition to tax to apply only to the underpayment                                 
            attributable to the disallowed credits.  Respondent asserted in                                
            her reply brief a reduced section 6659 addition to petitioners'                                
            tax for 1981 in the amount of $19,083.  We consider the addition                               
            to tax under section 6659 for 1981 reduced to correspond to the                                
            amount in dispute as set forth in respondent's reply brief.                                    
                  A graduated addition to tax is imposed when an individual                                
            has an underpayment of tax that equals or exceeds $1,000 and "is                               
            attributable to" a valuation overstatement.  Sec. 6659(a), (d).                                
            A valuation overstatement exists if the fair market value (or                                  
            adjusted basis) of property claimed on a return equals or exceeds                              
            150 percent of the amount determined to be the correct amount.                                 
            Sec. 6659(c).  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 investment tax credit and a business                              
            energy credit based on purported values of $1,162,666 for each                                 

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