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In petitioners' case, there was no argument made and no
evidence presented to the Court to prove that disallowance and
concession of the investment tax credits related to anything
other than a valuation overstatement. To the contrary,
petitioners stipulated substantially the same facts concerning
the underlying transactions as we found in Provizer v.
Commissioner, T.C. Memo. 1992-177. In the Provizer case, we held
that the taxpayers were liable for the section 6659 addition to
tax because the underpayment of taxes was directly related to the
overvaluation of the Sentinel EPE recyclers. The overvaluation
of the recyclers, exceeding 2325 percent, was an integral part of
our findings in Provizer that the transaction was a sham and
lacked economic substance. Similarly, the record in this case
plainly shows that the overvaluation of the recyclers is integral
to and is the core of our holding that the underlying transaction
here was a sham and lacked economic substance.
Consistent with our findings in Provizer, petitioners
stipulated that the Northeast partnership had no net equity
value, that Northeast's sole activity lacked any potential for
profit, and that the Northeast transaction therefore lacked
economic substance. When a transaction lacks economic substance,
section 6659 will apply because the correct basis is zero and any
basis claimed in excess of that is a valuation overstatement.
Gilman v. Commissioner, supra; Rybak v. Commissioner, 91 T.C.
524, 566-567 (1988); Zirker v. Commissioner, 87 T.C. 970, 978-979
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