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the correct value, the addition is equal to 30 percent of the
underpayment. Sec. 6659(b).
Petitioners each claimed an investment tax credit and a
business energy credit based on purported values of $1,066,666
for each Sentinel EPE recycler. Petitioners stipulated that the
fair market value of each recycler was not in excess of $50,000.
Therefore, if disallowance of petitioners' claimed credits is
attributable to the valuation overstatement, petitioners are
liable for the section 6659 addition to tax at the rate of 30
percent of the underpayment of tax attributable to the credits
claimed with respect to Hyannis.
Section 6659 does not apply to underpayments of tax that are
not "attributable to" valuation overstatements. See McCrary v.
Commissioner, supra; Todd v. Commissioner, 89 T.C. 912 (1987),
affd. 862 F.2d 540 (5th Cir. 1988). To the extent taxpayers
claim tax benefits that are disallowed on grounds separate and
independent from alleged valuation overstatements, the resulting
underpayments of tax are not regarded as attributable to
valuation overstatements. Krause v. Commissioner, 99 T.C. 132,
178 (1992) (citing Todd v. Commissioner, supra), affd. sub nom.
Hildebrand v. Commissioner, 28 F.3d 1024 (10th Cir. 1994).
However, when valuation is an integral factor in disallowing
deductions and credits, section 6659 is applicable. See Illes v.
Commissioner, 982 F.2d 163, 167 (6th Cir. 1992), affg. T.C. Memo.
1991-449; Gilman v. Commissioner, 933 F.2d 143, 151 (2d Cir.
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