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recyclers considered in these cases are the same type of machines
considered in the Provizer case.
Based on the entire record in these cases, including the
extensive stipulations, testimony of respondent's experts, and
cross-examination of them, and petitioners' testimony, we hold
that the Northeast transaction was a sham and lacked economic
substance. In reaching this conclusion, we rely heavily upon the
overvaluation of the Sentinel EPE recyclers. Respondent is
sustained on the question of the underlying deficiency. We note
that petitioners explicitly conceded this issue at trial, in
their briefs, and in a stipulation of settled issues. The record
plainly supports respondent's determination regardless of such
concession. For a detailed discussion of the facts and the
applicable law in a substantially identical case, see Provizer v.
Commissioner, supra.
In the notices of deficiency respondent determined that
petitioners were liable for the negligence additions to tax under
section 6653(a)(1) and (2) for 1981. Petitioners have the burden
of proving that respondent's determination is erroneous. Rule
142(a); Luman v. Commissioner, 79 T.C. 846, 860-861 (1982).
Section 6653(a)(1) imposes an addition to tax equal to 5
percent of the underpayment if any part of an underpayment of tax
is due to negligence or intentional disregard of rules or
regulations. In cases involving negligence, an additional amount
is added to the tax under section 6653(a)(2); such amount is
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