- 31 -
transaction. Sec. 6621(c)(3)(A)(v). Additionally, section
6621(c)(3)(B) authorizes the Secretary to specify by regulation
additional types of transactions which will be treated as
tax-motivated transactions. Section 301.6621-2T, Q&A-4,
Temporary Proced. & Admin. Regs., 49 Fed. Reg. 50392 (Dec. 28,
1984), provides that deductions disallowed for any period in the
case of an activity not engaged in for profit within the meaning
of section 183 are considered to be attributable to a
tax-motivated transaction.
Petitioners contend that section 6621(c) cannot be properly
applied to them because the “any sham or fraudulent transaction”
clause of section 6621(c)(3)(A)(v) was not added to the Internal
Revenue Code until 1984, which was after the years presently at
issue. This argument must fail. The statute, as so amended,
applies to interest accrued after December 31, 1984, even though
the transaction was entered into prior to that date. See
Solowiejczyk v. Commissioner, 85 T.C. 552 (1985), affd. per
curiam without published opinion 795 F.2d 1005 (2d Cir. 1986);
Kozlowski v. Commissioner, T.C. Memo. 1993-430, affd. without
published opinion 70 F.3d 1279 (9th Cir. 1995).
The section 6621(c) increased rate of interest does not
apply to deductions disallowed on separate and independent
grounds which do not fall within the specified categories of
tax-motivated transactions. McCrary v. Commissioner, 92 T.C.
827, 858-860 (1989). Here, we have sustained the disallowance of
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011