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In Provizer v. Commissioner, T.C. Memo. 1992-177, a test
case involving the Clearwater transaction, this Court (1) found
that each Sentinel EPE recycler had a fair market value not in
excess of $50,000, (2) held that the Clearwater transaction was a
sham because it lacked economic substance and a business purpose,
(3) upheld the section 6659 addition to tax for valuation
overstatement since the underpayment of taxes was directly
related to the overstatement of the value of the Sentinel EPE
recyclers, and (4) held that losses and credits claimed with
respect to Clearwater were attributable to tax-motivated
transactions within the meaning of section 6621(c). In reaching
the conclusion that the Clearwater transaction lacked economic
substance and a business purpose, this Court relied heavily upon
the overvaluation of the Sentinel EPE recyclers.
Although petitioners have not agreed to be bound by the
Provizer opinion, they have stipulated that their investment in
the Sentinel EPE recyclers was similar to the investment
described in Provizer v. Commissioner, supra. The underlying
transaction in these cases (the Empire transaction) is in all
material respects identical to the transaction considered in the
Provizer case. The Sentinel EPE recyclers considered in these
cases are the same type of machines considered in the Provizer
case.
Based on the entire records in these cases, including the
extensive stipulations, testimony of respondent's experts, and
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