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valuation overstatement. To the contrary, petitioners each
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 records in these cases
plainly show that the overvaluation of the recyclers is integral
to and is the core of our holding that the underlying transaction
in these cases was a sham and lacked economic substance.
Consistent with our findings in Provizer, petitioners each
stipulated that the Empire partnership had no net equity value,
that Empire's sole activity lacked any potential for profit, and
that the Empire 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 (1986);
Donahue v. Commissioner, T.C. Memo. 1991-181, affd. without
published opinion 959 F.2d 234 (6th Cir. 1992), affd. sub nom.
Pasternak v. Commissioner, 990 F.2d 893 (6th Cir. 1993).
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