James L. and Patricia A. Connell - Page 18

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          Sec. 6621(c)(1) and (2).  The increased rate of interest applies            
          to interest accruing after December 31, 1984.  See DeMartino v.             
          Commissioner, 88 T.C. 583, 589 (1987), affd. 862 F.2d 400 (2d               
          Cir. 1988), affd. without published opinion sub nom. McDonnell v.           
          Commissioner, 862 F.2d 308 (3d Cir. 1988) (the increased rate of            
          interest applies to interest accruing after December 31, 1984,              
          even though the transaction in question was entered into before             
          the date of enactment of section 6621(c)).  Respondent determined           
          that petitioners were liable for the increased interest because             
          the underpayments for the taxable years at issue were                       
          attributable to tax-motivated transactions.                                 
               Section 6621(c)(3)(A)(v) provides that the term "tax-                  
          motivated transaction" includes "any sham or fraudulent                     
          transaction."  Economic shams, or transactions that lack economic           
          substance, fall within the ambit of section 6621(c)(3)(A)(v).               
          Patin v. Commissioner, 88 T.C. 1086, 1128-1129 (1987), affd.                
          without published opinion 865 F.2d 1264 (5th Cir. 1989), affd.              
          sub nom. Gomberg v. Commissioner, 868 F.2d 865 (6th Cir. 1989),             
          affd. sub nom. Skeen v. Commissioner, 864 F.2d 93 (9th Cir.                 
          1989), affd. without published opinion sub nom. Hatheway v.                 
          Commissioner, 856 F.2d 186 (4th Cir. 1988).  The Court has                  
          concluded that Series 162 was an economic sham.  Accordingly,               
          respondent's determination that petitioners were liable for the             







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