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the taxable years 1980, 1981, and 1982 in the respective amounts
of $9,589, $16,653, and $14,738.
In Charlton v. Commissioner, T.C. Memo. 1990-402, affd. 990
F.2d 1161 (9th Cir. 1993), a test case involving limited
partnerships engaged in the production, marketing, and
distribution of similar tapes (the CME Partnerships), this Court
found: (1) The transaction was not engaged in for profit; (2)
that the appraisal grossly overstated not only the quality and
value of the tapes but also the sales forecast; and (3) that the
transaction was a sham because it lacked economic substance and a
business purpose. We upheld the section 6661 addition to tax for
substantial understatement of tax, and found that losses and
credits claimed with respect to the CME partnerships were
attributable to tax-motivated transactions within the meaning of
section 6621(c). The underlying transaction in the instant case
is in all material respects identical to the transaction
considered in the Charlton case.
In the notice of deficiency, respondent determined that
petitioners were negligent in claiming their distributive share
of MSA losses and investment tax credits. As such, she
determined that they are liable for additions to tax under
section 6653(a) for 1980, and sections 6653(a)(1) and (2) for
1981 through 1983. Respondent also determined that petitioners
are liable for additions to tax under section 6659 for 1980
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