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Based on the entire records in these cases, including the
extensive stipulations, testimony of respondent's experts, and
petitioners' testimony, we hold that each of the Partnership
transactions herein was a sham and lacked economic substance. In
reaching this conclusion, we rely heavily upon the overvaluation
of the Sentinel EPE recyclers. Respondent is sustained on the
question of the underlying deficiencies. We note that
petitioners have explicitly conceded this issue in the
stipulations of settled issues filed shortly before trial. The
records plainly support respondent's determinations regardless of
such concessions. For a detailed discussion of the facts and the
applicable law in a substantially identical case that also
involved Clearwater, see Provizer v. Commissioner, supra.
A. Section 6653(a)--Negligence
In notices of deficiency, respondent determined that each of
petitioners was liable for the additions to tax for negligence
under section 6653(a)(1) and (2) for 1981. Petitioners have the
burden of proving that respondent's determinations of these
additions to tax are erroneous. Rule 142(a); Luman v.
Commissioner, 79 T.C. 846, 860-861 (1982).
Section 6653(a)(1) imposes an addition to tax equal to 5
percent of the underpayment if any part of an underpayment of tax
is due to negligence or intentional disregard of rules or
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