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to tax because overvaluation of the computer equipment
contributed directly to this Court's earlier conclusion that the
transaction lacked economic substance and was a sham. Gilman v.
Commissioner, supra at 151. In addition, the Court of Appeals
for the Second Circuit agreed with this Court and with the Court
of Appeals for the Eighth Circuit that "'when an underpayment
stems from disallowed * * * investment credits due to lack of
economic substance, the deficiency is * * * subject to the
penalty under section 6659.'" Gilman v. Commissioner, supra at
151 (quoting Massengill v. Commissioner, 876 F.2d 616, 619-620
(8th Cir. 1989), affg. T.C. Memo. 1988-427); see also Rybak v.
Commissioner, 91 T.C. at 566-567; 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).
Petitioners' reliance on Gainer v. Commissioner, supra, Todd
v. Commissioner, supra, and McCrary v. Commissioner, 92 T.C. at
827, is misplaced. In those cases, in contrast to the
consolidated cases herein, it was found that a valuation
overstatement did not contribute to an underpayment of taxes. In
the Todd and Gainer cases, the underpayments were due exclusively
to the fact that the property in each case had not been placed in
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