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Glassley and petitioner Mahoney. Respondent also asserted by
amended answer that the increased interest under section 6621(c)
applied to petitioners Houser. Respondent has the burden of
proof with respect to the increased interest asserted in the
amendment to answer. Rule 142(a); Zirker v. Commissioner, 87
T.C. 970, 981 (1986).
The increased rate of interest under section 6621(c) is 120
percent of the statutory rate imposed on underpayments under
section 6601 if the underpayment exceeds $1,000 and is
attributable to a tax-motivated transaction (as defined in
section 6621(c)(3)). The increased interest is effective only
with respect to interest accruing after December 31, 1984,
notwithstanding that the transaction was entered into before that
date. Solowiejczyk v. Commissioner, 85 T.C. 552 (1985), affd.
per curiam without published opinion 795 F.2d 1005 (2d Cir.
1986).
Respondent contends that the increased rate of interest
under section 6621(c) applies because the research and
development expense deductions that petitioners claimed resulted
in a "substantial underpayment" attributable to a tax-motivated
transaction.
Section 6621(c)(3)(A) enumerates types of transactions that
are considered "tax-motivated transactions". Furthermore,
section 6621(c)(3)(B) gives the Secretary of the Treasury
authority, by regulation, to add to the categories of
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