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claimed tax benefits precludes imposition of the section 6659
additions to tax; and (3) respondent erroneously failed to waive
the section 6659 addition to tax. We reject each of these
arguments for reasons set forth below.
1. The Grounds for Petitioners' Underpayments
Section 6659 does not apply to underpayments of tax that are
not "attributable to" valuation overstatements. See McCrary v.
Commissioner, 92 T.C. 827 (1989); Todd v. Commissioner, 89 T.C.
912 (1987), affd. 862 F.2d 540 (5th Cir. 1988). To the extent
taxpayers claim tax benefits that are disallowed on grounds
separate and independent from alleged valuation overstatements,
the resulting underpayments of tax are not regarded as
attributable to valuation overstatements. Krause v.
Commissioner, 99 T.C. 132, 178 (1992) (citing Todd v.
Commissioner, supra), affd. sub nom. Hildebrand v. Commissioner,
28 F.3d 1024 (10th Cir. 1994). However, when valuation is an
integral factor in disallowing deductions and credits, section
6659 is applicable. See Illes v. Commissioner, 982 F.2d 163, 167
(6th Cir. 1992), affg. T.C. Memo. 1991-449; Gilman v.
Commissioner, 933 F.2d 143, 151 (2d Cir. 1991) (section 6659
addition to tax applies if a finding of lack of economic
substance is "due in part" to a valuation overstatement), affg.
T.C. Memo. 1989-684; Masters v. Commissioner, T.C. Memo. 1994-
197, affd. without published opinion 70 F.3d 1262 (4th Cir.
1995); Harness v. Commissioner, T.C. Memo. 1991-321.
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