- 79 -- 79 -
Sentinel EPE recycler had a fair market value not in excess of
$50,000. Our finding in the Provizer case that the Sentinel EPE
recyclers had been overvalued was integral to and inseparable
from our holding of a lack of economic substance. Petitioners
stipulated that the Partnership transactions were similar to the
Clearwater transaction described in the Provizer case, and that
the fair market value of a Sentinel EPE recycler in 1981 and 1982
was not in excess of $50,000. Given those concessions, and the
fact that the records here plainly show that the overvaluations
of the recyclers was the only reason for the disallowance of the
claimed tax benefits, we conclude that the deficiencies were
attributable to overvaluation of the Sentinel EPE recyclers.
3. Section 6659(e)
Petitioners argue that respondent erroneously failed to
waive the section 6659 additions to tax. Section 6659(e)
authorizes respondent to waive all or part of the addition to tax
for valuation overstatements if taxpayers establish that there
was a reasonable basis for the adjusted bases or valuations
claimed on the returns and that such claims were made in good
faith. Respondent's refusal to waive a section 6659 addition to
tax is reviewable by this Court for abuse of discretion. Krause
v. Commissioner, 99 T.C. at 179. Abuse of discretion has been
found in situations where respondent's refusal to exercise her
discretion is arbitrary, capricious, or unreasonable. See
Mailman v. Commissioner, 91 T.C. 1079 (1988); Estate of Gardner
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