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6659 addition to tax. We reject each of these arguments in these
cases 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). 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.
Petitioners argue that the disallowance of the claimed tax
benefits was not "attributable to" a valuation overstatement.
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