Philippe and Nadine Grelsamer - Page 61

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          According to petitioners, the tax benefits were disallowed                  
          because the Partnership transactions lacked economic substance,             
          not because of any valuation overstatements.  It follows,                   
          petitioners reason, that because the "attributable to" language             
          of section 6659 requires a direct causative relationship between            
          a valuation overstatement and an underpayment in tax, section               
          6659 cannot apply to their deficiencies.  Petitioners cite in               
          support of this argument:  Todd v. Commissioner, supra; Heasley             
          v. Commissioner, 902 F.2d 380 (5th Cir. 1990), revg. T.C. Memo.             
          1988-408; Gainer v. Commissioner, 893 F.2d 225 (9th Cir. 1990),             
          affg. T.C. Memo. 1988-416; McCrary v. Commissioner, supra.                  
               Petitioners' argument rests on the mistaken premise that our           
          holding that the Partnership transactions lacked economic                   
          substance was separate and independent from the overvaluation of            
          the Sentinel EPE recyclers.  To the contrary, in holding that the           
          Partnership transactions lacked economic substance, we relied               
          heavily upon the overvaluation of the recyclers.  Overvaluation             
          of the recyclers was an integral factor in regard to:  (1) The              
          disallowed tax credits and other benefits in these cases; (2) the           
          underpayments of tax; and (3) our finding that the Partnership              
          transactions lacked economic substance.                                     
               Petitioners argue that in Provizer v. Commissioner, T.C.               
          Memo. 1992-177, we found that the Clearwater transaction lacked             
          economic substance for reasons independent of the valuation                 






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