- 63 -
this Court's earlier conclusion that the transaction lacked
economic substance and was a sham. Gilman v. Commissioner, supra
at 151. In addition, the Court of Appeals for the Second Circuit
agreed with this Court and with the Court of Appeals for the
Eighth Circuit that "'when an underpayment stems from disallowed
* * * investment credits due to lack of economic substance, the
deficiency is * * * subject to the penalty under section 6659.'"
Gilman v. Commissioner, supra at 151 (quoting Massengill v.
Commissioner, 876 F.2d 616, 619-620 (8th Cir. 1989), affg. T.C.
Memo. 1988-427); see also Rybak v. Commissioner, 91 T.C. 524,
566-567 (1988); Zirker v. Commissioner, 87 T.C. 970, 978-979
(1986); Donahue v. Commissioner, T.C. Memo. 1991-181, affd.
without published opinion 959 F.2d 234 (6th Cir. 1992), affd. sub
nom. Pasternak v. Commissioner, 990 F.2d 893 (6th Cir. 1993).
Petitioners' reliance on Gainer v. Commissioner, 893 F.2d
225 (9th Cir. 1990), Todd v. Commissioner, 862 F.2d 540 (5th Cir.
1988), and McCrary v. Commissioner, 92 T.C. 827 (1989), is
misplaced. In those cases, in contrast to the consolidated cases
herein, it was found that a valuation overstatement did not
contribute to an underpayment of taxes. In the Todd and Gainer
cases, the underpayments were due exclusively to the fact that
the property in each case had not been placed in service. In the
McCrary case, the underpayments were deemed to result from a
concession that the agreement at issue was a license and not a
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