- 56 -
B. Section 6659--Valuation Overstatement
In notices of deficiency, respondent determined that
petitioners were liable for the section 6659 addition to tax on
the portion of their underpayments attributable to valuation
overstatement. Petitioners have the burden of proving that
respondent's determinations of the section 6659 additions to tax
are erroneous. Rule 142(a); Luman v. Commissioner, 79 T.C. at
860-861. In docket No. 27392-89, in her answer to petition
respondent asserted an increased amount under section 6659.
Respondent has the burden of proof with respect to the increased
addition to tax. Rule 142(a); Bagby v. Commissioner, 102 T.C.
596, 612 (1994).
A graduated addition to tax is imposed when an individual
has an underpayment of tax that equals or exceeds $1,000 and "is
attributable to" a valuation overstatement. Sec. 6659(a), (d).
A valuation overstatement exists if the fair market value (or
adjusted basis) of property claimed on a return equals or exceeds
150 percent of the amount determined to be the correct amount.
Sec. 6659(c). If the claimed valuation exceeds 250 percent of
the correct value, the addition is equal to 30 percent of the
underpayment. Sec. 6659(b).
Petitioners claimed tax benefits, including an investment
tax credit and a business energy credit, based on purported
values of $1,162,666 for each Sentinel EPE recycler. Petitioners
concede that the fair market value of a Sentinel EPE recycler in
Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 NextLast modified: May 25, 2011