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2. Concession of the Deficiencies
Petitioners argue that their concession of the deficiencies
precludes imposition of the section 6659 additions to tax.
Petitioners contend that their concession renders any inquiry
into the grounds for such deficiencies moot. Absent such
inquiry, petitioners argue that it cannot be known whether their
underpayments were attributable to a valuation overstatement or
another discrepancy. Without a finding that a valuation
overstatement contributed to an underpayment, according to
petitioners, section 6659 cannot apply. In support of this line
of reasoning, petitioners rely heavily upon Heasley v.
Commissioner, supra, and McCrary v. Commissioner, supra.
Petitioners' open-ended concession does not obviate our
finding that the Partnership transactions lacked economic
substance due to overvaluation of the recyclers. This is not a
situation where we have "to decide difficult valuation questions
for no reason other than the application of penalties." See
McCrary v. Commissioner, supra at 854 n.14. The value of the
Sentinel EPE recycler was established in Provizer v.
Commissioner, supra, and stipulated by the parties. As a
of a transaction for lack of economic substance, the underpayment
cannot be attributable to an overvaluation, this Court and the
Court of Appeals for the Second Circuit have disagreed. See
Gilman v. Commissioner, 933 F.2d 143, 151 (2d Cir. 1991) ("The
lack of economic substance was due in part to the overvaluation,
and thus the underpayment was attributable to the valuation
overstatement."), affg. T.C. Memo. 1989-684.
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