- 41 -
Marvin Yarnell described as funds in excess of "case" money, that
is, he explained, excess amounts they did not need for present or
anticipated business purposes or living expenses. The records in
these cases show that the accountants offered their clients an
admittedly high risk transaction, involving an industry and
machinery about which neither the accountants nor petitioners had
any expertise or significant understanding. These petitioners,
knowing the substantial tax benefits and little more about the
transaction, and knowing that their advisers had no expertise in
the area of the investment, took the risk. However, they did not
in good faith directly or indirectly investigate the underlying
viability, financial structure, and economics of the Partnership
transactions. We hold, upon consideration of the entire records,
that petitioners are liable for the negligence additions to tax
under the provisions of section 6653(a)(1) and (2) for 1981.
Respondent is sustained on this issue.
Issue 2. Section 6659 Valuation Overstatement
Respondent determined that petitioners were each liable for
the section 6659 addition to tax on the portion of their
respective underpayments attributable to valuation overstatement.
Petitioners have the burden of proving that respondent's
determinations of these section 6659 additions to tax are
erroneous. Rule 142(a); Luman v. Commissioner, 79 T.C. 846, 860-
861 (1982).
A graduated addition to tax is imposed when an individual
has an underpayment of tax that equals or exceeds $1,000 and "is
Page: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 NextLast modified: May 25, 2011