Peter and Ursula Reimann, et al. - Page 43

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          Commissioner, supra), affd. sub nom. Hildebrand v. Commissioner,            
          28 F.3d 1024 (10th Cir. 1994).  However, when valuation is an               
          integral factor in disallowing deductions and credits, section              
          6659 is applicable.  See Illes v. Commissioner, 982 F.2d 163, 167           
          (6th Cir. 1992), affg. T.C. Memo. 1991-449; Gilman v.                       
          Commissioner, 933 F.2d 143, 151 (2d Cir. 1991) (section 6659                
          addition to tax applies if a finding of lack of economic                    
          substance is "due in part" to a valuation overstatement), affg.             
          T.C. Memo. 1989-684; Masters v. Commissioner, T.C. Memo. 1994-              
          197, affd. without published opinion 70 F.3d 1262 (4th Cir.                 
          1995); Harness v. Commissioner, T.C. Memo. 1991-321.                        
               In the respective stipulations of settled issues,                      
          petitioners concede that they "are not entitled to any                      
          deductions, losses, investment credits, business energy                     
          investment credits, or any other tax benefits claimed on their              
          tax returns as a result of their participation in the Plastics              
          Recycling Program."  In Todd v. Commissioner, supra, and McCrary            
          v. Commissioner, supra, we denied application of section 6659,              
          even though the subject property was overvalued, because the                
          related deductions and credits had been conceded or denied in               
          their entirety on other grounds.  In Todd, we found that an                 
          underpayment was not attributable to a valuation overstatement              
          because property was not placed in service during the years in              
          issue.  In McCrary, we found the taxpayers were not liable for              
          the section 6659 addition to tax when, prior to the trial of the            
          case, the taxpayers conceded that they were not entitled to the             



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