- 61 -
the Partnership transactions lacked economic substance, not
because of any valuation overstatements. It follows, he reasons,
that because the "attributable to" language of section 6659
requires a direct causative relationship between a valuation
overstatement and an underpayment in tax, section 6659 cannot
apply to the deficiency. Farrell cites the following cases to
support this argument: Heasley v. Commissioner, 902 F.2d 380
(5th Cir. 1990), revg. T.C. Memo. 1988-408; Gainer v.
Commissioner, 893 F.2d 225 (9th Cir. 1990), affg. T.C. Memo.
1988-416; McCrary v. Commissioner, supra; Todd v. Commissioner,
supra.
This argument rests on the mistaken premise that our holding
that the Partnership transactions lacked economic substance was
separate and independent from the overvaluation of the Sentinel
EPE recyclers. To the contrary, in holding that the Partnership
transactions lacked economic substance, we relied heavily upon
the overvaluation of the recyclers. Overvaluation of the
recyclers was an integral factor in regard to: (1) The
disallowed tax credits and other benefits in these cases; (2) the
underpayments of tax; and (3) our finding that the Partnership
transactions lacked economic substance.
Moreover, a virtually identical argument was rejected in
Gilman v. Commissioner, supra, by the Second Circuit Court of
Appeals, the court to which appeal in these cases lies. See
Page: Previous 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 NextLast modified: May 25, 2011