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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
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 each claimed an investment tax credit and a
business energy credit based on the following purported values
for each Sentinel EPE recycler: $1,162,666 in the Northeast
transaction and $1,066,666 in the Hyannis transaction.
Petitioners each concede that the fair market value of each
recycler was not in excess of $50,000. Therefore, if
disallowance of petitioners' claimed credits is attributable to
the valuation overstatements, petitioners are liable for the
section 6659 addition to tax at the rate of 30 percent of the
respective underpayments of tax attributable to the credits
claimed with respect to the Partnerships.
Section 6659 does not apply to underpayments of tax that are
not "attributable to" valuation overstatements. See McCrary v.
Commissioner, 92 T.C. 827 (1989); Todd v. Commissioner, 89 T.C.
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