James H. Upchurch - Page 23

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               Accordingly, the record supports respondent's assertion that             
          a substantial understatement under section 6661 exists with                   
          respect to petitioner's 1982 taxable year.                                    
               Respondent also determined that petitioner was liable for                
          increased interest under section 6621(c) for each of the taxable              
          years 1980, 1981, 1982, and 1983.  The increased interest equals              
          120 percent of the interest payable under section 6601 with                   
          respect to any substantial underpayment attributable to a tax-                
          motivated transaction.  An underpayment is substantial if it                  
          exceeds $1,000.  Sec. 6621(c)(2).  A "tax motivated transaction"              
          includes, among other categories, valuation overstatements within             
          the meaning of section 6659 and any sham or fraudulent                        
          transaction.  See sec. 6621(c)(3)(A)(i) and (v).  Respondent has              
          conceded that section 6659 is not applicable in this case.                    
          Accordingly, we consider whether the energy-device transaction                
          was a "sham or fraudulent".                                                   
               Transactions that lack economic substance or a profit motive             
          are sham transactions under section 6621(c).  See, e.g., Cherin               
          v. Commissioner, 89 T.C. 986, 1000 (1987); sec. 301.6621-2T Q&A-              
          4, Temporary Proced. & Admin. Regs., 49 Fed. Reg. 50392 (Dec. 28,             
          1984).  Respondent argues that the facts here support a holding               
          that petitioner's energy-device transaction was a tax motivated               
          transaction within the meaning of section 6621(c).  As with the               
          prior issues, petitioner argues that he did not expect to make an             
          immediate profit, but that he expected retirement income from the             




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