Bruce and Lois Zenkel, et al. - Page 65

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          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.                        
               Petitioners argue that the disallowance of the claimed tax             
          benefits was not "attributable to" a valuation overstatement.               
          According to petitioners, the tax benefits were disallowed                  
          because the Partnership transactions lacked economic substance,             
          not because of any valuation overstatements.  It follows,                   
          petitioners reason, 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 their deficiencies.  Petitioners cite in               
          support of this argument, Todd v. Commissioner, supra; 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.                  
               Petitioners' argument rests on the mistaken premise that our           
          holding herein 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           








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