- 65 -
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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