- 69 -
benefits and our holding that the Partnership transactions lacked
economic substance.6
2. Concession of the Deficiency
Petitioners argue that their concessions of the deficiencies
preclude imposition of the section 6659 additions to tax.
Petitioners contend that their concessions render any inquiry
into the grounds for such deficiencies moot. Absent such
inquiry, petitioners argue that it cannot be known if their
underpayments were attributable to a valuation overstatement or
other discrepancy. Without a finding that a valuation
overstatement contributed to an underpayment, according to
petitioners, section 6659 cannot apply. In support of this line
of reasoning, petitioners rely heavily upon Heasley v.
Commissioner, 902 F.2d 380 (5th Cir. 1990), and McCrary v.
Commissioner, supra.
6 To the extent that Heasley v. Commissioner, 902 F.2d
380 (5th Cir. 1990), revg. T.C. Memo. 1988-408, merely represents
an application of Todd v. Commissioner, 89 T.C. 912 (1987), affd.
862 F.2d 540 (5th Cir. 1988), we consider it distinguishable. To
the extent that the reversal in the Heasley case is based on a
concept that where an underpayment derives from the disallowance
of a transaction for lack of economic substance, the underpayment
cannot be attributable to an overvaluation, this Court and the
Court of Appeals for the Second Circuit have disagreed. See
Gilman v. Commissioner, 933 F.2d 143, 151 (2d Cir. 1991): "The
lack of economic substance was due in part to the overvaluation,
and thus the underpayment was attributable to the valuation
overstatement."
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