-11-
overstatement is found if the claimed fair market value or adjusted
basis of property is at least 150 percent of the correct amount.
Sec. 6659(c).
Petitioner claims that the disallowance of the claimed
partnership deductions and investment tax credits is unrelated to
any valuation overstatement, thus making the section 6659 addition
to tax inappropriate in this case.
If an underpayment of tax is not "attributable to" a valuation
overstatement, the section 6659 addition does not apply. See
McCrary v. Commissioner, 92 T.C. 827 (1989). Section 6659 does
apply, however, when the claimed valuation was an integral factor
in disallowing deductions and credits. See Illes v. Commissioner,
982 F.2d 163, 167 (6th Cir. 1992), affg. T.C. Memo. 1991-449. When
a transaction lacks economic substance, the correct basis is zero;
any amount claimed is a valuation overstatement. Gilman v.
Commissioner, 933 F.2d 143, 151 (2d Cir. 1991), affg. T.C. Memo.
1989-684; Rybak v. Commissioner, 91 T.C. 524, 566-567 (1988).
In Charlton v. Commissioner, supra, valuation overstatement
was central to the holding that the transactions were a sham. It
is obvious from the record in this case that valuation
overstatement was a primary reason for the disallowance of the
claimed tax benefits. Accordingly, we hold that petitioner is
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011