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In Provizer, a test case for the Plastics Recycling group of
cases, this Court found that each Sentinel EPE recycler had a
fair market value not in excess of $50,000; (2) held that the
transaction, which is almost identical to the transactions in
this case, was a sham because it lacked economic substance and a
business purpose; (3) upheld the sections 6653(a)(1) and (2)
additions to tax for negligence; (4) upheld the section 6659
addition to tax for valuation overstatement since the
underpayment of taxes was directly related to the overstatement
of the value of the Sentinel EPE recyclers; and (5) held that
losses and credits claimed with respect to Clearwater were
attributable to tax-motivated transactions within the meaning of
section 6621(c). In reaching the conclusion that the transaction
lacked economic substance and a business purpose, this Court
relied heavily upon the overvaluation of the Sentinel EPE
recyclers.
The value of the Sentinel recyclers was misrepresented in
Sunbelt's promotional materials. Petitioners never took any
legal action against anyone connected with Sunbelt or PI.
Petitioners never took any legal action against Storey in
connection with the recommendations or advice he provided to them
regarding Sunbelt.
Discussion
Section 6653(a) for 1979 and 1980 and section 6653(a)(1) for
1981 and 1982 impose an addition to tax equal to 5 percent of the
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