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separate and independent from alleged valuation overstatements,
the resulting underpayments of tax are not regarded as
attributable to valuation overstatements. Krause v.
Commissioner, 99 T.C. at 178 (citing Todd v. Commissioner,
supra). However, when valuation is an integral factor in
disallowing deductions and credits, section 6659 is applicable.
See Illes v. Commissioner, 982 F.2d 163, 167 (6th Cir. 1992),
affg. T.C. Memo. 1991-449; Gilman v. Commissioner, 933 F.2d 143,
151 (2d Cir. 1991) (the 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 the
following cases to support this argument: Heasley v.
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