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overstatement since the underpayment of taxes was directly
related to the overstatement of the value of the Sentinel EPE
recyclers, and (4) 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 Clearwater transaction lacked economic
substance and a business purpose, this Court relied heavily upon
the overvaluation of the Sentinel EPE recyclers.
Although petitioners have not agreed to be bound by
Provizer, they have stipulated that their investment in the
Sentinel EPE recyclers in this case is similar to the investment
described in Provizer v. Commissioner, supra. The underlying
transactions in this case, and the Sentinel EPE recyclers
purportedly leased by Northeast, are the same type of
transactions and same type of machines considered in Provizer v.
Commissioner, supra.
Based on the entire record in this case, including the
extensive stipulations, testimony of respondent's experts, and
petitioner's testimony, we hold that the Northeast transaction
was a sham and lacked economic substance. In reaching this
conclusion, we rely heavily upon the overvaluation of the
Sentinel EPE recyclers. Respondent is sustained on the question
of the underlying deficiencies. We note that petitioners have
explicitly conceded this issue in the stipulation of facts and
stipulation of settled issues filed shortly before trial. The
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