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returns for the years 1978, 1979, 1980, and 1981. The direct
reductions claimed on petitioners' tax returns for those years,
from the investment tax credits alone, equaled 170 percent of
their cash investment. Therefore, like the taxpayers in Provizer
v. Commissioner, supra, "except for a few weeks at the beginning,
petitioners never had any money in the * * * [Northeast
transaction]." The record shows that petitioner was on notice
that the Northeast transaction was a sham transaction primarily
intended to generate tax benefits, and that his decision to
invest was tax driven, not economically driven. See Zfass v.
Commissioner, 118 F.3d 184 (4th Cir. 1997), affg. T.C. Memo.
1996-167. We hold, upon consideration of the entire record, that
petitioners are liable for the negligence additions to tax under
section 6653(a) for 1978, 1979, and 1980, and under section
6653(a)(1) and (2) for 1981. Respondent is sustained on this
issue.
B. Section 6659--Valuation Overstatement
In the amended answer, respondent asserted that petitioners
were liable for the section 6659 addition to tax on the portion
of their underpayment attributable to valuation overstatement.
Because the section 6659 addition to tax was raised for the first
time in the amended answer, respondent has the burden of proof.
Rule 142(a); Vecchio v. Commissioner, 103 T.C. at 196; Bagby v.
Commissioner, 102 T.C. at 612.
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