- 72 -
A graduated addition to tax is imposed when an individual
has an underpayment of tax that equals or exceeds $1,000 and "is
attributable to" a valuation overstatement. Sec. 6659(a), (d).
A valuation overstatement exists if the fair market value (or
adjusted basis) of property claimed on a return equals or exceeds
150 percent of the amount determined to be the correct amount.
Sec. 6659(c). If the claimed valuation exceeds 250 percent of
the correct value, the addition is equal to 30 percent of the
underpayment. Sec. 6659(b).
Petitioners claimed tax benefits, including investment tax
credits and business energy credits, based on purported values of
$1,162,666 for each Sentinel EPE recycler. Petitioners concede
that the fair market value of a Sentinel EPE recycler in 1981 and
up to the end of 1982 was not in excess of $50,000. Therefore,
if disallowance of petitioners' claimed tax benefits is
attributable to such valuation overstatements, petitioners are
liable for the section 6659 additions to tax at the rate of 30
percent of the underpayments of tax attributable to the tax
benefits claimed with respect to the Partnerships.
Petitioners contend that section 6659 does not apply in
their cases for the following three reasons: (1) Disallowance of
the claimed tax benefits was attributable to other than a
valuation overstatement; (2) petitioners' concessions of the
claimed tax benefits preclude imposition of the section 6659
additions to tax; and (3) respondent erroneously failed to waive
Page: Previous 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 NextLast modified: May 25, 2011