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each of those cases, the overvaluations were not the grounds on
which the taxpayers' liability was sustained. In contrast, "a
different situation exists where a valuation overstatement * * *
is an integral part of or is inseparable from the ground found
for disallowance of an item." McCrary v. Commissioner, supra at
859. Petitioners' cases present just such a "different
situation": overvaluation of the recyclers was integral to and
inseparable from petitioners' claimed tax benefits and our
holding that the Partnership transactions lacked economic
substance.29
2. Concession of the Deficiency
Petitioners argue that their concessions of the deficiencies
preclude imposition of the section 6659 additions to tax.
Petitioners contend that their concessions render any inquiry
into the grounds for such deficiencies moot. Absent such
inquiry, petitioners argue that it cannot be known if their
underpayments were attributable to a valuation overstatement or
other discrepancy. Without a finding that a valuation
29 To the extent that Heasley v. Commissioner, 902 F.2d 380
(5th Cir. 1990), revg. T.C. Memo. 1988-408, merely represents an
application of Todd v. Commissioner, 89 T.C. 912 (1987), affd.
862 F.2d 540 (5th Cir. 1988), we consider it distinguishable. To
the extent that the reversal in the Heasley case is based on a
concept that where an underpayment derives from the disallowance
of a transaction for lack of economic substance, the underpayment
cannot be attributable to an overvaluation, this Court and the
Court of Appeals for the Second Circuit have disagreed. See
Gilman v. Commissioner, 933 F.2d 143, 151 (2d Cir. 1991) ("The
lack of economic substance was due in part to the overvaluation,
and thus the underpayment was attributable to the valuation
overstatement"), affg. T.C. Memo. 1989-684.
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