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In a notice of deficiency dated March 26, 1986, respondent
determined a deficiency in petitioners' 1981 joint Federal income
tax in the amount of $102,686, plus an addition to tax under
section 6659 for valuation overstatement in the amount of
$30,465. Respondent also determined that interest on the
deficiency accruing after December 31, 1984, would be calculated
at 120 percent of the statutory rate under section 6621(c).1
In a first amendment to answer, respondent asserted
additions to tax for 1981 in the amount of $5,134 under section
6653(a)(1) for negligence, and under section 6653(a)(2) in the
amount of 50 percent of the interest due on the underpayment
attributable to negligence.
In respondent's trial memorandum and posttrial brief,
respondent asserted a lesser addition to tax under section 6659
for valuation overstatement in the amount of $24,758. We
consider the addition to tax under section 6659 to be reduced
accordingly.
1 The deficiency notice refers to sec. 6621(d). This section
was redesignated as sec. 6621(c) by sec. 1511(c)(1)(A) of the Tax
Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, 2744, and
repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act
of 1989 (OBRA 1989), Pub. L. 101-239, 103 Stat. 2106, 2399,
effective for tax returns due after Dec. 31, 1989, OBRA 1989 sec.
7721(d), 103 Stat. 2400. The repeal does not affect the instant
case. For simplicity, we refer to this section as sec. 6621(c).
The annual rate of interest under sec. 6621(c) for interest
accruing after Dec. 31, 1984, equals 120 percent of the interest
payable under sec. 6601 with respect to any substantial
underpayment attributable to tax-motivated transactions.
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