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2. Concession of the Deficiency
Petitioners argue that their concession of the deficiency
precludes imposition of the section 6659 addition to tax.
Petitioners contend that their concession renders any inquiry
into the grounds for such deficiency moot. Absent such inquiry,
petitioners argue that it cannot be known if their underpayment
was attributable to a valuation overstatement or other
discrepancy. Without a finding that a valuation overstatement
contributed to an underpayment, according to petitioners, section
6659 cannot apply. In support of this line of reasoning,
petitioners rely heavily upon Heasley v. Commissioner, 902 F.2d
380 (5th Cir. 1990), and McCrary v. Commissioner, supra.
Petitioners' open-ended concession does not obviate our
finding that the Plymouth transaction lacked economic substance
due to overvaluation of the recyclers. This is not a situation
where we have "to decide difficult valuation questions for no
reason other than the application of penalties." See McCrary v.
Commissioner, supra at 854 n.14. The value of the Sentinel EPE
7(...continued)
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
Courts of Appeals for the Second, Fourth, Sixth and Eighth
Circuits 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; Zfass v. Commissioner, supra.
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