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underlying deficiency arising from the disallowance of the
partnership losses and various tax credits with respect to their
plastics recycling investment. We sustained the Commissioner on
the issue of the underlying deficiency in every one of those
cases.
In Provizer v. Commissioner, T.C. Memo. 1992-177, the test
case for the Plastics Recycling group of cases, this Court: (1)
Found that each Sentinel EPE recycler had a fair market value not
over $50,000; (2) held that the transaction, which was virtually
identical to the transactions in the present case, was a sham
because it lacked economic substance and a business purpose; (3)
sustained the additions to tax for negligence under section
6653(a)(1) and (2); (4) sustained the addition to tax for
valuation overstatement under section 6659 because the
underpayment of taxes was directly related to the overvaluation
of the Sentinel EPE recyclers; and (5) held that the partnership
losses and tax credits claimed with respect to Clearwater Group
were attributable to tax-motivated transactions within the
meaning of section 6621(c). In reaching the conclusion that the
transaction lacked business purpose, this Court relied heavily on
an objective criterion; namely, the overvaluation of the Sentinel
EPE recyclers.
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