- 596 -
With respect to the 1987 capital gains and losses adjustment
of $3,097,750, included therein is the disallowance of losses
claimed on the sale of notes receivable, stock, and partnership
interests to Windy City and MAF for nominal consideration.
Kanter admitted that the purpose of these sales was to establish
losses for tax purposes. As discussed in the disallowance of
these losses, the claimed losses were based on sham transactions
wholly lacking in economic substance. Consequently, any
underpayments resulting from these adjustments are attributable
to tax-motivated transactions within the meaning of section
6621(c).
Issue 37. Whether IRA Is Liable for the Section 6651(a)(1)
Addition to Tax for 1980
OPINION
In the notice of deficiency, respondent determined that IRA
was liable for an addition to tax under section 6651(a)(1) equal
to 15 percent of the deficiency for filing a delinquent return
for 1980.
Section 6651(a)(1) provides that if there is a failure to
file a return on the date prescribed therefor (determined with
regard to any extension of time for filing), unless it is shown
that such failure is due to reasonable cause and not due to
willful neglect, there will be added to the amount required to be
shown as tax on such return 5 percent of the amount of such tax
if the failure is not for more than 1 month, with an additional 5
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