- 601 -
Holdings in a purported section 351 transaction. Consequently,
we sustain respondent's determination that IRA is liable for the
addition to tax under section 6653(a)(1)(A) and (B) for 1988 on
the underpayment from the disallowed Form 4797 loss.
Issue 39. Whether IRA Is Liable for the Section 6659(a)
Additions to Tax for 1982 and 1983
OPINION
Consistent with the previous discussion with respect to
Issues 22 and 23, a portion of each of the underpayments in
income tax for 1982 and 1983 is attributable to gross
overstatements by IRA as to the valuation of computer equipment
and the attempt to structure a transaction under section 351 to
realize a loss. In both instances, the transactions were factual
and legal shams, lacked economic substance, and lacked a profit
motive as well as a business purpose. See Rose v. Commissioner,
supra. In the section 351 situation, the transactions, under
section 357(b) and (c) had no bona fide business purpose, were
purposely intended to avoid Federal income tax, and the
liabilities to which the properties were subject exceeded the
adjusted bases of the properties. IRA presented no meaningful
evidence relating to the valuation of the computer equipment nor
evidence relating to the inapplicability of section 357(b) and
(c) in the section 351 transaction.
In our view, the underpayments of taxes shown on IRA's
income tax returns for the years in question are attributable to
Page: Previous 587 588 589 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 NextLast modified: May 25, 2011