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the prohibited conduct; i.e. the deliberate overvaluations. In
each of the transactions the indebtedness incurred by IRA/Cedilla
for purchase of the equipment greatly exceeded the amounts paid
by prior owners of the equipment, and no evidence was presented
to establish the reason for such increases in cost. IRA's
overvaluations with respect to the computer equipment are
inseparable from the transactions' lack of economic substance and
profit motive and their sham character. The same rationale
applies to the section 351 transaction. Accordingly, we sustain
respondent's determination that a portion of the underpayment for
each of the years 1982 and 1983 is attributable to a valuation
overstatement involving the equipment leasing transactions.
Issue 40. Whether IRA Is Liable for the Section 6661 Additions
to Tax for 1983 Through 1988
OPINION
This issue relates to the addition to tax under section 6661
for IRA's understatements of tax attributable to a number of
adjustments that we have sustained for 1983 through 1988.
In the notices of deficiency issued to IRA for 1983 through
1988, respondent determined that the entire deficiency for each
year was a substantial understatement of tax for which IRA was
liable for the addition to tax under section 6661(a).
IRA contends that it is not liable for the section 6661(a)
addition to tax because there was substantial authority for the
positions it took with respect to the disallowed items.
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