- 112 -
prudent person would do under the circumstances. See Neely v.
Commissioner, 85 T.C. 934, 947 (1985).
With respect to the restructuring of the excess value
income, we have found that petitioner engaged in ongoing sham
transactions devoid of economic substance during the year at
issue. Petitioner is a sophisticated taxpayer. The primary
thrust of petitioner's argument was that it had valid business
purposes for restructuring its EVC activities. We have not
accepted this explanation. On the basis of the record as
described above, we reject any contention that petitioner had a
reasonable basis for the positions taken on the returns. We,
therefore, sustain respondent's determination under section
6653(a)(1). We further sustain respondent's determination under
section 6653(a)(2) with regard to that portion of the
underpayment of tax that is attributable to the excess value
charges.
Respondent also determined that petitioner is liable for an
addition to tax for 1984 under section 6661. Section 6661(a)
provides for an addition to tax equal to 25 percent of the amount
of the underpayment attributable to a substantial understatement
of income tax. See Pallottini v. Commissioner, 90 T.C. 498, 503
(1988). In the case of a corporation, other than an S
corporation or personal holding company, an understatement is
substantial if it exceeds the greater of $10,000 or 10 percent of
Page: Previous 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 NextLast modified: May 25, 2011