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the tax required to be shown on the return. See sec.
6661(b)(1)(A) and (B). The amount of the understatement may be
reduced under section 6661(b)(2)(B) for amounts adequately
disclosed or supported by substantial authority. Respondent's
determination of the addition to tax is presumed correct, and
petitioner bears the burden of proving otherwise. See Rule
142(a); Hall v. Commissioner, 729 F.2d 632, 635 (9th Cir. 1984),
affg. T.C. Memo. 1982-337.
The authority cited by petitioner on brief does not support
its position with respect to its excess value activity. We
sustain respondent's determination with respect to the
understatement related to the excess value activity.
Respondent also determined that petitioner is liable for
increased interest under section 6621(c)62 for 1984 on the
portion of the deficiency attributable to EVC's. Section 6621(c)
provides for an interest rate of 120 percent of the adjusted rate
established under section 6621(b) on substantial underpayments
that exceed $1,000 and are attributable to "tax motivated
transactions".
62The Tax Reform Act of 1986, Pub. L. 99-514, sec. 1535, 100
Stat. 2750, amended sec. 6621 to include sham or fraudulent
transactions in the list of "tax motivated transactions" set
forth in sec. 6621(c)(3). The amendment applies (1) to any
underpayment with respect to which there was not a final court
decision before the enactment of the act (i.e., Oct. 22, 1986),
and (2) to interest accruing after Dec. 31, 1984. See Price v.
Commissioner, 88 T.C. 860, 888 (1987).
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