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making further inquiry and intentionally disregarded rules and
regulations.
In view of his sophistication and educational background,
petitioner should have been able to determine that the Sentinel
EPE recyclers were not unique, that they were not worth the
amount ascribed to them, and that Clearwater lacked economic
substance and had no potential for profit. Taking all of the
above factors into consideration, we think it is more likely than
not that petitioners invested in Clearwater in an effort to
generate tax benefits, rather than to make a profit. Therefore,
under the circumstances of this case, petitioners failed to
exercise due care in claiming loss deductions and tax credits
with respect to Clearwater.
Upon consideration of the entire record, we hold that
petitioners are liable for the additions to tax for negligence
under section 6653(a)(1) and (2). Respondent is sustained on
this issue.
Issue 3. Section 6659 Valuation Overstatement
Petitioners also contest the addition to tax for valuation
overstatement under section 6659.
A value claimed on a return that exceeds the correct value
by 150 percent or more constitutes a valuation overstatement.
See sec. 6659(c). The Sentinel EPE recyclers were valued at
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