Patty K. Copeland, a.k.a. Patty K. White - Page 8




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          imposition against them of increased interest would violate due             
          process of law.1  See sec. 301.6621-2T, A-4, Temporary Proced. &            
          Admin. Regs., 49 Fed. Reg. 50392 (Dec. 28, 1984).                           
               As we explained in Krause v. Commissioner, 99 T.C. at 180,             
          imposition of increased interest under section 6621(c), and its             
          predecessor section 6621(d), is largely mechanical.  Section                
          6621(c) provides an increased rate of interest for substantial              
          underpayments attributable to tax-motivated transactions.                   
          Substantial underpayments are defined as underpayments in excess            
          of $1,000.  By legislative regulation, see sec. 6621(c)(3)(B),              
          among the types of transactions that are considered to be tax-              
          motivated transactions within the meaning of section 6621(c) are            
          those with respect to which related tax deductions are disallowed           
          under section 183 for lack of profit objective.  See Rybak v.               
          Commissioner, 91 T.C. 524, 568 (1988); sec. 301.6621-2T, A-4(1),            
          Temporary Proced. & Admin. Regs., 49 Fed. Reg. 50392 (Dec. 28,              
          1984).                                                                      
               We note that in 1986, in amending section 6621(c) to include           
          sham transactions among the specified types of transactions that            
          trigger increased interest, congressional reports expressly                 
          commented with approval on the temporary legislative regulations            
          under section 6621(c) that included lack of profit motive or                


          1    As of June 30, 1990, respondent asserts approximately                  
          $250,000 of increased interest under sec. 6621(c) and in excess             
          of $2 million of regular interest under sec. 6621(a).                       




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