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In the Court of Appeals for the Ninth Circuit’s opinion in
Hill v. Commissioner, supra at 1220, the following explanation is
dispositive of petitioners’ arguments:
“We specifically reject Krause’s assertion
that the Tax Court erred in finding Barton
Income Fund liable for an increased rate of
interest because a transaction which is
determined to lack a profit motive does not
equal a tax-motivated transaction under
section 6621. Section 6621(c)(1) imposes an
increased rate of interest on ‘any
substantial underpayment attributable to tax
motivated transactions,’ which include
activities not engaged in for profit.” * * *
[Quoting in part Hildebrand v. Commissioner,
28 F.3d at 1028.]
The reasoning in Hildebrand is sound: the Secretary
has authority to define certain transactions as tax
motivated, the Secretary has defined transactions
lacking a profit motive under section 183 as tax
motivated, the transactions in this case lack a profit
motive under section 183, petitioners’ activities
relating to these transactions are therefore tax
motivated.
A close examination of section 6621(c)
demonstrates that the Secretary is well within the
granted regulatory power to simply equate the violation
of one code section with a violation of section
6621(c).
* * * * * * *
These, and the remaining “tax motivated
transactions” set out in section 6621(c)(3)(A) show a
legislative pattern established by Congress which
treats violations of certain code sections as implicit
violations of section 6621(c). The Secretary simply
followed this pattern pursuant to the regulatory
authority granted in section 6621(c)(3)(B) by
establishing regulations that make a violation of
section 183 a tax motivated transaction.
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Last modified: May 25, 2011