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Petitioners claimed tax benefits, including investment tax
credits and business energy credits, based on a purported value
of $1,750,000 for each recycler. Petitioners have conceded that
the fair market value of a recycler in 1982 was not in excess of
$50,000. Accordingly, if disallowance of petitioners’ claimed
benefits is attributable to such valuation overstatements,
petitioners are liable for section 6659 additions to tax at the
rate of 30 percent of the underpayments of tax attributable to
tax benefits claimed with respect to Masters.
Petitioners contend that section 6659 does not apply in
their cases because (1) disallowance of the claimed tax benefits
was attributable to other than a valuation overstatement, and (2)
Masters’ concession in the underlying partnership case precludes
imposition of the section 6659 additions to tax.
1. The Grounds for Petitioners’ Underpayments
Petitioners argue that where, as here, the Commissioner
completely disallows a tax benefit, the tax underpayment cannot
be attributable to a valuation overstatement. Petitioners cite
the following cases to support their argument: Heasley v.
Commissioner, 902 F.2d 380 (5th Cir. 1990), revg. T.C. Memo.
1988-408; Gainer v. Commissioner, 893 F.2d 225 (9th Cir 1990),
affg. T.C. Memo. 1988-416; Todd v. Commissioner, 862 F.2d 540
(5th Cir. 1988), affg. 89 T.C. 912 (1987); McCrary v.
Commissioner, 92 T.C. 827 (1980).
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