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Since none of the taxpayers in the three cited cases were
entitled to any deductions and credits regardless of any
valuation overstatement, there were no underpayments attributable
to a valuation overstatement. McCrary further held that section
6621(c) interest was inapplicable where deductions are disallowed
on separate and independent grounds that do not fall among the
categories of tax-motivated transactions listed in section
6621(c)(3)(A).
Noting the U.S. Court of Appeals for the Fifth Circuit’s
decision in Heasley v. Commissioner, 902 F.2d 380 (5th Cir.
1990), revg. T.C. Memo. 1988-408, petitioners additionally argue
that there can be no valuation overstatement where the
transaction was a sham and the asset alleged to have been
acquired does not exist.
2. Respondent’s Arguments
Respondent contends that this Court, as set forth in
respondent’s motions to dismiss, lacks jurisdiction in these
partnership proceedings to determine whether section 6621(c)
applies. However, respondent now further maintains that this
Court does have jurisdiction to and should determine that (1)
there were asset overvaluations and basis overstatements, and (2)
the partnership transactions were shams.
Respondent disputes petitioner’s argument that the
partnership transactions do not involve valuation overstatements
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