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the correct amount of basis. Secs. 6621(c)(3)(A)(i), 6659(c). A
tax motivated transaction further includes “any sham or
fraudulent transaction.” Sec. 6621(c)(3)(A)(v).
The section 6621(c) increased rate of interest does not
apply to deductions disallowed on separate and independent
grounds which do not fall within the specified categories of tax-
motivated transactions. McCrary v. Commissioner, 92 T.C. 827,
858-859 (1989). However, an increased rate of interest will
apply where a valuation overstatement or other category of tax-
motivated transaction is an integral part of or is inseparable
from the ground found for disallowance of an item. Irom v.
Commissioner, 866 F.2d 545, 547-548 (2d Cir. 1989), vacating in
part T.C. Memo. 1988-211; McCrary v. Commissioner, supra at 859-
860.
C. The Tax Court’s Jurisdiction
Congress enacted the partnership audit and litigation
procedures to provide a method to uniformly adjust items of
partnership income, loss, deduction, or credit that would affect
each partner. The statute makes a distinction between
partnership items and nonpartnership items. The tax treatment of
partnership items may only be determined in a partnership level
proceeding, while nonpartnership items may only be determined at
the individual partner level. See sec. 6221; Affiliated Equip.
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