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III. Increased Interest Under Section 6621(d)
As applicable to this case, section 6621(d)(1) provided that
“In the case of interest * * * with respect to any substantial
underpayment attributable to tax motivated transactions, the
annual rate of interest * * * shall be 120 percent of the
adjusted rate”.22 A substantial underpayment attributable to a
tax-motivated transaction is defined as “any underpayment of
taxes * * * which is attributable to 1 or more tax motivated
transactions if the amount of the underpayment for such year so
attributable exceeds $1,000.” Sec. 6621(d)(2). The term “tax-
motivated transaction” includes any valuation overstatement
within the meaning of section 6659(c). Sec. 6621(d)(3)(A)(i).
Additionally, tax-motivated transactions include activities not
engaged in for profit. Hildebrand v. Commissioner, 28 F.3d at
1028; sec. 301.6621-2T, Q&A-4, Temporary Proced. & Admin. Regs.,
22Sec. 6621(d) was enacted by the Deficit Reduction Act of
1984, Pub. L. 98-369, sec. 144(a), 98 Stat. 682. Sec. 6621(d)
applies with respect to interest accruing after Dec. 31, 1984,
regardless of the date the return was filed. Solowiejczyk v.
Commissioner, 85 T.C. 552, 556 (1985), affd. without published
opinion 795 F.2d 1005 (2d Cir. 1986). The Tax Reform Act of
1986, Pub. L. 99-514, sec. 1511(c), 100 Stat. 2744, redesignated
and amended sec. 6621(d) as sec. 6621(c). Sec. 6621(c) was
repealed by the Omnibus Budget Reconciliation Act of 1989, Pub.
L. 101-239, sec. 7721(b), 103 Stat. 2399, effective for returns
the due date for which is after Dec. 31, 1989. Current sec.
6621(c), which was enacted by the Omnibus Budget Reconciliation
Act of 1990, Pub. L. 101-508, sec. 11341(a), 104 Stat. 1388-470
(effective for purposes of determining interest for periods after
Dec. 31, 1990), applies an additional 2-percent interest rate on
deficiencies attributable to large corporate underpayments of
tax.
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