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IV. Tax Motivated Interest
Section 6621(c) provides an increased rate of interest for
“any substantial underpayment attributable to tax motivated
transactions”. A “substantial underpayment attributable to tax
motivated transactions” is defined under section 6621(c)(2) as
“any underpayment of taxes imposed by subtitle A for any taxable
year which is attributable to 1 or more tax motivated
transactions if the amount of the underpayment for such year so
attributable exceeds $1,000.” A “tax motivated transaction” is
defined under section 6621(c)(3)(A) to include “any valuation
overstatement (within the meaning of section 6659(c))” and “any
credit disallowed under section 46(c)(8)”. Sec. 6621(c)(3)(A)(i)
and (ii). In general, section 46(c)(8) limits a taxpayer’s basis
in certain depreciable property to the amount the taxpayer is “at
risk” with respect to such property, thereby limiting the amount
of investment tax credit available to the taxpayer. Sec. 46(a),
(c)(1), (c)(8)(A).
While respondent’s arguments concerning the applicability of
section 6621(c) center on whether respondent disallowed the
credits under section 46(c)(8), we need not reach those
arguments. Section 6621(c) also applies the increased rate of
interest to underpayments of tax that are attributable to
valuation overstatements, as that term is defined under section
6659(c). Sec. 6621(c)(3)(A)(i). Because we have sustained
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