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claiming an improper deduction or credit rather than to a
valuation overstatement. Heasley v. Commissioner, 902 F.2d at
383. To support its holding, the Court of Appeals for the Fifth
Circuit in Heasley relied on Todd v. Commissioner, 862 F.2d 540
(5th Cir. 1988), in which it held that a valuation overstatement
did not contribute to the underpayment of taxes where the
underpayment was due exclusively to the fact that the property
providing the basis for the tax benefits at issue had not been
placed in service in the year the benefits were claimed.
On facts similar to the facts in this case, the Court of
Appeals for the Third Circuit, the court to which this case is
appealable, has distinguished Heasley. In Merino v.
Commissioner, 196 F.3d 147 (3d Cir. 1999), the taxpayer had
invested in a tax shelter that involved the leasing of
recyclers. The taxpayer was a successful engineer with a Ph.D.
degree in managerial economics and experience in the
petrochemical industry, who, like petitioner in this case,
claimed that he was an acknowledged expert in plastics
technology. Id. at 149. The taxpayer investigated the tax
shelter for a friend and invested for himself as a result of his
findings. Id. at 148-149. The Commissioner ultimately
determined that the investment lacked economic substance,
disallowed the tax benefits the taxpayer claimed in relation to
the investment, and imposed additions to tax as a result of the
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