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context of tax shelter transactions, that the penalty was
applicable. Id. at 151. The Court of Appeals observed:
“application of the section 6659 penalty surely reenforces the
Congressional objective of lessening tax shelter abuse.” Id.
The Court of Appeals in Gilman acknowledged that former
section 6659 might require some nexus with an overvaluation but
determined: “A transaction that lacks economic substance
generally reflects an arrangement in which the basis of the
property was misvalued in the context of the transaction.” Id.
at 152. The Court of Appeals determined that the lack of
economic substance in that case was due in part to a valuation
overstatement, relying on the absence of any reasonable
expectation of profit and the lack of value in the property that
the taxpayer purchased. Id. at 151; see also Massengill v.
Commissioner, 876 F.2d 616 (8th Cir. 1989), affg. T.C. Memo.
1988-427.
As in Gilman, valuation issues form a critical part of these
cases. For example, we have found that the absence of value in
the properties that Generale Bank and CLIS “contributed” under
the guise of the partnership rules indicates a lack of economic
substance in the transaction. We have also found that the
absence of value in these properties suggests a lack of economic
benefit in the transaction from the Ackerman group’s perspective
and indicates that the Ackerman group pursued the transaction
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