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breeding activities lacked economic substance, were shams, and
existed only to provide tax benefits.
It is also significant in these cases that for section
6621(c) penalty-interest purposes the partnerships overvalued
their assets and overstated their bases therein. The parties
have stipulated facts that support findings of partnership asset
overvaluations and basis overstatements. For example, they
stipulated that: (1) The purchase prices exceeded the value of
each partnership’s flock because many of the sheep purportedly
sold did not exist; (2) sheep sold to the partnerships for
average prices ranging from $1,135 to $2,126 were nowhere near
the quality of breeding sheep Barnes Ranches sold for $400 or
more; (3) the partnerships never acquired the benefits and
burdens of ownership; and (4) the promissory notes used to
purchase the sheep did not represent valid indebtedness. Because
we have determined that the partnership transactions lacked
economic substance and are shams and that the partnerships never
acquired the benefits and burdens of ownership, it follows that
the adjusted bases in the sheep are zero. Clayden v.
Commissioner, 90 T.C. 656, 677-678 (1988); Rose v. Commissioner,
supra at 426; Zirker v. Commissioner, 87 T.C. 970, 978-979
(1986).
We conclude that the partnerships’ activities are tax-
motivated transactions within the meaning of section 6621(c).
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