t c memo united_states tax_court leon m and mary k jaroff petitioners v commissioner of internal revenue respondent docket nos filed date stuart a smith and david h schnabel for petitioners maureen t o'brien and david n brodsky for respondent docket nos and are consolidated for purposes of trial briefing and opinion contents page memorandum findings_of_fact and opinion opinion of the special_trial_judge findings_of_fact a the plastics recycling transactions b the partnerships c stuart becker and steven leicht dollar_figure d petitioners and their introduction to the partnership transactions dollar_figure opinion dollar_figure a sec_6653 a --negligence dollar_figure the private offering memoranda dollar_figure the so-called oil crisis dollar_figure petitioners' purported reliance on a tax adviser dollar_figure a the circumstances under which a taxpayer may avoid liability under sec_6653 and because of reasonable reliance on competent and fully informed professional advice dollar_figure b becker and tucker dollar_figure miscellaneous dollar_figure conclusion as to negligence dollar_figure b section 6659--valuation overstatement dollar_figure the grounds for petitioners' underpayments dollar_figure concession of the deficiencies dollar_figure sec_6659 dollar_figure c petitioners' motion for leave to file motion for decision ordering relief from the negligence_penalty and the penalty rate of interest and to file supporting memorandum of law dollar_figure memorandum findings_of_fact and opinion dawson judge these consolidated cases were assigned to special_trial_judge norman h wolfe pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_183 all section references are to the internal_revenue_code in effect for the tax years in issue unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge wolfe special_trial_judge these consolidated cases are part of the plastics recycling group of cases for a detailed discussion of the transactions involved in the plastics recycling cases see provizer v commissioner tcmemo_1992_177 affd without published opinion 996_f2d_1216 6th cir the facts of the underlying transactions involving the sentinel recyclers in these consolidated cases are substantially identical to those in the transaction considered in the provizer case in a notice_of_deficiency dated date respondent determined a deficiency in petitioners' federal_income_tax in the amount of dollar_figure and additions to tax for that year in the amount of dollar_figure under section for valuation_overstatement in the amount of dollar_figure under sec_6653 for negligence and under sec_6653 b in an amount equal to percent of the interest due on the amount of the underpayment attributable to negligence dollar_figure respondent also determined that interest on deficiencies accruing after december in the alternative to the sec_6659 addition_to_tax respondent determined an addition_to_tax under sec_6661 for substantial_understatement of liability for taxable_year the addition_to_tax for negligence in an amount equal to percent of the interest due on the amount of the underpayment attributable to negligence was provided for under sec_6653 not sec_6653 would be calculated pincite percent of the statutory rate under sec_6621 the increased interest was calculated on the amount of dollar_figure in her answer respondent asserted that the entire deficiency was subject_to the increased rate of interest under sec_6621 in her trial memorandum respondent asserted that the sec_6659 addition_to_tax should be reduced to dollar_figure and that only dollar_figure of the deficiency was subject_to sec_6621 as originally determined in the notice_of_deficiency we consider the amounts in dispute in docket no to be adjusted accordingly in a notice_of_deficiency dated date respondent determined a deficiency in petitioners' federal_income_tax in the amount of dollar_figure and additions to tax for that year in the amount of dollar_figure under sec_6659 for valuation_overstatement in the amount of dollar_figure under sec_6653 for negligence and under sec_6653 in an amount equal to percent of the interest due on the amount of the underpayment attributable to negligence respondent also determined that interest on deficiencies accruing after date would be calculated pincite percent of the statutory rate under sec_6621 the increased interest was calculated on the amount of dollar_figure in an amendment to answer respondent asserted an increased addition_to_tax under sec_6659 in the amount of dollar_figure and also asserted that the entire deficiency of dollar_figure was subject_to the increased rate of interest under sec_6621 we consider the amounts in dispute in docket no to be adjusted accordingly for each of these consolidated cases the parties filed a stipulation of settled issues concerning the adjustments relating to petitioners' participation in the plastics recycling program the stipulations provide petitioners are not entitled to any deductions losses investment credits business energy investment credits or any other tax benefits claimed on their tax returns as a result of their participation in the plastics recycling program the underpayments in income_tax attributable to petitioners' participation in the plastics recycling program are substantial underpayments attributable to tax_motivated_transactions subject_to the increased rate of interest established under sec_6621 formerly sec_6621 this stipulation resolves all issues that relate to the items claimed on petitioners' tax returns resulting from their participation in the plastics recycling program with the exception of petitioners' potential liability for additions to the tax for valuation overstatements under sec_6659 and for negligence under the applicable provisions of sec_6653 with respect to the issue of the addition to the tax under sec_6659 petitioners do not intend to contest the value of the sentinel recycler or the existence of a valuation_overstatement on the petitioners' returns however petitioners reserve their right to argue that the underpayment in tax is not attributable to a valuation_overstatement within the meaning of sec_6659 and that the secretary should have waived the addition_to_tax pursuant to the provisions of sec_6659 long after the trial of these consolidated cases on date petitioners filed a motion for leave to file motion for decision ordering relief from the negligence_penalty and the penalty rate of interest and to file supporting memorandum of law under rule on that same date petitioners lodged with the court a motion for decision seeking relief from the additions to tax for negligence and the increased rate of interest with attachments and a memorandum in support of the motion subsequently respondent filed an objection with attachments and a memorandum in support thereof and petitioners filed a reply memorandum for reasons discussed in more detail at the end of this opinion and also in farrell v commissioner tcmemo_1996_295 petitioners' motion shall be denied see also gollin v commissioner tcmemo_1996_454 grelsamer v commissioner tcmemo_1996_399 zenkel v commissioner tcmemo_1996_398 the issues remaining in these consolidated cases are whether petitioners are liable for the additions to tax for negligence under the provisions of sec_6653 and whether petitioners are liable for additions to tax under sec_6659 for underpayments of tax attributable to valuation overstatements findings_of_fact some of the facts have been stipulated and are so found the stipulated facts and attached exhibits are incorporated herein by this reference a the plastics recycling transactions these consolidated cases concern petitioners' investments in two limited_partnerships that leased sentinel expanded polyethylene epe recyclers sab resource recovery associates sab recovery and sab resource reclamation associates sab reclamation for convenience we refer to these two partnerships collectively as the partnerships the transactions involving the sentinel epe recyclers leased by the partnerships are substantially identical to those in the clearwater group limited_partnership clearwater the partnership considered in provizer v commissioner tcmemo_1992_177 petitioners have stipulated substantially the same facts concerning the underlying transactions as we found in the provizer case in the provizer case packaging industries inc pi manufactured and sold six sentinel epe recyclers to eci corp for dollar_figure each eci corp in turn resold the recyclers to f g corp for dollar_figure each f g corp then leased the recyclers to clearwater which licensed the recyclers to fmec corp which sublicensed them back to pi the sales of the recyclers from pi to eci corp were financed with nonrecourse notes approximately percent of the sales_price of the recyclers sold by eci corp to f g corp was paid in cash with the remainder financed through notes these notes provided that percent of the notes were recourse but that the recourse portion of the notes was only due after the nonrecourse portion percent was paid in full all of the monthly payments required among the entities in the above transactions offset each other these transactions were done simultaneously although the recyclers were sold and leased for the above amounts under the structure of simultaneous transactions the fair_market_value of a sentinel epe recycler in was not in excess of dollar_figure pi allegedly sublicensed the recyclers to entities that would use them to recycle plastic scrap the sublicense agreements provided that the end-users would transfer to pi percent of the recycled scrap in exchange for a payment from fmec corp based on the quality and amount of recycled scrap like clearwater each of the partnerships leased sentinel epe recyclers from f g corp and licensed those recyclers to fmec corp the transactions of the partnerships differ from the underlying transactions in the provizer case in the following respects the entity that leased the machines from f g corp and licensed them to fmec corp and the number of machines sold leased licensed and sublicensed sab recovery leased and licensed seven sentinel epe recyclers sab reclamation was to lease and license eight recyclers according to its offering memorandum but the sab reclamation partnership tax_return for indicates that it leased and licensed only four recyclers for convenience we refer to the series of transactions among pi eci corp f g corp each of the partnerships fmec corp and pi as the partnership transactions in addition to the partnership transactions a number of other limited_partnerships entered into transactions similar to the partnership transactions also involving sentinel epe recyclers and sentinel expanded polystyrene eps recyclers we refer to these collectively as the plastics recycling transactions b the partnerships sab recovery and sab reclamation are new york limited_partnerships sab recovery was formed in late and sab reclamation was formed in early both partnerships were organized and promoted by stuart becker becker a certified_public_accountant c p a and the founder and principal_owner of stuart becker co p c becker co an accounting firm that specialized in tax matters becker organized a total of six recycling partnerships the sab recycling partnerships two of the sab recycling partnerships closed in late two closed in early and two more closed in late the general_partner of each of the sab recycling partnerships including sab recovery and sab reclamation is sab management ltd sab management sab management is wholly owned by scanbo management ltd scanbo which is wholly owned by becker scanbo is an acronym for three of becker's children scott andy and bonnie the officers and directors of sab management and scanbo are as follows becker president and director noel tucker tucker vice president treasurer and director and steven leicht leicht vice president secretary and director during the years in issue tucker and leicht also worked at becker co tucker was vice president each owned approximately to percent of the stock of becker co sab management did not engage in any business before becoming involved with the sab recycling partnerships with respect to each of the partnerships a private_placement memorandum was distributed to potential limited partners reports by f g corp 's evaluators dr stanley m ulanoff ulanoff a marketing consultant and dr samuel z burstein burstein a mathematics professor were appended to the offering memoranda ulanoff owns a 27-percent interest in plymouth equipment associates and a 37-percent interest in taylor recycling associates partnerships that leased sentinel recyclers burstein owns a 605-percent interest in empire associates and a 82-percent interest in jefferson recycling associates also partnerships that leased sentinel recyclers burstein also was a client and business_associate of elliot i miller miller the corporate counsel to pi the offering memoranda for sab recovery and sab reclamation state that the general_partner will receive fees from those partnerships in the respective amounts of dollar_figure and dollar_figure sab management received fees of approximately dollar_figure as the general_partner of the sab recycling partnerships in addition becker co prepared the partnership returns and schedules k-1 for all of the sab recycling partnerships and received fees for those services the offering memoranda for the partnerships also allocate percent of the proceeds from each offering to the payment of sales commissions and offeree representative fees in addition the offering memoranda provide that the respective general partners may retain as additional compensation all amounts not paid as sales commissions or offeree representative fees however neither sab management nor becker retained or received any sales commissions or offeree representative fees instead after the closing of each sab recycling partnership becker rebated to each investor whose investment was not subject_to a sales commission or offeree representative fee an amount equal to percent of such investor's original investment the offering memoranda list significant business and tax risk factors associated with investments in the partnerships specifically the offering memoranda state there is a substantial likelihood of audit by the internal_revenue_service irs and the purchase_price paid_by f g corp to eci corp probably will be challenged as being in excess of fair_market_value the partnerships have no prior operating history the general_partner has no prior experience in marketing recycling or similar equipment the limited partners have no control_over the conduct of the partnerships' business there is no established market for the sentinel epe recyclers there are no assurances that market prices for virgin resin will remain at their current costs per pound or that the recycled pellets will be as marketable as virgin pellets and certain potential conflicts of interest exist c stuart becker and steven leicht becker does not have an engineering background and he is not an expert in plastics materials or plastics recycling he received a b s degree in accounting from new york university in and an m b a in taxation from new york university school of business administration in he passed the certified public accountancy test in and was the winner of the gold medal awarded for achieving the highest score on the examination for that year since early becker has practiced as an accountant exclusively in the tax area from until he worked for the accounting firm of touche ross co and in he joined the accounting firm of richard a eisner co as the partner in charge of the tax department in becker founded becker co becker had considerable experience involving tax_shelter transactions before he organized the sab recycling partnerships he prepared opinions regarding tax shelters' economic and tax projections advised individuals and companies with respect to investments in tax_shelters lectured extensively about tax_shelter investments generally and lectured and published with respect to leveraged tax_shelters becker described a leveraged tax_shelter as a transaction where the ratio of the effective tax writeoff which includes the value of the tax_credit to the amount invested exceeds one to one becker co specialized in tax-advantaged investments from to approximately percent of the work done by becker co involved tax-sheltered and private investments becker has owned minority interests in general partners of numerous limited_partnerships prior to organizing the sab recycling partnerships becker owned percent of the general_partner of partnerships involved in approximately transactions concerning river transportation such as barges tow boats and grain elevators although investment counseling was related to his firm's line_of_business becker did not consider himself in the business of providing investment advice becker did not normally hire other professionals for consultation or advice in circumstances where he believed there was a need for outside advice he would so advise the client between and of becker's clients invested in the plastics recycling partnerships becker learned of the plastics recycling transactions when a prospective client presented him with an offering memorandum concerning the transactions in august or date becker reviewed the offering memorandum and spoke to miller one of the key figures in the transactions and an acquaintance of becker's miller was a shareholder of f g corp and as noted the corporate counsel to pi he also represented robert grant grant the president and 100-percent owner of the stock of eci corp and some of grant's clients thereafter becker recommended the investment to the prospective client although the prospective client did not invest in the plastics recycling transactions becker became interested in the proposal and organized the sab recycling partnerships in order to make similar investments in sentinel epe recyclers conveniently available to appropriate clients in organizing the sab recycling partnerships becker was not allowed to change the format of the transactions or the purchase lease or licensing prices of the sentinel epe recyclers he was allowed only to conduct a limited investigation of the proposed investments and choose whether or not to organize similar partnerships becker relied heavily upon the offering materials and discussions with persons involved in the matter to evaluate the plastics recycling transactions he and two other members of becker co leicht and tucker investigated pi and visited its plant in hyannis massachusetts where they saw the sentinel epe recyclers tucker did not testify during his investigation of the plastics recycling transactions becker did not hire any plastics engineering or technical experts or recommend that his clients do so becker discussed the transactions with michael canno canno of the equitable bag co a manufacturer of paper and plastic bags canno never saw the recyclers or the pellets and never wrote any reports assessing the equipment or the pellets in addition becker retained a law firm rabin silverman to assist him in organizing the sab recycling partnerships see spears v commissioner tcmemo_1996_341 to the effect that in employing the law firm becker sought particularly to protect himself against liability after the sab recycling partnerships closed becker had an accountant sent to pi to confirm by serial number that as of date the equipment that was leased to the sab recycling partnerships was indeed available for use becker arranged for this verification independent of pi because he understood that the investment tax and business energy credits would not be available if the qualifying property was not available for use leicht also familiarized himself with the plastics recycling transactions leicht has a b a degree in finance and accounting from penn state university a j d from suny buffalo and an ll m in taxation from new york university school of law leicht ran a mathematical check on the numbers contained in the offering materials for becker but he did not test the underlying assumptions upon which they were based he also visited pi in hyannis and met with miller and other insiders to the transactions leicht never communicated an opinion as to the value of the recyclers other than what was presented in the offering memoranda he has no education or expertise in plastics materials or plastics recycling d petitioners and their introduction to the partnership transactions leon m and mary k jaroff resided in new york new york when their petition was filed leon m jaroff petitioner earned degrees in electrical engineering and mathematics from the university of michigan in he then moved to new york and worked for an engineering magazine entitled materials and methods six months later he joined the staff of life magazine over approximately the next years petitioner was employed as a researcher then as a reporter in new york and then as a bureau correspondent for life magazine while working in the chicago bureau in petitioner transferred to time magazine time several years later he was promoted to detroit bureau chief in petitioner was transferred to new york to write for the business section of time subsequently petitioner was employed as a science writer for time the science editor for that magazine and then as a senior editor in time inc started a science magazine discover and petitioner was chosen to be its first managing editor petitioner was the managing editor of the science magazine discover for years including the taxable years in issue mary k jaroff was a sales executive with institutional investor systems during the taxable years in issue petitioner acquired a second-tier 895928-percent interest in sab recovery--through the partnership resource partners--for dollar_figure in as a result of his second-tier interest in sab recovery on their return petitioners claimed an operating loss in the amount of dollar_figure and investment tax and business energy credits totaling dollar_figure petitioners also claimed a dollar_figure loss from sab recovery on their return in petitioner acquired a second-tier approximately 8-percent5 interest in sab reclamation--through the partnership v l equities--for dollar_figure as a result of his second-tier interest in sab the record does not directly disclose petitioner's percentage interest in sab recovery petitioner testified that he invested dollar_figure through resource partners in sab recovery attached to the partnership return of sab recovery is a schedule_k-1 partner's share of income credits deductions etc of an individual who invested dollar_figure in sab recovery for dollar_figure that limited_partner acquired a 895928-percent interest in sab recovery the amount of sab recovery's operating loss allocated to that partner was dollar_figure and the amount of basis allocated to that partner was dollar_figure which results in a combined investment and business_energy_credit in the amount of dollar_figure dollar_figure x dollar_figure dollar_figure x dollar_figure those figures are consistent with the loss and credits claimed by petitioners on their income_tax return the record does not directly disclose petitioner' sec_5 percentage interest in sab reclamation however on its partnership return sab reclamation reported a loss in the amount of dollar_figure and a basis in the recyclers in the amount of dollar_figure petitioner was allocated a loss in the amount of dollar_figure and a basis in the recyclers in the amount of dollar_figure dollar_figure dollar_figure x dollar_figure dollar_figure the record does not directly disclose the amount that petitioner invested in v l equities for his second-tier interest in sab reclamation however the schedule_k-1 for v l equities for attached to the sab reclamation partnership return shows that v l equities acquired a 9-percent interest in sab reclamation for dollar_figure petitioner had a 8-percent second-tier interest in sab reclamation dollar_figure x dollar_figure dollar_figure reclamation on their return petitioners claimed an operating loss in the amount of dollar_figure and investment tax and business energy credits in the amount of dollar_figure respondent disallowed the operating losses and credits related to sab recovery and claimed by petitioners on their return with respect to petitioners' return respondent disallowed dollar_figure of the claimed dollar_figure loss related to sab recovery dollar_figure of the claimed dollar_figure loss related to sab reclamation and dollar_figure of the claimed dollar_figure investment tax and business energy credits related to sab reclamation the total operating loss claimed by petitioners on their return from both sab reclamation and sab recovery was dollar_figure dollar_figure dollar_figure dollar_figure petitioner learned of the plastics recycling transactions from noel tucker of becker co in petitioner had been referred to becker co in by richard snyder snyder who at the time was the chief_executive_officer of simon schuster inc petitioner and snyder frequented the same fitness center and often talked while exercising while bemoaning his financial status on one such occasion petitioner told snyder that he would love to increase his income and that his taxes were all screwed up snyder was a client of becker co and he recommended the firm to petitioner petitioner contacted becker who almost immediately turned him over to noel tucker tucker serviced petitioner's account for approximately year and then it was turned over to a new member of the firm harry shuffrin tucker suggested the plastics recycling transactions to petitioner in and provided him with a copy of the sab recovery offering memorandum petitioner claims that he and his wife mary devoted several evenings to the offering memorandum and read it very carefully the possibility of being audited and a statement about there being some risk concerned petitioner and he raised these concerns with tucker according to petitioner tucker indicated that such warnings or caveats are routine and that the venture was sound petitioner recalled believing that tucker had not visited pi but that becker had visited pi several times often with experts in tow and that the sentinel epe recycler was supposed to be better than the state-of-the-art machines at that time petitioner could not recall speaking to becker about sab recovery after his initial introduction to becker and except for an occasional phone conversation with leicht when tucker was out of the office during his first year as a client petitioner recalled dealing only with tucker petitioner confirmed at trial that if he needs information he knows how to get it he is familiar with a library and how to get information from various publications petitioner knew how to locate plastics trade journals but he did not consult any such magazines before investing in the partnerships petitioner explained that one of the ways he gets information best is to go to experts generally in the fields of science and technology and medicine he did not however consult anyone outside of becker co about the partnerships petitioner was never led to believe that becker was an engineer or had any expertise in plastics he knew that tucker was an accountant but assumed that tucker was relying upon the advice of experts that stuart becker had engaged petitioner did not ask tucker who those experts were petitioners never made a profit in any year from their participation in sab recovery and sab reclamation petitioner did not see a sentinel epe recycler prior to investing in the partnerships he has no education or work experience in plastics recycling or plastics materials opinion we have decided a large number of the plastics recycling group of cases the majority of these cases like the consolidated cases herein raised issues regarding additions to tax for negligence and valuation_overstatement we have found provizer v commissioner tcmemo_1992_177 affd without published opinion 996_f2d_1216 6th cir concerned the substance of the partnership transaction and also the additions to tax the following cases concerned the addition_to_tax for negligence inter alia gollin v commissioner tcmemo_1996_454 grelsamer v commissioner tcmemo_1996_399 zenkel v commissioner tcmemo_1996_398 estate of busch v commissioner tcmemo_1996_342 spears v commissioner tcmemo_1996_341 stone v commissioner tcmemo_1996_230 reimann v commissioner tcmemo_1996_84 bennett v commissioner tcmemo_1996_14 atkind v commissioner tcmemo_1995_582 triemstra v commissioner tcmemo_1995_581 pace v commissioner tcmemo_1995_580 dworkin v commissioner tcmemo_1995_533 wilson v commissioner tcmemo_1995_525 avellini v commissioner tcmemo_1995_489 paulson v commissioner tcmemo_1995_387 zidanich v commissioner tcmemo_1995_382 ramesh v commissioner tcmemo_1995_346 reister v commissioner tcmemo_1995_305 fralich v commissioner tcmemo_1995_257 shapiro v commissioner tcmemo_1995_224 pierce v commissioner tcmemo_1995_223 fine v commissioner tcmemo_1995_222 pearlman v commissioner tcmemo_1995_182 kott v commissioner tcmemo_1995_181 eisenberg v commissioner tcmemo_1995_180 88_tc_376 concerned the applicability of the safe-harbor leasing provisions of sec_168 95_tc_560 concerned a jurisdictional issue farrell v commissioner tcmemo_1996_295 baratelli v commissioner tcmemo_1994_484 estate of satin v commissioner tcmemo_1994_435 fisher v commissioner tcmemo_1994_434 foam recycling associates v commissioner tcmemo_1992_645 madison recycling associates v commissioner tcmemo_1992_605 concerned other issues the taxpayers liable for such additions to tax in all but one of the opinions to date on these issues although procedural rulings have involved many more favorable results for taxpayers in provizer v commissioner tcmemo_1992_177 a test case for the plastics recycling group of cases this court found that each sentinel epe recycler had a fair_market_value not in excess of dollar_figure held that the transaction which is almost identical to the partnership transactions in these consolidated cases was a sham because it lacked economic_substance and a business_purpose upheld the sec_6659 addition_to_tax for valuation_overstatement since the underpayment of taxes was directly related to the overstatement of the value of the sentinel epe recyclers and held that losses and credits claimed with respect to clearwater were attributable to tax-motivated transactions within the meaning of in zidanich v commissioner tcmemo_1995_382 we held the taxpayers liable for the sec_6659 addition_to_tax but not liable for the negligence additions to tax under sec_6653 as indicated in our opinion the zidanich case and the steinberg case consolidated with it for opinion involved exceptional circumstances in estate of satin v commissioner supra and fisher v commissioner supra after the decision in provizer v commissioner supra the taxpayers were allowed to elect to accept a beneficial settlement because of exceptional circumstances in farrell v commissioner supra we rejected the taxpayers' claim to a similar belated settlement arrangement since the circumstances were different and the taxpayers previously had rejected settlement and elected to litigate the case see also gollin v commissioner supra grelsamer v commissioner supra zenkel v commissioner supra baratelli v commissioner supra sec_6621 in reaching the conclusion that the transaction lacked economic_substance and a business_purpose this court relied heavily upon the overvaluation of the sentinel epe recyclers although petitioners have not agreed to be bound by the provizer opinion they have stipulated that the investments in the sentinel epe recyclers in these consolidated cases are similar to the investment described in provizer v commissioner supra the underlying transactions in these consolidated cases and the sentinel epe recyclers considered in these consolidated cases are the same type of transaction and same type of machines considered in provizer v commissioner supra based on the entire record in these consolidated cases including the extensive stipulations testimony of respondent's experts and petitioner's testimony we hold that each of the partnership transactions herein was a sham and lacked economic_substance in reaching this conclusion we rely heavily upon the overvaluation of the sentinel epe recyclers respondent is sustained on the question of the underlying deficiencies we note that petitioners have explicitly conceded this issue in the stipulations of settled issues filed shortly before trial the record plainly supports respondent's determinations regardless of such concession for a detailed discussion of the facts and the applicable law in a substantially identical case see provizer v commissioner supra a sec_6653 a --negligence in two notices of deficiency respondent determined that petitioners were liable for the additions to tax for negligence under sec_6653 and for and dollar_figure petitioners have the burden of proving that respondent's determinations of these additions to tax are erroneous rule a 79_tc_846 sec_6653 imposes an addition_to_tax equal to percent of the underpayment if any part of an underpayment_of_tax is due to negligence or intentional disregard of rules or regulations sec_6653 imposes an addition_to_tax equal to percent of the interest payable with respect to the portion of the underpayment attributable to negligence or intentional disregard of rules or regulations negligence is defined as the failure to exercise the due care that a reasonable and ordinarily prudent person would employ under the circumstances 85_tc_934 the question is whether a particular taxpayer's actions in connection with the transactions were reasonable in light of his experience and the nature of the investment or business see 60_tc_728 when considering the negligence addition_to_tax we evaluate the particular facts of each case judging the relative in the notice_of_deficiency for taxable_year respondent referred to sec_6653 as sec_6653 sophistication of the taxpayers as well as the manner in which they approached their investment mcpike v commissioner tcmemo_1996_46 compare spears v commissioner tcmemo_1996_ with zidanich v commissioner tcmemo_1995_382 petitioner maintains that he and his wife were reasonable in claiming deductions and credits with respect to the partnerships he claims that he carefully read the sab recovery offering memorandum intended and reasonably expected to make an economic profit from the partnerships in light of the so-called oil crisis in the united_states in and and reasonably relied upon tucker as a qualified adviser on this matter the private offering memoranda petitioner testified that he relied in part upon the sab recovery offering memorandum he claimed that he and his wife spent several consecutive evenings carefully reading it petitioner did not indicate how much time if any he spent reviewing the sab reclamation offering memorandum each of the offering memoranda highlighted a number of tax risk factors and business risk factors including the following the partnerships had no operating history management of the partnerships' business was dependent upon the general_partner who had no experience in marketing recycling_equipment and who was required to devote only such time to the partnerships as such general_partner deemed necessary the limited partners had no right to take part in or interfere in any manner with the management or conduct of the business of the partnerships there was no established market for the sentinel recyclers and although competitors were purportedly not marketing comparable equipment and the sentinel recyclers purportedly involved carefully guarded trade secrets pi did not intend to apply for a patent for protection against appropriation and use by others in these consolidated cases the projected tax benefits in the sab recovery and sab reclamation offering memoranda exceeded petitioner's investments according to the offering memoranda for each dollar_figure investor the projected first-year tax benefits were investment tax_credits in the amounts of dollar_figure and dollar_figure respectively plus deductions in the amounts of dollar_figure and dollar_figure respectively as a result of petitioner's second- tier dollar_figure investment in sab recovery on their return petitioners claimed an operating loss in the amount of dollar_figure and investment tax and business energy credits totaling dollar_figure and on their return they claimed an operating loss in the amount of dollar_figure for petitioner's dollar_figure second-tier investment in sab reclamation in petitioners claimed an operating loss in the amount of dollar_figure and investment tax and business energy credits in the amount of dollar_figure petitioner estimated that at the time he invested in the partnerships he was working hours a week at discover magazine and just the thought of pursuing any other kind of activity was just out of the question for him petitioner testified that he invested in the partnerships to obtain an additional source_of_income to help offset current and future tuition bills of his children as well as alimony payments to his former wife according to petitioner the long-term projected royalty payments and not the tax benefits primarily induced him to invest in the partnerships petitioners claimed three children as dependents on their and returns they deducted alimony paid--in the amount of dollar_figure--only on their return petitioners reported income from wages interest and dividends in the amount of dollar_figure in and in the amount of dollar_figure in petitioner testified that after purportedly reading the sab recovery offering memorandum over several nights his primary concern was the risk of being audited petitioner testified that the tax benefits flowing from the partnerships were explained to him and that he understood they would exceed his cash invested he was not so well informed or concerned about the business aspects of the partnerships however petitioner testified that he thought that the sentinel epe recycler had an advantage over its competitors because it was supposed to be better than the state-of-the-art machines at that time but the offering memoranda warned that pi was not patenting the machine to protect against appropriation and use by others the financial structure of the partnerships was not clear to petitioner from the offering memoranda and at trial he could not recall that the offering memoranda warned that there was no established market for the recyclers this point was discussed in a section of the offering memorandum entitled no established market for the sentinel recyclers the offering memoranda explained that there is presently no established market for leasing or licensing the use of the sentinel recyclers or comparable recycling_equipment and that there can be no assurance that the sentinel recyclers will be placed to any significant extent notwithstanding petitioner's purported economic profit_motive for investing in the partnerships the record in these consolidated cases indicates that petitioners did not carefully read the offering memoranda did not give due consideration to all of the information set out therein and ultimately did not place a great deal of reliance if any on the representations therein the direct reductions in petitioners' federal income taxes from the investment tax_credits alone ranged from percent to percent of their cash investments without consideration of any rebated commissions or advance royalty payments therefore after adjustments of withholding estimated_tax or final payment like the taxpayers in provizer v commissioner tcmemo_1992_177 except for a few weeks at the beginning petitioners never had any money in the partnership transactions in view of the disproportionately large tax benefits claimed on petitioners' federal_income_tax returns relative to the dollar amounts invested further investigation of the partnership transactions clearly was required a careful consideration of the materials in the offering memoranda in these cases especially the discussions of high writeoffs and risk of audit should have alerted a prudent and reasonable investor to the questionable nature of the promised deductions and credits see 857_f2d_1383 9th cir affg dister v commissioner tcmemo_1987_217 sacks v commissioner tcmemo_1994_217 affd 82_f3d_918 9th cir a reasonably prudent person would not conclude without substantial investigation that the government was providing tax benefits so disproportionate to the taxpayers' investment of their own capital petitioners' reliance upon the court_of_appeals for the ninth circuit's partial reversal of our decision in osterhout v commissioner tcmemo_1993_251 affd in part and revd in part without published opinion sub nom balboa energy fund v commissioner 85_f3d_634 9th cir is misplaced in osterhout we found that certain oil_and_gas partnerships were not engaged in a trade_or_business and sustained the commissioner's imposition of the negligence additions to tax with respect to one of the partners thereindollar_figure the court_of_appeals for the ninth circuit reversed our imposition of the negligence additions to tax petitioners point out that the taxpayer in that case relied in part upon a tax opinion contained in the offering materials osterhout v commissioner tcmemo_1993_251 affd in part and revd in part without published opinion sub nom balboa energy fund v commissioner 85_f3d_634 9th cir involved a group of consolidated cases the parties therein agreed to be bound by the court's opinion regarding the application of the additions to tax under sec_6653 inter alia accordingly although the court's analysis focused on one taxpayer the additions to tax were sustained with respect to all of the taxpayers in the consolidated cases before us however petitioner's testimony indicates that he and his wife did not carefully read the offering memoranda and therefore did not place a great deal of reliance if any upon the tax opinion letter attached thereto moreover the offering memoranda for the partnerships herein warned prospective investors that the accompanying tax opinion_letters were not in final form and were prepared for the general_partner and that prospective investors should consult their own professional advisers with respect to the tax benefits and tax risks associated with the partnerships the tax opinion_letters accompanying the sab recovery and sab reclamation offering memoranda were addressed solely to the general_partner and began with the following opening disclaimer this opinion is provided to you for your individual guidance we expect that prospective investors will rely upon their own professional advisors with respect to all tax issues arising in connection with an investment in the partnership and the operations thereof we recognize that you intend to include this letter with your offering materials and we have consented to that with the understanding that the purpose in distributing it is to assist your offerees' and their tax advisors in making their own analysis and not to permit any prospective investor to rely upon our advice in this matter emphasis added accordingly the tax opinion_letters expressly indicate that prospective investors such as petitioners were not to rely upon the tax opinion letter see collins v commissioner supra the limited technical opinion of tax counsel expressed in these letters was not designed as advice upon which taxpayers might rely and the opinion of counsel itself so states the so-called oil crisis petitioner contends that he reasonably expected to make an economic profit from the partnership transactions because plastic is an oil derivative and the united_states was experiencing a so- called oil crisis during the years and based upon our review of the record we find petitioner's contention unconvincing regardless of the so-called oil crisis moreover testimony by one of respondent's experts establishes that the oil pricing changes during the late 1970's and early 1980's did not justify petitioners' claiming excessive investment credits and purported losses based on vastly exaggerated valuations of recycling machinery by petitioner had approximately years' experience as variously a reporter bureau correspondent and editor for the magazines life time and discover he confirmed at trial that if he needs information he knows how to get it in addition to utilizing libraries and varying publications petitioner noted that one of the ways that he gets information best is to go to experts generally in the fields of science and technology and medicine despite his research and reporting experience and the resources available to him at time inc petitioner did not educate himself in or personally investigate the plastics recycling transactions nor did he consult anyone outside of becker co in addition petitioner and his wife did not carefully read the sab recovery offering memorandum or seriously attempt to resolve the numerous caveats and warnings therein we are not convinced that petitioner gave sufficient consideration to the business aspects of the partnerships to demonstrate that he really intended and reasonably expected to make an economic profit from the transactions regardless of the so-called oil crisis moreover petitioners did not explain how the so-called oil crisis provided a reasonable basis for them to invest in the partnerships and claim the associated tax deductions and credits the offering materials warned that there could be no assurances that prices for new resin pellets would remain at their then- current level one of respondent's experts steven grossman explained that the price of plastics materials is not directly proportional to the price of oil in his report he stated that less than percent of crude_oil is utilized for making plastics materials and that studies have shown that a increase in crude_oil prices results in only a to increase in the cost of plastics products furthermore during and in addition to the media coverage of the so-called oil crisis there was extensive continuing press coverage of questionable tax_shelter plans 731_f2d_1417 9th cir affg 79_tc_714 petitioners' reliance on 99_tc_132 affd sub nom 28_f3d_1024 10th cir is misplaced the facts in krause v commissioner supra are distinctly different from the facts of these cases in the krause case the taxpayers invested in limited_partnerships whose investment objectives concerned enhanced oil recovery eor technology the krause opinion states that during the late 1970's and early 1980's the federal government adopted specific programs to aid research_and_development of eor technology id pincite in holding that the taxpayers in the krause case were not liable for the negligence additions to tax this court noted that one of the government's expert witnesses acknowledged that investors may have been significantly and reasonably influenced by the energy price hysteria that existed in the late 1970s and early 1980s to invest in eor technology id pincite in the present cases however as explained by respondent's expert steven grossman the price of plastics materials was not directly proportional to the price of oil and there is no persuasive evidence that the so- called oil crisis had a substantial bearing on petitioner's decision to invest while eor was according to our krause opinion in the forefront of national policy and the media during the late 1970's and 1980's there is no showing in these records that the so-called energy crisis would provide a reasonable basis for petitioner's investing in recycling of polyethylene particularly in the machinery here in question in addition the taxpayers in the krause case were experienced in or investigated the oil industry and eor technology specifically one of the taxpayers in krause v commissioner supra undertook significant investigation of the proposed investment including researching eor technology the other taxpayer was a geological and mining engineer whose work included research of oil recovery methods and who hired an independent geologic engineer to review the offering materials id pincite in the present cases petitioners were not experienced or educated in plastics recycling petitioner did not independently investigate the sentinel recyclers or hire an expert in plastics to evaluate the partnership transactions we consider petitioners' arguments with respect to the krause case inapplicable petitioners' purported reliance on a tax adviser petitioner maintains that he reasonably relied upon the advice of a qualified adviser tucker and that he relied on various representations allegedly made by tucker about what becker had done the concept of negligence and the argument of reliance on an expert are highly fact intensive petitioner is well educated he earned degrees in electrical engineering and mathematics from the university of michigan for approximately years he worked variously as a reporter bureau correspondent editor senior editor and managing editor for life magazine time magazine and discover magazine this experienced business and science journalist claims that he relied upon an accountant to investigate the tax law and the underlying business circumstances of a proposed investment the success of which depended upon a purportedly technologically unique machine becker who is experienced in tax matters explains that he made an investigation within the limits of his resources and abilities and that he and tucker fully disclosed what he had done for reasons set forth below we believe that petitioner did not reasonably rely upon tucker and ultimately becker with respect to valuation problems requiring expertise in engineering and plastics technology a the circumstances under which a taxpayer may avoid liability under sec_6653 and because of reasonable reliance on competent and fully informed professional advice a taxpayer may avoid liability for the additions to tax under sec_6653 and if he or she reasonably relied on competent professional advice 469_us_241 89_tc_849 affd 904_f2d_1011 5th cir affd 501_us_868 reliance on professional advice standing alone is not an absolute defense to negligence but rather a factor to be considered freytag v commissioner supra for reliance on professional advice to excuse a taxpayer from the negligence additions to tax the taxpayer must show that the professional had the expertise and knowledge of the pertinent facts to provide informed advice on the subject matter 43_f3d_788 2d cir affg tcmemo_1993_621 39_f3d_402 2d cir affg tcmemo_1993_480 freytag v commissioner supra sacks v commissioner tcmemo_1994_217 affd 82_f3d_918 9th cir kozlowski v commissioner tcmemo_1993_430 affd without published opinion 70_f3d_1279 9th cir see also stone v commissioner tcmemo_1996_230 reimann v commissioner tcmemo_1996_84 reliance on representations by insiders promoters or offering materials has been held an inadequate defense to negligence goldman v commissioner supra 990_f2d_893 6th cir affg donahue v commissioner tcmemo_1991_181 94_tc_637 affd without published opinion 956_f2d_274 9th cir affd without published opinion sub nom cowles v commissioner 949_f2d_401 10th cir 92_tc_958 affd without published opinion 921_f2d_280 9th cir 92_tc_827 91_tc_524 pleas of reliance have been rejected when neither the taxpayer nor the advisers purportedly relied upon by the taxpayer knew anything about the nontax business aspects of the contemplated venture david v commissioner supra goldman v commissioner supra freytag v commissioner supra 85_tc_557 lax v commissioner tcmemo_1994_329 affd without published opinion 72_f3d_123 3d cir sacks v commissioner supra steerman v commissioner tcmemo_1993_447 rogers v commissioner tcmemo_1990_619 see also the plastics recycling cases cited supra note in the instant consolidated cases petitioner maintains that he reasonably relied upon tucker as a qualified adviser on this matter although petitioner testified that he did not discuss the plastics recycling transactions with becker and he does not argue that he relied on becker the substance of petitioner's testimony is that he relied upon tucker's representations about what becker had done to investigate the plastics recycling transactions tucker did not testify at trial becker did b becker and tucker becker had no education special qualifications or professional skills in plastics engineering plastics recycling or plastics materials in evaluating the plastics recycling transactions and organizing the sab recycling partnerships becker supposedly relied upon the offering materials a tour of the pi facility in hyannis discussions with insiders to the transactions canno and his investigation of the reputation and background of pi and persons involved in the transactions despite his lack of knowledge regarding the product the target market and the technical aspects at the heart of the plastics recycling transactions becker did not hire an expert in plastics materials or plastics recycling or recommend that his clients do so the only independent person having any connection with the plastics industry with whom becker spoke was canno canno was a client of becker co and was a part owner and the production manager of equitable bag co a manufacturer of paper and plastic bags becker spoke to canno about the recyclers and pi but did not hire or pay him for any advice canno did not visit the pi plant in hyannis see or test a sentinel epe recycler or see or test any of the output from a sentinel epe recycler or the recycled resin pellets after they were further processed by pi according to becker canno endorsed the partnership transactions after reviewing the offering materials asked at trial if canno had done any type of comparables analysis becker replied i don't know what mr canno did becker visited the pi plant in hyannis toured the facility viewed a sentinel epe recycler in operation and saw products that were produced from recycled plastic becker claims that he was told by pi personnel that the recycler was unique and that it was the only machine of its type in fact the sentinel epe recycler was not unique instead several machines capable of densifying low density materials were already on the market other plastics recycling machines available during and ranged in price from dollar_figure to dollar_figure including the foremost densilator nelmor weiss densification system regenolux buss- condux plastcompactor and cumberland granulator see provizer v commissioner tcmemo_1992_177 becker was also told that pi had put an enormous amount of research and development--10 to years' worth--into the creation and production of the sentinel epe recycler when he asked to see the cost records for some kind of independent verification however his request was denied becker was informed that such information was proprietary and secret and that he would just have to take pi's representations as true although pi claimed that all of its information was a trade secret and that it never obtained patents on any of its machines pi had in fact obtained numerous patents prior to the recycling transactions and had also applied for a trademark for the sentinel recyclers becker decided to accept pi's representations after speaking with miller the corporate counsel to pi canno who had never been to pi's plant or seen a sentinel epe recycler and a surrogate judge from rhode island who did business in the boston cape cod area and who had no expertise in engineering or plastics materials becker testified that he was allowed to see pi's internal accounting controls regarding the allocation of royalty payments and pi's recordkeeping system in general in provizer v commissioner supra this court found that pi had no cost accounting system or records becker confirmed at trial that he relied on the offering materials and discussions with pi personnel to establish the value and purported uniqueness of the recyclers becker testified that he relied upon the reports of ulanoff and burstein contained in the offering materials despite the fact that ulanoff's report did not contain any hard data to support his opinion ulanoff was not an economics or plastics expert becker did not know whether burstein was an engineer and burstein was a client of miller's and was not an independent expert in addition ulanoff and burstein each owned an interest in more than one partnership that owned sentinel recyclers as part of the plastics recycling program becker explained at trial that in the course of his practice when evaluating prospective investments for clients he focuses on the economics of the transaction and investigates whether there is a need or market for the product or service with respect to the partnership transactions the records indicate that becker overlooked several red flags regarding the economic viability and market for the sentinel epe recyclers the offering memoranda for the partnership transactions warned that there was no established market for the sentinel epe recyclers becker never saw any marketing plans for selling the pellets or leasing the recyclers he accepted representations by pi personnel that they would be marketing the recyclers to clients and that there was a sufficient base of end-users for the machines yet he never saw pi's client list at the time of the closing of the partnerships becker did not know who the end- users were or whether there were any end-users actually committed to the transaction becker purportedly checked the price of the pellets by reading trade journals of the plastics industry however he did not use those same journals to investigate the recyclers' purported value or to see whether there were any advertisements for comparable machines in concluding that the partnerships would be economically profitable becker made two assumptions that he concedes were unsupported by any hard data that there was a market for the pellets and that market demand for them would increase becker had a financial interest in sab recovery sab reclamation and the sab recycling partnerships generally he received fees in excess of dollar_figure with respect to the sab recycling partnerships and more than dollar_figure of those fees was derived from sab recovery and sab reclamation becker also received fees for investment advice from some individual investors in addition becker co received fees from the sab recycling partnerships for preparing their partnership returns as becker himself testified potential investors could not have read the offering materials and remained ignorant of the financial benefits accruing to him petitioner's recollection of becker's investigation as purportedly told to him by tucker is inconsistent with becker's testimony according to petitioner he understood from tucker that tucker had not visited the pi plant in hyannis but that becker had gone many times and had taken experts in plastics and manufacturing along with him in contrast becker testified that he visited pi just one or two times and that tucker visited pi once or twice becker was quite certain that tucker accompanied him on one of his visits to pi although he did not indicate when that visit occurred as for taking along experts in plastics and manufacturing becker testified that he did not hire any independent experts other than counsel to represent him as general_partner and that he relied on pi for the value and uniqueness of the sentinel recycler becker and petitioner also have differing recollections regarding whether the two of them discussed the plastics recycling transactions according to petitioner after he first contacted becker becker took him on as a client and almost immediately turned him over to noel tucker petitioner testified that thereafter except for an occasional phone conversation with leicht his dealings were entirely with noel tucker until his account was turned over to shuffrin in contrast becker testified that he spoke to petitioner more than once although to the best of his recollection only once prior to the closing of sab recovery becker testified that mr jaroff called me after discussing the transaction with mr tucker and asked me to confirm the information that noel tucker had given him as becker recalled he and petitioner discussed the plastics recycling transactions for approximately to minutes in tucker's office asked if his testimony would be different if petitioner were to testify that he had met becker only once and that he had spoken only to tucker and shuffrin about the partnerships becker replied no my testimony wouldn't be different asked if he had a definite recollection of talking to petitioner becker replied i recall talking to him in tucker's office with respect to what he told petitioner becker's testimony is inconsistent on direct examination becker testified that he confirmed to petitioner that he and his associates at becker co had visited pi observed the recyclers and done everything they thought appropriate becker testified that i just confirmed that we believed that we had done an appropriate level of due diligence on cross-examination becker modified his earlier testimony and said i told jaroff that i had done a high degree of investigation review and analysis as opposed to saying i did due diligence i had told him about some of the things that i had done some of the other things that mr tucker had done and we also had discussed the investment with jaroff i had indicated to him that based upon my knowledge of his financial circumstance he could afford the risk that was basically the substance of my discussions with mr jaroff becker testified that he was very careful not to mislead any of his clients regarding the particulars of his investigation as he put it i don't recall saying to a client i did due diligence rather i told my clients precisely what i had done to investigate or analyze the transaction i didn't just say i did due diligence and leave it open for them to define what i might or might not have done the record shows that petitioner did not carefully read the offering memoranda did not independently research the plastics recycling transactions and did not consult any experts in plastics materials or plastics recycling petitioner claims that he relied on tucker and particularly relied on tucker's purported representations about what becker had done to investigate the plastics recycling transactions as petitioner recalls them however tucker's purported representations contradict becker's testimony regarding what he had done we find petitioner's recollection of tucker's representations to be unreliable and his failure to call tucker to testify gives rise to the inference that such testimony would not have been favorable to petitioners 101_tc_374 affd without published opinion 40_f3d_385 5th cir 47_tc_92 affd 392_f2d_409 5th cir 6_tc_1158 affd 162_f2d_513 10th cir sacks v commissioner tcmemo_1994_217 we are not required to accept petitioner's self-serving testimony as true particularly when inconsistent and contradicted by other evidence 338_f2d_602 9th cir affg 41_tc_593 99_tc_202 87_tc_74 snyder v commissioner tcmemo_1995_285 sacks v commissioner supra petitioner does not allege that tucker misled or deceived him as a member of becker co tucker was privy to the particulars of becker's investigation certainly he knew that becker did not take any experts with him to pi especially considering becker's testimony that tucker was with him on one such occasion to the extent that tucker related the particulars of becker's investigation to petitioner we have no reason to doubt that his representations were accurate and forthright in addition becker's testimony convinces us that petitioner discussed the plastics recycling transactions with becker and that becker supplemented the representations made by tucker so that petitioner knew precisely what becker had done to investigate or analyze the transaction accordingly we find that petitioner was fully apprised of the particulars of becker co 's investigation consistent with the facts as we have found them we hold that petitioner's purported reliance on tucker and indirectly on becker was not reasonable not in good_faith nor based upon full disclosure the purported value of the sentinel epe recycler generated the deductions and credits in these cases and that circumstance was reflected in the offering memoranda petitioner testified that the tax benefits were explained to him and that he recognized that the sentinel recycler was very expensive certainly tucker and becker recognized the nature of the tax benefits and given petitioner's education and professional experience he should have recognized it as well yet neither petitioner nor tucker nor becker verified the purported value of the sentinel epe recycler petitioner ultimately relied on becker and becker confirmed at trial that he relied on pi for the value of the sentinel epe recyclers in the end tucker becker and petitioner relied on pi personnel for the value of the sentinel epe recyclers and the economic viability of the partnership transactions see vojticek v commissioner tcmemo_1995_444 to the effect that advice from such persons is better classified as sales promotion tucker and becker did not have any education special qualifications or professional skills in plastics materials or plastics recycling a taxpayer may rely upon his adviser's expertise in these cases accounting and tax_advice but it is not reasonable or prudent to rely upon a tax adviser regarding matters outside of his field of expertise or with respect to facts that he does not verify see david v commissioner f 3d pincite goldman v commissioner f 3d pincite 864_f2d_93 9th cir affg 88_tc_1086 lax v commissioner tcmemo_1994_329 sacks v commissioner supra rogers v commissioner tcmemo_1990_619 see also gollin v commissioner tcmemo_1996_454 grelsamer v commissioner tcmemo_1996_399 zenkel v commissioner tcmemo_1996_398 estate of busch v commissioner tcmemo_1996_342 spears v commissioner tcmemo_1996_341 with respect to becker's advice in plastics recycling cases miscellaneous petitioners stipulated that the fair_market_value of a sentinel epe recycler in was not in excess of dollar_figure notwithstanding this concession petitioners contend that they were reasonable in claiming credits on their federal_income_tax returns based upon each recycler having a value of dollar_figure in support of this position petitioners submitted into evidence preliminary reports prepared for respondent by ernest d carmagnola carmagnola the president of professional plastic associates carmagnola had been retained by the irs in to evaluate the sentinel epe and eps recyclers in light of what he described as the fantastic values placed on the recyclers by the owners based on limited information available to him at that time carmagnola preliminarily estimated that the value of the sentinel epe recycler was dollar_figure however after additional information became available to him carmagnola concluded in a signed affidavit dated date that the machines actually had a fair_market_value of not more than dollar_figure each in the fall of and we accord no weight to the carmagnola reports submitted by petitioners the projected valuations therein were based on inadequate information research and investigation and were subsequently rejected and discredited by their author in one preliminary report carmagnola states that he has a serious concern of actual profit of a sentinel epe recycler and that to determine whether the machines actually could be profitable he required additional information from pi carmagnola also indicates that in preparing the report he did not have information available concerning research_and_development costs of the machines and that he estimated those costs in his valuations of the machines respondent rejected the carmagnola reports and considered them unsatisfactory for any purpose and there is no indication in the records that respondent used them as a basis for any determinations in the notices of deficiency even so counsel for petitioners obtained copies of these reports and urge that they support the reasonableness of the values reported on petitioners' returns not surprisingly said counsel did not call carmagnola to testify in these cases but preferred instead to rely solely upon his preliminary ill-founded valuation estimates carmagnola has not been called to testify in any of the plastics recycling cases before us the carmagnola reports were a part of the record considered by this court and reviewed by the sixth circuit_court of appeals in provizer v commissioner tcmemo_1992_177 where we held the taxpayers negligent consistent therewith we find in these consolidated cases as we have found previously that the reports prepared by carmagnola are unreliable and of no consequence petitioners are not relieved of the negligence additions to tax based on the preliminary reports prepared by carmagnola petitioners cite a number of cases in support of their position but primarily rely on 71_f3d_515 5th cir affg in part and revg in part tcmemo_1994_179 66_f3d_729 5th cir affg in part and revg in part tcmemo_1994_228 wright v commissioner tcmemo_1994_288 wood v commissioner tcmemo_1991_205 davis v commissioner tcmemo_1989_607 and mollen v united_states aftr 2d ustc par big_number d ariz this court dismissed the negligence additions to tax in the wright wood and davis cases for reasons inapposite to the facts herein in the wright case the taxpayers were unsophisticated investors with little or no experience in financial matters nothing in their lives had given them the experience they needed to manage their money or to recognize the importance or meaning of the warning signs inherent in the investment at issue in wood a group of consolidated cases all of the taxpayers had profit objectives the transactions were not sham transactions and one pair of taxpayers inspected the equipment at issue in the davis case the taxpayers reasonably relied upon a trusted and long-term adviser who was independent of the investment venture and the offering materials reviewed by the taxpayers did not reflect that the principals in the venture lacked experience in the pertinent line_of_business unlike the taxpayer in wright as a former business reporter for time petitioner plainly had the experience and education necessary to recognize the importance or meaning of the warning signs inherent in the partnership transactions in contrast to the wood case the partnership transactions are shams lacking economic_substance we are not convinced that petitioner had an honest objective of making an economic profit and he did not inspect the recyclers unlike the circumstances of the davis case tucker and becker were not long-term advisers of petitioner becker was not independent of the sab recycling partnerships and the offering memoranda warned that the general_partner had no prior experience in marketing recycling or similar equipment accordingly petitioners' reliance on the wright wood and davis cases is misplaced in mollen v united_states supra the taxpayer was a medical doctor who specialized in diabetes and who on behalf of the arizona medical association led a continuing medical education cme accreditation program for local hospitals the underlying tax matter involved the taxpayer's investment in diabetics cme group ltd a limited_partnership that invested in the production marketing and distribution of medical educational video tapes the district_court found that the taxpayer's personal expertise and insight in the underlying investment gave him reason to believe it would be economically profitable although the taxpayer was not experienced in business or tax matters he did consult with an accountant and a tax lawyer regarding those matters moreover the district_court noted that the propriety of the taxpayer's disallowed deduction therein was reasonably debatable id pincite7 ustc par big_number at big_number see zfass v commissioner tcmemo_1996_167 petitioner and becker have no formal education expertise or experience in plastics recycling tucker never represented that he was expert in plastics recycling and petitioner had no reason to believe otherwise there is no showing in the record that petitioner tucker or becker had any personal insight or industry know-how in plastics recycling that would reasonably lead them to believe that the plastics recycling transactions would be economically profitable becker purportedly discussed the transactions with canno who apparently was familiar with the plastics industry but canno was not hired by becker to investigate pi and the sentinel epe recycler never saw a sentinel epe recycler and never prepared any kind of formal written analysis of the venture in the end becker co and petitioner relied upon representations by insiders to the plastics recycling transactions and neither becker co nor petitioner hired any independent experts in the field of plastic materials or plastics recycling accordingly we consider petitioners' arguments with respect to the mollen case inapplicable under the circumstances of these consolidated cases petitioners also rely on two recent decisions by the court_of_appeals for the fifth circuit that reversed this court's imposition of the negligence additions to tax in a pair of non- plastics recycling cases 71_f3d_515 5th cir affg in part and revg in part tcmemo_1994_ and 66_f3d_729 5th cir the taxpayers in the durrett and chamberlain cases were among thousands who invested in the first western tax_shelter program involving alleged straddle transactions of forward contracts in the durrett and chamberlain cases the court_of_appeals for the fifth circuit concluded that the taxpayers reasonably relied upon professional advice concerning tax matters in other first western cases however the courts of appeals have affirmed decisions of the tax_court imposing negligence additions to tax see foulds v commissioner tcmemo_1994_489 the well- educated taxpayer failed to establish the substance of advice and the purported adviser lacked tax expertise affd without published opinion 94_f3d_651 9th cir chakales v commissioner tcmemo_1994_408 reliance on a long-term adviser who was a tax attorney and accountant and who in turn relied on a promoter of the venture held unreasonable affd 79_f3d_726 8th cir kozlowski v commissioner tcmemo_1993_430 reliance on an adviser held unreasonable absent a showing that the adviser understood the transaction and was qualified to give an opinion whether it was bona_fide affd without published opinion 70_f3d_1279 9th cir 89_tc_849 reliance on tax_advice given by attorneys and c p a 's held unreasonable absent a showing that the taxpayers consulted any experts regarding the bona fides of the transactions here we have found that neither tucker nor becker the advisers consulted by petitioner possessed sufficient knowledge of the plastics recycling business to render a competent opinion this circumstance has been deemed relevant by the court_of_appeals for the second circuit the court to which appeal in these cases lies see david v commissioner f 3d pincite taxpayers' reliance on expert advice not reasonable where expert lacks knowledge of business in which taxpayers invested goldman v commissioner f 3d pincite same accordingly we shall not relieve petitioners of the negligence additions to tax based upon the court of appeals' decisions in the durrett and chamberlain casesdollar_figure conclusion as to negligence under the circumstances of these consolidated cases petitioners failed to exercise due care in claiming large deductions and tax_credits with respect to the partnerships on their federal_income_tax returns we hold that petitioner did not reasonably rely upon the offering memoranda tucker and becker or in good_faith investigate the underlying viability financial structure and economics of the partnership transactions we are unconvinced by the claim of petitioner an experienced business and science journalist and editor with a leading national investigative news magazine that he reasonably failed to inquire about his investments and simply relied on the offering circulars and becker co despite warnings in the offering circulars and explanations by tucker and becker about the limitations of becker's investigation petitioner knew or should have known better we hold upon consideration of the entire record that petitioners are liable for the negligence additions to tax under sec_6653 and for the taxable years at issue respondent is sustained on this issue other cases cited by petitioners are inapplicable and distinguishable for the following general nonexclusive reasons they involve far less sophisticated if not unsophisticated taxpayers the reasonableness of the respective taxpayers' reliance on expert advice was established in those cases on grounds that do not exist here and the advice given was within the adviser's area of expertise b section 6659--valuation overstatement in notices of deficiency respondent determined that petitioners were liable for the sec_6659 addition_to_tax on the portion of their underpayments attributable to valuation_overstatement petitioners have the burden of proving that respondent's determinations of the sec_6659 additions to tax are erroneous rule a luman v commissioner t c pincite in docket no in her answer to petition respondent asserted an increased amount under sec_6659 respondent has the burden_of_proof with respect to the increased addition_to_tax rule a 102_tc_596 a graduated addition_to_tax is imposed when an individual has an underpayment_of_tax that equals or exceeds dollar_figure and is attributable to a valuation_overstatement sec_6659 d a valuation_overstatement exists if the fair_market_value or adjusted_basis of property claimed on a return equals or exceed sec_150 percent of the amount determined to be the correct amount sec_6659 if the claimed valuation exceed sec_250 percent of the correct value the addition is equal to percent of the underpayment sec_6659 petitioners claimed tax benefits including an investment_tax_credit and a business_energy_credit based on purported values of dollar_figure for each sentinel epe recycler petitioners concede that the fair_market_value of a sentinel epe recycler in was not in excess of dollar_figure therefore if disallowance of petitioners' claimed tax benefits is attributable to such valuation overstatements petitioners are liable for the sec_6659 additions to tax at the rate of percent of the portions of their underpayments attributable to such valuation overstatements petitioners contend that sec_6659 does not apply in their consolidated cases for the following three reasons disallowance of the claimed tax benefits was attributable to other than a valuation_overstatement petitioners' concession of the claimed tax benefits precludes imposition of the sec_6659 additions to tax and respondent erroneously failed to waive the sec_6659 additions to tax we reject each of these arguments for reasons set forth below the grounds for petitioners' underpayments sec_6659 does not apply to underpayments of tax that are not attributable to valuation overstatements see 92_tc_827 89_tc_912 affd 862_f2d_540 5th cir to the extent taxpayers claim tax benefits that are disallowed on grounds separate and independent from alleged valuation overstatements the resulting underpayments of tax are not regarded as attributable to valuation overstatements krause v commissioner t c pincite citing todd v commissioner supra however when valuation is an integral factor in disallowing deductions and credits sec_6659 is applicable see 982_f2d_163 6th cir affg tcmemo_1991_449 933_f2d_143 2d cir the sec_6659 addition_to_tax applies if a finding of lack of economic_substance is due in part to a valuation_overstatement affg tcmemo_1989_684 masters v commissioner tcmemo_1994_197 affd without published opinion 70_f3d_1262 4th cir harness v commissioner tcmemo_1991_321 petitioners argue that the disallowance of the claimed tax benefits was not attributable to a valuation_overstatement according to petitioners the tax benefits were disallowed because the partnership transactions are sham transactions lacking economic_substance not because of any valuation overstatements it follows petitioners reason that because the attributable to language of sec_6659 requires a direct causative relationship between a valuation_overstatement and an underpayment in tax sec_6659 cannot apply to their deficiencies petitioners cite the following cases to support this argument 902_f2d_380 5th cir revg tcmemo_1988_408 893_f2d_225 9th cir affg tcmemo_1988_416 mccrary v commissioner supra and todd v commissioner supra petitioners' argument rests on the mistaken premise that our holding herein that the partnership transactions lacked economic_substance was separate and independent from the overvaluation of the sentinel epe recyclers to the contrary in holding that the partnership transactions lacked economic_substance we relied heavily upon the overvaluation of the recyclers overvaluation of the recyclers was an integral factor in regard to the disallowed tax_credits and other_benefits in these cases the underpayments of tax and our finding that the partnership transactions lacked economic_substance petitioners argue that in provizer v commissioner tcmemo_1992_177 we found that the clearwater transaction lacked economic_substance for reasons independent of the valuation reported in that case according to petitioners the purported value of the recyclers in the clearwater transaction was predicated upon a projected stream of royalty income and this court merely rejected the taxpayers' valuation method petitioners misread and distort our provizer opinion in the provizer case overvaluation of the sentinel epe recyclers irrespective of the technique employed by the taxpayers in their efforts to justify the overvaluation was the dominant factor that led us to hold that the clearwater transaction lacked economic_substance likewise overvaluation of the sentinel recyclers in these cases is the ground for our holding herein that the partnership transactions lacked economic_substance moreover a virtually identical argument was recently rejected in gilman v commissioner supra by the court_of_appeals for the second circuit the court to which appeal in these cases lies see 54_tc_742 affd 445_f2d_985 10th cir in the gilman case the taxpayers engaged in a computer equipment sale_and_leaseback transaction that this court held was a sham_transaction lacking economic_substance the taxpayers therein citing todd v commissioner supra and heasley v commissioner supra argued that their underpayment of taxes derived from nonrecognition of the transaction for lack of economic_substance independent of any overvaluation the court_of_appeals for the second circuit sustained imposition of the sec_6659 addition_to_tax because overvaluation of the computer equipment contributed directly to this court's earlier conclusion that the transaction lacked economic_substance and was a sham gilman v commissioner supra pincite in addition the court_of_appeals for the second circuit agreed with this court and with the court_of_appeals for the eighth circuit that 'when an underpayment stems from disallowed investment credits due to lack of economic_substance the deficiency is subject_to the penalty under sec_6659 ' id pincite quoting 876_f2d_616 8th cir affg t c memo see also rybak v commissioner t c pincite- 87_tc_970 donahue v commissioner tcmemo_1991_181 affd without published opinion 959_f2d_234 6th cir affd sub nom 990_f2d_893 6th cir petitioners' reliance on gainer v commissioner supra 92_tc_827 and todd v commissioner supra is misplaced in those cases in contrast to the consolidated cases herein it was found that a valuation_overstatement did not contribute to an underpayment of taxes in the todd and gainer cases the underpayments were due exclusively to the fact that the property in each case had not been placed_in_service in the mccrary case the underpayments were deemed to result from a concession that the agreement at issue was a license and not a lease although property was overvalued in each of those cases the overvaluations were not the ground on which the taxpayers' liability was sustained in contrast a different situation exists where a valuation_overstatement is an integral part of or is inseparable from the ground found for disallowance of an item mccrary v commissioner supra pincite petitioners' consolidated cases present just such a different situation overvaluation of the recyclers was integral to and inseparable from petitioners' claimed tax benefits and our holding that the partnership transactions lacked economic substancedollar_figure to the extent that 902_f2d_380 5th cir revg tcmemo_1988_408 merely represents an application of 89_tc_912 affd 862_f2d_540 5th cir we consider it distinguishable to the extent that the reversal in the heasley case is based on a concept that where an underpayment derives from the disallowance concession of the deficiencies petitioners argue that their concession of the deficiencies precludes imposition of the sec_6659 additions to tax petitioners contend that their concession renders any inquiry into the grounds for such deficiencies moot absent such inquiry petitioners argue that it cannot be known whether their underpayments were attributable to a valuation_overstatement or another discrepancy without a finding that a valuation_overstatement contributed to an underpayment according to petitioners sec_6659 cannot apply in support of this line of reasoning petitioners rely heavily upon heasley v commissioner supra and mccrary v commissioner supra petitioners' open-ended concession does not obviate our finding that the partnership transactions lacked economic_substance due to overvaluation of the recyclers this is not a situation where we have to decide difficult valuation questions for no reason other than the application of penalties see mccrary v commissioner supra pincite n the value of the sentinel epe recycler was established in provizer v commissioner supra and stipulated by the parties as a of a transaction for lack of economic_substance the underpayment cannot be attributable to an overvaluation this court and the court_of_appeals for the second circuit have disagreed see 933_f2d_143 2d cir the lack of economic_substance was due in part to the overvaluation and thus the underpayment was attributable to the valuation_overstatement affg tcmemo_1989_684 consequence of the inflated value assigned to the recyclers by the partnerships petitioners claimed deductions and credits that resulted in underpayments of tax and we held that the partnership transactions lacked economic_substance regardless of petitioners' concession in these cases the underpayments of tax were attributable to the valuation overstatements moreover concession of the investment_tax_credit in and of itself does not relieve taxpayers of liability for the sec_6659 addition_to_tax see dybsand v commissioner tcmemo_1994_56 chiechi v commissioner tcmemo_1993_630 instead the ground upon which the investment_tax_credit is disallowed or conceded is significant dybsand v commissioner supra even in situations in which there are arguably two grounds to support a deficiency and one supports a sec_6659 addition_to_tax and the other does not the taxpayer may still be liable for the addition_to_tax gainer v commissioner f 2d pincite 866_f2d_545 2d cir vacating in part tcmemo_1988_211 harness v commissioner tcmemo_1991_321 in the present consolidated cases no argument was made and no evidence was presented to the court that disallowance and concession of the claimed investment tax_credits and other tax benefits related to anything other than a valuation_overstatement to the contrary petitioners stipulated substantially the same facts concerning the partnership transactions as we found in provizer v commissioner tcmemo_1992_177 in the provizer case we held that the taxpayers were liable for the sec_6659 addition_to_tax because the underpayment of taxes was directly related to the overvaluation of the sentinel epe recyclers the overvaluation of the recyclers exceeding big_number percent was an integral part of our findings in provizer that the transaction was a sham and lacked economic_substance similarly the records in these cases plainly show that the overvaluation of the recyclers is integral to and is the core of our holding that the underlying transactions here were shams and lacked economic_substance petitioners' reliance on 92_tc_827 is misplaced in that case the taxpayers conceded disentitlement to their claimed tax benefits and the sec_6659 additions to tax were held inapplicable however the concessions of the claimed tax benefits in and of themselves did not preclude imposition of the sec_6659 additions to tax in mccrary v commissioner supra the sec_6659 addition_to_tax was disallowed because the agreement at issue was conceded to be a license and not a lease in contrast the records in petitioners' cases plainly show that petitioners' underpayments were attributable to overvaluation of the sentinel recyclers we hold that petitioners' reliance on mccrary v commissioner supra is inappropriatedollar_figure we held in provizer v commissioner supra that each sentinel epe recycler had a fair_market_value not in excess of dollar_figure our finding in the provizer case that the sentinel epe recyclers had been overvalued was integral to and inseparable from our holding of a lack of economic_substance petitioners stipulated that the partnership transactions were similar to the clearwater transaction described in the provizer case and that the fair_market_value of a sentinel epe recycler in was not in excess of dollar_figure given those concessions and the fact that the record here plainly shows that the overvaluations of the recyclers was the only reason for the disallowance of the claimed tax benefits we conclude that the deficiencies were attributable to overvaluation of the sentinel epe recyclers sec_6659 petitioners argue that respondent erroneously failed to waive the sec_6659 additions to tax sec_6659 authorizes the commissioner to waive all or part of the addition_to_tax for valuation overstatements if taxpayers establish that there was a reasonable basis for the adjusted bases or valuations petitioners' citation of heasley v commissioner supra in support of the concession argument is also inappropriate that case was not decided by the court_of_appeals for the fifth circuit on the basis of a concession moreover see supra note to the effect that the court_of_appeals for the second circuit and this court have not followed the heasley opinion with respect to the application of sec_6659 claimed on the returns and that such claims were made in good_faith the commissioner's refusal to waive a sec_6659 addition_to_tax is reviewable by this court for abuse_of_discretion krause v commissioner t c pincite abuse_of_discretion has been found in situations where the commissioner's refusal to exercise her discretion is arbitrary capricious or unreasonable see 91_tc_1079 82_tc_989 haught v commissioner tcmemo_1993_58 we note initially that petitioners did not request respondent to waive the sec_6659 additions to tax until well after the trial of these consolidated cases petitioners made their request more than months after the trial of these consolidated cases we are reluctant to find that respondent abused her discretion in these consolidated cases when she was not timely requested to exercise it and there is no direct evidence of any abuse of administrative discretion haught v commissioner supra cf wynn v commissioner tcmemo_1995_ klieger v commissioner tcmemo_1992_734 however we do not decide this issue solely on petitioners' failure timely to request waivers but instead we have considered the issue on its merits petitioners urge that they relied on the respective offering materials and tucker in deciding on the valuation claimed on their tax returns petitioners contend that such reliance was reasonable and therefore that respondent should have waived the sec_6659 additions to taxdollar_figure however as we explained above in finding petitioners liable for the negligence additions to tax petitioners' purported reliance on the offering materials and tucker was not reasonable petitioners did not carefully read the offering memoranda to the extent that they reviewed either of them they did not give due consideration to the numerous warnings and caveats contained therein we found petitioner's recollection of events to be unreliable and his testimony suspect becker possessed no special qualifications or professional skills in the recycling or plastics industries and the record indicates the same was true of tucker despite these obvious limitations tucker becker and petitioners never hired or consulted any plastics engineering or technical experts with respect to the plastics recycling transactions becker spoke with canno who apparently had some knowledge of the plastics industry but the substance of canno's purported comments is doubtful and he had only minimal information about the transaction anyway at trial becker confirmed that in the end he relied exclusively on pi its personnel and the offering materials as to the value and in their posttrial brief petitioners referenced the report sec_15 prepared by carmagnola in support of the reasonableness of the claimed valuation for reasons discussed supra we consider the reports prepared by carmagnola to be unreliable and of no consequence purported uniqueness of the machines in support of their contention that they acted reasonably petitioners cite 22_f3d_1001 10th cir revg tcmemo_1993_23 however the facts in the mauerman case are distinctly different from the facts of these cases in mauerman the tenth circuit_court of appeals held that the commissioner had abused her discretion for not waiving a sec_6661 addition_to_tax like the sec_6659 addition a sec_6661 addition_to_tax may be waived by the commissioner if the taxpayer demonstrates that there was reasonable_cause for his underpayment and that he acted in good_faith sec_6661 the taxpayer in mauerman relied upon independent attorneys and accountants for advice as to whether payments were properly deductible or capitalized the advice relied upon by the taxpayer in mauerman was within the scope of the advisers' expertise the interpretation of the tax laws as applied to undisputed facts in these consolidated cases particularly with respect to valuation petitioners relied upon advice that was outside the scope of expertise and experience of tucker and becker consequently we consider petitioners' reliance on the mauerman case inapplicable we hold that petitioners did not have a reasonable basis for the adjusted bases or valuations claimed on their tax returns with respect to their investments in the partnerships in these consolidated cases respondent could find that petitioner's purported reliance on the offering materials tucker and becker was unreasonable the record in these consolidated cases does not establish an abuse_of_discretion on the part of respondent but supports respondent's position we hold that respondent's refusal to waive the sec_6659 addition_to_tax is not an abuse_of_discretion petitioners are liable for the respective sec_6659 additions to tax at the rate of percent of the portions of their underpayments attributable to valuation overstatements respondent is sustained on this issue c petitioners' motion for leave to file motion for decision ordering relief from the negligence_penalty and the penalty rate of interest and to file supporting memorandum of law long after the trial of these consolidated cases petitioners filed a motion for leave to file motion for decision ordering relief from the negligence_penalty and the penalty rate of interest and to file supporting memorandum of law under rule petitioners also lodged with the court a motion for decision seeking relief from the additions to tax for negligence and from the increased rate of interest with attachments and a memorandum in support of the motion respondent filed an objection with attachments and a memorandum in support thereof and petitioners thereafter filed a reply memorandum petitioners argue that they should be afforded the same settlement that was reached between other taxpayers and the irs in docket nos and each of which was styled miller v commissioner see farrell v commissioner tcmemo_1996_295 denying a motion similar to petitioners' motion see also gollin v commissioner tcmemo_1996_454 grelsamer v commissioner tcmemo_1996_399 zenkel v commissioner tcmemo_1996_398 counsel for petitioners seek to raise a new issue long after the trial of these consolidated cases resolution of such issue might well require a new trial such a further trial would be contrary to the established policy of this court to try all issues raised in a case in one proceeding and to avoid piecemeal and protracted litigation 64_tc_989 see also 62_tc_145 consequently under the circumstances here at this late date in the litigation proceedings long after trial and briefing and after the issuance of numerous opinions on issues and facts closely analogous to those in these consolidated cases petitioners' motion for leave is not well founded farrell v commissioner supra even if petitioners' motion for leave were granted the arguments set forth in the motion and the attached memorandum lodged with this court are invalid and the motion would be denied therefore and for reasons set forth in more detail below petitioners' motion for leave shall be denied some of our discussion of background and circumstances underlying petitioners' motion is drawn from documents submitted by the parties and findings of this court in two earlier decisions see estate of satin v commissioner tcmemo_1994_435 fisher v commissioner tcmemo_1994_434 such matters are not disputed by the parties we discuss the background matters for the sake of completeness as we have noted granting petitioners' motion for leave would require further proceedings the estate of satin and fisher cases involved stipulation of settlement agreements piggyback agreements made available to taxpayers in the plastics recycling project whereby taxpayers could agree to be bound by the results of three test cases provizer v commissioner tcmemo_1992_177 and the two miller cases we held in estate of satin and fisher that the terms of the piggyback_agreement bound the parties to the results in all three lead cases not just the provizer case petitioners assert that the piggyback_agreement was extended to them but they do not claim to have accepted the offer timely so they effectively rejected itdollar_figure in or about date a settlement offer the plastics recycling project settlement offer or the offer was made available by respondent in all docketed plastics recycling cases and subsequently in all nondocketed cases baratelli v commissioner tcmemo_1994_484 pursuant to the offer taxpayers had days to accept the following terms in their motion for decision petitioners state after the lead counsel for taxpayers and respondent had agreed upon the designation of the lead cases respondent's counsel prepared piggyback agreements and offered them to counsel for the taxpayers in this case and to other taxpayers emphasis added allowance of a deduction for percent of the amount of the cash investment in the venture in the year s of investment to the extent of loss claimed government concession of the substantial_understatement of tax penalties under sec_6661 and the negligence additions to tax under sec_6653 and taxpayer concession of the sec_6659 addition_to_tax for valuation_overstatement and the increased rate of interest under sec_6621 and execution of a closing_agreement form_906 stating the settlement and resolving the entire matter for all yearsdollar_figure petitioners assert that the plastics recycling project settlement offer was extended to them but they did not accept the offer timely so they effectively rejected itdollar_figure in date the miller cases were disposed of by settlement agreement between the taxpayers and respondentdollar_figure although the record does not include a settlement offer to petitioners petitioners have attached to their motion for decision a copy of a settlement offer to another taxpayer with respect to a plastics recycling case and respondent has not disputed the accuracy of the statement of the plastics recycling settlement offer in their motion for decision petitioners state respondent formulated a standard settlement position which was extended to all taxpayers having docketed or non-docketed cases in the plastics recycling group including petitioner emphasis added although it is not otherwise a part of the record in these consolidated cases respondent attached copies of the miller closing_agreement and disclosure waiver to her objection to petitioners' motion for leave and petitioners do not dispute the accuracy of the document this court entered decisions based upon those settlements on date the settlement provided that the taxpayers in the miller cases were liable for the addition_to_tax under sec_6659 for valuation_overstatement but not for the additions to tax under the provisions of sec_6661 and sec_6653 the increased interest under sec_6621 premised solely upon miller's interest in the recyclers for the taxable years at issue was not applicable because miller made payments prior to date so no interest accrued after that time respondent did not notify petitioners or any other taxpayers of the disposition of the miller cases estate of satin v commissioner supra fisher v commissioner supra petitioners argue that they are similarly situated to miller the taxpayer in the miller cases and that pursuant to the principle of equality they are therefore entitled to the same settlement agreement executed by respondent and miller in those cases in effect petitioners seek to resurrect the piggyback_agreement offer and or the settlement offer they previously failed to accept petitioners contend that under the principle of equality the commissioner has a duty_of_consistency toward similarly situated taxpayers and cannot tax one and not tax another without some rational basis for the difference 363_us_299 frankfurter j concurring see 748_f2d_1465 11th cir 476_f2d_406 4th cir according to petitioners the principle of equality precludes the commissioner from making arbitrary distinctions between like cases see 787_f2d_637 d c cir vacating 83_tc_822 the different tax treatment accorded petitioners and miller was not arbitrary or irrational while petitioners and miller both invested in the plastics recycling project their actions with respect to such investments provide a rational basis for treating them differently miller foreclosed any potential liability for increased interest in his cases by making payments prior to date no interest accrued after that date in contrast petitioners made no such payment and they conceded that the increased rate of interest under sec_6621 applies in their consolidated cases liability for the increased rate of interest is the principal difference between the settlement in the miller cases which petitioners declined when they failed to accept the piggyback_agreement offer and the settlement offer that petitioners also failed to accept petitioners argue that sec_6621 must have been an issue in the miller cases since each of the decisions in miller recites that there is no increased interest due from the petitioner s for the taxable years at issue under the provisions of sec_6621 according to petitioners surely if the millers were not otherwise subject_to the penalty interest provisions because of the particular timing of their tax_payments there would have been no need for the court to include such a recital in its decisions emphasis added this argument by petitioners is entirely conjectural and is not supported by the documentation on which counsel relies in fact the recital that no increased interest under sec_6621 was due in the miller cases was an express term of the settlement documents in those cases and apparently included in the decisions for completeness and accuracy there is nothing on the record in the present consolidated cases or in the court's opinions in estate of satin v commissioner tcmemo_1994_435 or fisher v commissioner tcmemo_1994_434 or in any of the material submitted to us in these consolidated cases that would indicate that the millers were otherwise subject_to the penalty interest provisions petitioners' argument is based on a false premise we find that petitioners and miller were treated equally to the extent they were similarly situated and differently to the extent they were not miller foreclosed the applicability of the sec_6621 increased rate of interest in his cases while petitioners concede it applies in their cases petitioners failed to accept a piggyback settlement offer that would have entitled them to the settlement reached in the miller cases and also rejected a settlement offer made to them prior to trial of a test case in contrast miller negotiated for himself and accepted an offer that was essentially the same as the plastics recycling project settlement offer rejected by petitioners prior to trial accordingly petitioners' motion is not supported by the principle of equality on which they rely cf baratelli v commissioner tcmemo_1994_484 in order to reflect the foregoing an appropriate order will be issued denying petitioners' motion and decisions will be entered under rule