Leroy J. Omerza; Betty J. Omerza, Petitioners-appellants, v. Commissioner of Internal Revenue, Respondent-appellee, 999 F.2d 540 (6th Cir. 1993)

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U.S. Court of Appeals for the Sixth Circuit - 999 F.2d 540 (6th Cir. 1993) July 6, 1993

Before NELSON and SUHRHEINRICH, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.


Petitioners appeal from the Tax Court's decision that they are liable for deficiencies and penalties resulting from an investment in a tax shelter that lacked economic substance. Counsel for both parties have expressly waived oral argument. This case has been referred to a panel of the court pursuant to Rule 9(a), Rules of the Sixth Circuit. Upon examination, this panel unanimously agrees that oral argument is not needed. Fed. R. App. P. 34(a).

Petitioners contend that they are entitled to a loss deduction under I.R.C. § 165(c) (2), that additions to tax under I.R.C. § 6653(a) are improper, and that interest was improperly computed pursuant to I.R.C. § 6621(c). Virtually identical arguments were rejected by a panel of this court in a case involving the same tax shelter in Illes v. Commissioner, 982 F.2d 163 (6th Cir. 1992) (per curiam), cert. denied, 113 S. Ct. 1579 (1993). Upon consideration, the decision of the Tax Court will be affirmed for the reasons stated in Illes.

Petitioners' claim that a deduction under I.R.C. § 165(c) (2) is warranted is meritless because petitioners stipulated before trial that the tax shelter lacked economic substance. See Rose v. Commissioner, 868 F.2d 851, 853 (6th Cir. 1989); Mahoney v. Commissioner, 808 F.2d 1219, 1220 (6th Cir. 1987). Petitioners' claim that penalties pursuant to I.R.C. § 6653(a) are unwarranted lacks merit because petitioners cannot show that the Tax Court's finding that petitioners were negligent is clearly erroneous. See Leuhsler v. Commissioner, 963 F.2d 907, 910-11 (6th Cir. 1992). Finally, the interest assessed at 120% pursuant to I.R.C. § 6621(c) is warranted under the circumstances of this case. Section 6621(c)'s increased interest rate applies to " [a]ny deduction disallowed for any period under § 165(c) (2), relating to any transaction not entered into for profit." 26 C.F.R. § 310.6621-2T (temporary IRS regulation, published at 49 FR 50391 (Dec. 28, 1984)).

Therefore, the judgment of the Tax Court is affirmed pursuant to Rule 9(b) (3), Rules of the Sixth Circuit.