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of the machines, made the popcorn material. Had a very
small-barrelled extruder. They ran it through the
extruder.
And they took the pellets that came out of the
extruder and they put it back in the process, which was
very difficult to do, by the way, because they used
cyclone feeding.
So, getting the pellets back in the process wasn't
easy.
Petitioner observed at the demonstration: "It worked. You know,
on the scale that they gave, everything worked."
Attorneys from the law firm of Windels, Marx, Davies & Ives
(WMDI) visited the PI plant on the same day as petitioner. WMDI
prepared the offering memorandum, tax opinion, and other legal
documents for all of the 1981 Plastics Recycling partnerships,
including Northeast. During a lunch break, petitioner asked the
attorneys some questions about the legal aspects of the venture,
such as whether the transactions qualified for the recently
enacted safe-harbor leasing provisions of section 168(f).
Petitioner "knew that the government was not happy with"
nonrecourse leveraged lease transactions, and he considered the
Northeast transaction to be "a classic leveraged lease deal."
After lunch petitioner questioned Bambara, particularly with
respect to factors bearing on the price of resin, which he
purportedly considered "the crucial part of the economics of this
deal". Petitioner understood that PI purchased resin at "a
volume discount", but Bambara did not indicate the amount of the
discount. Petitioner also learned that because PI received resin
shipments by truck instead of rail, it paid a penalty that
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