Lauro G. and Gayle W. Guaderrama - Page 7




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          years.  At the time the notices of deficiency were issued,                     
          respondent believed the transaction was a sale of the premises,                
          liquor license, and equipment by the Guaderramas back to                       
          Benavidez that resulted in capital gains.  After trial, however,               
          respondent in his brief took the position that Benavidez did not               
          relinquish ownership of the property and liquor license to the                 
          Guaderramas, and therefore the transaction was not a sale, but                 
          rather a financing arrangement between petitioners.                            
                                        OPINION                                          
               We must decide whether the parties’ transaction was in                    
          substance a “sale-leaseback”3 or a financing arrangement.  The                 
          Guaderramas contend that the transaction was a lease, while both               
          respondent and Benavidez contend that the transaction was a                    
          financing arrangement.                                                         
          I.  Standard of Proof                                                          
               Before we analyze the transaction, we must first determine                
          whether Benavidez or respondent should be allowed to ignore the                

               3 The transaction could not be a true sale-leaseback because              
          petitioner Lauro G. Guaderrama (Guaderrama) constructed a                      
          building on the land that was transferred by Benavidez, and                    
          therefore Severo’s was not “sold” to Guaderrama and then                       
          subsequently leased back to Benavidez.  However, when taking into              
          account the transfer by Benavidez of the land, liquor license,                 
          trade name and telephone number, all of which petitioners Lauro                
          G. and Gayle W. (the Guaderramas) argue were subsequently                      
          “leased” back to Benavidez, the form of this transaction is                    
          analytically similar to a sale-leaseback.  Thus, it is                         
          appropriate to consider those factors traditionally associated                 
          with sale-leaseback transactions for purposes of determining the               
          proper characterization of this transaction.                                   





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