Leon and Belle Atkind - Page 5

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            for his investment of $25,000.  As a result of the passthrough                              
            from Hyannis, petitioners deducted on their 1981 Federal income                             
            tax return an operating loss in the amount of $20,326 and claimed                           
            investment tax and business energy credits totaling $39,604.  The                           
            underlying deficiency in this case results from respondent's                                
            disallowance of petitioners' claimed operating loss and credits                             
            related to Hyannis for 1981.                                                                
                  The underlying transaction in this case was found by this                             
            Court to be the initial Plastics Recycling transaction in                                   
            Provizer v. Commissioner, supra, and may be summarized as                                   
            follows.  In 1981, Packaging Industries, Inc. (PI), manufactured                            
            and sold six Sentinel expanded polyethylene (EPE) recyclers to                              
            ECI Corp. for $5,400,000 ($900,000 each), of which $340,000 was                             
            to be paid in cash.  ECI Corp., in turn, resold the recyclers to                            
            the Hyannis limited partnership for $6,400,000 ($1,066,666 each),                           
            of which $440,000 was paid in cash.  Hyannis then leased the                                
            recyclers to FMEC, which subleased them back to PI.  All of the                             
            monthly payments for nonrecourse notes, leases, and licenses,                               
            which were required among the entities in the above transactions,                           
            offset each other.  These transactions were accomplished                                    
            simultaneously.                                                                             
                  After the Hyannis offering closed, the safe-harbor leasing                            
            rules were enacted as part of the Economic Recovery Tax Act of                              
            1981 (ERTA), Pub. L. 97-34, 95 Stat. 172.  The underlying                                   
            transaction was restructured in a manner designed to take                                   




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