- 5 - 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 takePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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