Leon and Belle Atkind - Page 6

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            advantage of the safe-harbor provisions.  F & G corporation                                 
            became the safe-harbor lessor and was interposed between ECI and                            
            the primary leasing partnership, in this case Hyannis.                                      
            Subsequent Plastics Recycling programs were structured in a                                 
            similar manner to take advantage of the new statutory safe-harbor                           
            opportunities.  See Provizer v. Commissioner, supra.  We refer to                           
            the transactions herein collectively as the Hyannis transaction.                            
                  In the Provizer case, we considered such a restructured                               
            Plastics Recycling transaction, the Clearwater transaction.  In                             
            the Clearwater transaction, PI sold six EPE recyclers to ECI                                
            Corp. for $981,000 each.  ECI Corp., in turn, resold the                                    
            recyclers to F & G Corp. for $1,162,666 each.  F & G then leased                            
            the recyclers to Clearwater, which licensed them to FMEC, which                             
            sublicensed them to PI.  The transaction involved herein differed                           
            from the Clearwater transaction in the following respects:  (1)                             
            F & G purchased the recyclers for $6,400,000, rather than the                               
            $6,975,996 paid in Clearwater, and (2) Hyannis, rather than                                 
            Clearwater, leased the recyclers from F & G and then licensed                               
            them to FMEC.4  In all other material respects the transactions                             
            are substantively identical.  Hyannis is thus like Clearwater,                              
            occupying the same link in the transactional chain.  In addition,                           

                  There is no explanation in the record as to why the six                               
            recyclers were sold to F & G for $6,400,000 in the Hyannis                                  
            transaction but later the same number of identical machines sold                            
            for $6,975,996 in subsequent Plastics Recycling transactions.  We                           
            note that the Hyannis partnership initially closed at the lower                             
            price prior to the enactment of the safe-harbor legislation, and                            
            subsequently the arrangement was modified in an attempt to take                             
            advantage of those rules by inserting F & G in the transaction.                             

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