Albert R. and Phyllis F. Dworkin - Page 5

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                  During 1981, Albert R. Dworkin (petitioner) was a semi-                                  
            retired certified public accountant (C.P.A.) and an investor in                                
            real estate and other entities.  His spouse, petitioner Phyllis                                
            F. Dworkin, was not employed outside the home during 1981.  On                                 
            their 1981 Federal income tax return, petitioners reported gross                               
            income from interest, dividends, business, capital gains, and                                  
            other sources in excess of $196,500.  Consequently, in the                                     
            absence of significant deductions or credits, they were subject                                
            to payment of Federal income taxes in substantial amounts.                                     
                  The facts of the underlying transaction in this case are                                 
            substantially identical to those in Provizer v. Commissioner,                                  
            supra, and may be summarized as follows.  In 1981, Packaging                                   
            Industries, Inc. (PI), manufactured and sold seven Sentinel                                    
            expanded polyethylene (EPE) recyclers to ECI Corp. for $6,867,000                              
            ($981,000 each), of which $530,000 was paid in cash.  ECI Corp.,                               
            in turn, resold the recyclers to F & G Corp. for $8,138,667                                    
            ($1,162,666 each), of which $615,000 was paid in cash.  F & G                                  
            Corp. then leased the recyclers to Northeast Resource Recovery                                 
            Associates (Northeast), a limited partnership, which licensed the                              
            recyclers to FMEC Corp., which sublicensed them back to PI.  All                               
            of the monthly payments required among the entities in the above                               
            transactions offset each other.  These transactions were done                                  
            simultaneously.  We refer to these transactions collectively as                                
            the Northeast transaction.                                                                     

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