Paul L. and Doris J. Triemstra, et al. - Page 5

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          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.                                                  
               In Provizer v. Commissioner, supra, we examined 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 leased the recyclers to a limited partnership, Clearwater,            
          which licensed them to FMEC, which sublicensed them to PI.  The             
          transaction involved herein differs in two respects:  (1) Seven             
          Sentinel EPE recyclers were sold and leased rather than six, and            
          (2) Northeast, rather than Clearwater, leased the recyclers from            
          F & G and then licensed them to FMEC.  Northeast is thus like               
          Clearwater, occupying the same link in the transactional chain.             
          In addition, the Sentinel EPE recyclers considered in these cases           
          are the same type of machines considered in the Provizer case.              
          The fair market value of a Sentinel EPE recycler in 1981 was not            
          in excess of $50,000.                                                       
               PI allegedly sublicensed the recyclers to entities that                
          would use them to recycle plastic scrap.  The sublicense                    
          agreements provided that the end-users would transfer to PI 100             
          percent of the recycled scrap in exchange for a payment from FMEC           
          Corp. based on the quality and amount of recycled scrap.                    

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