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d. Adherence to Contractual Terms
A transaction that has economic substance will be
characterized by enforcement of the agreements between the
parties. The parties' failure to enforce the provisions of their
agreements is evidence that the transaction does not conform to
economic realities. Helba v. Commissioner, 87 T.C. at 1011; cf.
Arrowhead Mountain Getaway, Ltd. v. Commissioner, T.C. Memo.
1995-54 (finding of sham transaction supported by showing that
promoter was "notably careless and unbusinesslike" in documenting
and altering legal relationships of the partnership).
The cases before us present numerous instances of sloppy
documentation and of arbitrary alterations of the rights of the
participants. For example, the date for MPC to pay the "Contract
Renegotiation fee" to MIT 80 was set to be January 1, 1992. This
was 1 day past the date that the MIT 80 partnership, according to
the partnership agreement, was to terminate.
With respect to MIT 82, Machise purportedly lent $3,075,000
to the 29 partners in exchange for their notes. The employee
leasing agreement, however, provided that the amount would be $3
million.
The MIT 83 partners were required to execute personal notes
in substantial amounts to Qulart. As partners in MIT 83, Fred
and Bruce themselves executed similar notes totaling, in the
aggregate, $265,000. These notes, however, were made out to
Machise, and not to Qulart, because of an apparent error.
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