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recycler after PI was notified by the second end-user that it no
longer wanted the recycler. The third end-user ran a
cost/benefit analysis on the recycler and found it unprofitable.
PI waited another 6 months before picking up the recycler. The
last end-user used the machine infrequently and was not paid for
the recycled scrap produced.
Like Clearwater, each of the Partnerships leased Sentinel
EPE recyclers from F & G Corp. and licensed those recyclers to
FMEC Corp. The transactions of the Partnerships differ from the
underlying transactions in the Provizer case in the following
respects: (1) The entity that leased the machines from F & G
Corp. and licensed them to FMEC Corp., and (2) the number of
machines sold, leased, licensed, and sublicensed. Each of the
Partnerships leased and licensed seven Sentinel EPE recyclers.4
For convenience, we refer to the series of transactions
among PI, ECI Corp., F & G Corp., each of the Partnerships, FMEC
Corp., and PI as the Partnership transactions. In addition to
the Partnership transactions, a number of other limited
4 The 1981 partnership returns for SAB Recovery, Scarborough,
and Plymouth indicate that those partnerships leased and licensed
seven Sentinel EPE recyclers. Although the record is without a
partnership return or a copy of the offering memorandum for SAB
Recycling, the amount of basis allocated to petitioner Allan J.
Becker, based on his interest in SAB Recycling, is consistent
with ownership of seven Sentinel EPE recyclers. SAB Recovery,
Scarborough, and Plymouth each reported a basis in their seven
recyclers in the amount of $8,138,667. Petitioner Allan J.
Becker acquired a 0.507692-percent interest in SAB Recycling in
1982. On his 1982 return, he reported a basis in the recyclers
in the amount of $41,320 ($8,138,667 x 0.00507692 = $41,319.36).
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