appraisal listing the master’s value at $500,000. Mr. Tirk,
respondent’s expert witness, has been in the record business for
36 years in various positions including manufacturer,
distributor, wholesaler, retailer, and executive vice president
and owner of his own record company. Mr. Tirk’s valuation is
based upon many factors including the slight market for the
particular music involved, the limited number of retail outlets
that carry that type of music, the improbability of generating
any sales from exploitation of the product, petitioner’s complete
lack of experience in the industry, the relative obscurity of the
artists involved, and the poor quality of the master. Mr. Tirk
valued the subject master at $3,000 to $5,000.
The manner in which the lessee carried on his or her
activities can also be evidence of a lack of economic substance.
Pasternak v. Commissioner, supra at 900-901. Petitioner blindly
signed the form lease, failing to negotiate any of the lease
terms, and purchased no insurance on the master although the
master was purportedly worth $496,000. Petitioner did not obtain
an independent appraisal with respect to either the value of the
subject master or the possibility of making a profit with the
master. Furthermore, petitioner neither listened to the master
nor determined the quality of the master before signing the lease
agreement.
Assuming that petitioner had a one-third interest in BBG,
his share of the initial contribution amount advanced to Encore
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