in 1984 under the lease equaled $4,960, although he claimed
deductions and investment tax credits in an amount exceeding
$27,000. The tax benefits petitioner claimed immediately were
several times as much as the so-called investment, and little
revenue was ever produced.
The illusory nature of the financing of the lease
transaction is another factor suggesting lack of economic
substance. Rose v. Commissioner, 88 T.C. at 422. Consistent
with the tax-motivated nature of the subject transaction is the
structure of the financing of the Encore lease with large
commercially unreasonable deferred indebtedness which was very
unlikely to ever be paid. The debt was unlikely to ever be paid
because little or no revenues were likely to be received. All
future lease payments were to come from a share of the profits
earned on the sale of the recordings deferring the bulk of the
consideration by promissory notes, nonrecourse in form and
substance.
Based upon the foregoing, the record in the instant case
convinces us that the lease transaction entered into between
petitioner and Encore is devoid of economic substance. It is
apparent from the nature of the lease transaction that the Encore
lease package was marketed and sold to petitioner as a tax
shelter. As we have determined that the subject lease
transaction is devoid of economic substance, we need not address
the issue of profit motive. Accordingly, the lease transaction
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