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Transactions involving the Sentinel EPE recycler were
considered in Provizer v. Commissioner, supra. Petitioner has
stipulated to substantially the same facts concerning the
underlying transactions as were found in Provizer, with the
exception of certain facts concerning (1) the Provizers, (2) the
expert opinions, (3) the value of the Sentinel EPE recycler, and
(4) other matters that we regard as having minimal significance.
The facts concerning the transactions as found in Provizer may be
summarized as follows:
Packaging Industries, Inc. (PI) manufactured and sold six
Sentinel 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 Corp. then leased the recyclers to the Clearwater
Group partnership, which licensed the recyclers to FMEC Corp.,
which sublicensed them back to PI. PI allegedly sublicensed the
recyclers to entities (the end-users), which 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 payment from FMEC Corp. based on the
quality and amount of recycled scrap.
All of the foregoing transactions were executed
simultaneously.
The sale of the recyclers from PI to ECI Corp. was financed
with nonrecourse notes. Approximately 7 percent of the sales
price of the recyclers sold by ECI Corp. to F&G Corp. was paid in
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