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On October 7, 1981, in a series of transactions similar to
those of the Clearwater Group partnership in Provizer v.
Commissioner, T.C. Memo. 1992-177, affd. without published
opinion 996 F.2d 1216 (6th Cir. 1993), petitioner purchased
outright one Sentinel EPE recycler from ECI Corp. for
$1,162,667.4 As prearranged, petitioner leased the recycler to
FMEC Corp. Thus, the significant transactions of petitioner's
purchase of the Sentinel EPE recycler differ from the underlying
transactions in Provizer in the following respects: (1) The form
of petitioner's interest in the equipment; (2) the entity from
which petitioner's interest was obtained; (3) the fact that
equipment was leased, rather than licensed, to FMEC Corp.; and
(4) the number of machines sold, leased, licensed, and
sublicensed.
As of October 7, 1981, there was no established market for
operating Sentinel EPE recyclers.
Petitioner never made a profit in any year from his Sentinel
EPE recycler.
2. Petitioner's Purchase of the Sentinel EPS Recyclers
In 1982, PI manufactured Sentinel EPS recyclers which
recycled expanded polystyrene. Bambara showed petitioner the
blueprints of the machine and explained to petitioner that the
4 Petitioner purchased the Sentinel EPE recycler for cash in
the amount of $43,700 and notes in the amount of $1,118,967. It
does not appear that petitioner made any payments on the note.
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