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A. The Plastics Recycling Transactions
This case concerns petitioners' investment in Resource
Reclamation Associates (Resource), a limited partnership that
leased Sentinel expanded polyethylene (EPE) recyclers. The
transactions involving the Sentinel EPE recyclers leased by
Resource are substantially identical to those in the Clearwater
Group limited partnership (Clearwater), the partnership
considered in Provizer v. Commissioner, supra. Petitioners have
stipulated substantially the same facts concerning the underlying
transactions as we found in the Provizer case.
In transactions closely resembling those in the Provizer
case, Packaging Industries, Inc. (PI), manufactured and sold
seven 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
Resource, which licensed the recyclers to FMEC Corp., which
sublicensed them back to PI. The sales of the recyclers from PI
to ECI Corp. were financed with nonrecourse notes. Approximately
7 percent of the sale price of the recyclers sold by ECI Corp. to
F & G Corp. was paid in cash with the remainder financed through
notes. These notes provided that 10 percent of the notes were
recourse but that the recourse portion of the notes was only due
after the nonrecourse portion, 90 percent, was paid in full.
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