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All of the monthly payments required among the entities in
the above transactions offset each other. These transactions
were done simultaneously. Although the recyclers were sold and
leased for the above amounts under the structure of simultaneous
transactions, the fair market value of a Sentinel EPE recycler in
1981 was not in excess of $50,000.
PI allegedly sublicensed the recyclers to entities that
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 a payment from FMEC
Corp. based on the quality and amount of recycled scrap.
Both Clearwater and Resource leased Sentinel EPE recyclers
from F & G Corp. and licensed those recyclers to FMEC Corp.
Apart from leasing and licensing seven recyclers instead of six,
the underlying transactions involving Resource do not differ in
any substantive respect from the Clearwater transactions
considered in the Provizer case.
For convenience, we refer to the series of transactions
among PI, ECI Corp., F & G Corp., Resource, FMEC Corp., and PI as
the Resource transactions. In addition to the Resource
transactions, a number of other limited partnerships entered into
transactions similar to the Resource transactions, also involving
Sentinel EPE recyclers and Sentinel expanded polystyrene (EPS)
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Last modified: May 25, 2011