Robert D. and Patricia K. Kaliban, et al. - Page 7

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            Weber were limited partners in Clearwater.  For convenience we                            
            refer to these partnerships collectively as the Partnerships.                             
                  The Clearwater partnership and the transactions involving                           
            the Sentinel EPE Recyclers leased by Clearwater were considered                           
            in Provizer v. Commissioner, supra.  The transactions involving                           
            the Sentinel EPE recyclers purportedly leased by Poly Reclamation                         
            are substantially identical to the Clearwater transactions.                               
            Petitioners have stipulated substantially the same facts                                  
            concerning the underlying transactions as we found in the                                 
            Provizer case.                                                                            
                  In the Provizer case, 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 Clearwater, 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 sales 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.                          
                  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                           

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