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leased for the above amounts under the structure of simultaneous
transactions, the fair market value of a Sentinel EPE recycler in
1981 and up to the end of 1982 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.
Like Clearwater, Poly Reclamation leased Sentinel EPE
recyclers from F & G Corp. and licensed those recyclers to FMEC
Corp. Apart from the entity that leased the machines from F & G
Corp. and licensed them to FMEC Corp., the transactions of the
Partnerships do not differ in any substantive respects.
For convenience, we refer to the series of transactions
among PI, ECI Corp., F & G Corp., each of the Partnerships, FMEC
Corp., and PI as the Partnership transactions. In addition to
the Partnership transactions, a number of other limited
partnerships entered into transactions similar to the Partnership
transactions, also involving Sentinel EPE recyclers and Sentinel
expanded polystyrene (EPS) recyclers. We refer to these
collectively as the Plastics Recycling transactions.
B. The Partnerships
Clearwater and Poly Reclamation are New York limited
partnerships. Both partnerships closed during the last few
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