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small downpayment and an installment note for the balance of the
purchase price. Program then sold the equipment to LEA, the
partnership in which the taxpayer Emershaw was a partner. LEA
paid a small downpayment and for the balance gave Program a
partial recourse installment note equal to the installment note
Program had given CIS. LEA then leased the equipment back to CIS
for monthly rent payments equal to the monthly payments LEA owed
on its note to Program. The payments on the lease and various
notes were made by offsetting bookkeeping entries pursuant to
letter agreements between the parties.
In Martuccio v. Commissioner, supra, the principals, Tiger,
Elmco, and the taxpayer, Martuccio, were in the same positions,
respectively, as CIS, Program, and the LEA partners were in the
Emershaw transaction. The principals in both of those cases
paralleled the principals CIS, Comdisco, Charterhouse, Hambrose,
the partnership, and petitioner in the instant case.
In Emershaw v. Commissioner, supra, the Court of Appeals for
the Sixth Circuit held, as discussed previously, that the
circular offsetting structure of payments in the three-party
sale-leaseback transaction, similar to that presented in this
case, did not by itself constitute protection from loss under
section 465(b)(4). Emershaw v. Commissioner, 949 F.2d at 848.
Upon examining the similar sale-leaseback transaction in issue in
Martuccio v. Commissioner, supra, the Court of Appeals for the
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