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petitioner did not directly address this matter of competition
affecting the allegedly anticipated flow of income.
3. Petitioner's Argument Concerning Valuation of the
Recycler Erroneously Requires Acceptance of a Sham Transaction as
Though It Were Valid
With respect to the fair market value of the recycler,
petitioner claims that he did not view the investment as a
purchase of the machines standing alone, and that he did not
"look at it to see whether or not it costs $50,000 or $100,000 to
build the machine." Instead, he "looked to see whether or not
the overall economics justified that kind of investment and made
sense." Petitioner asserted that the Sentinel EPE recycler could
not be valued in isolation from the Northeast transactions, but
within the context of said transactions, he concluded that it was
worth $1,162,666.
However, as petitioners stipulated, the fair market value of
a Sentinel EPE recycler was not in excess of $50,000 in 1981.
Respondent's expert Lindstrom testified that prices of
commercially available machines that were similar to the Sentinel
EPE recycler were in the range of $50,000 in 1981. An example of
a machine "that provided equivalent capability of recycling
polyethylene and polystyrene film and foam waste", according to
respondent's expert Grossman, was the Foremost Densilator, which
had been available since 1978 and sold for approximately $20,000
in 1981. Petitioner testified that he was familiar with the
Foremost Densilator, as well as other plastics recycling
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