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identical to those in the Clearwater Group limited partnership
(Clearwater), the partnership considered in Provizer v.
Commissioner, T.C. Memo. 1992-177. 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.4
No arm's-length negotiations for the price of the Sentinel
EPE recycler took place between or among PI, ECI, and F & G Corp.
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
4 In the Foam transaction, such notes provided that 20 percent
of the notes were recourse but that the recourse portion of the
notes was only due after the nonrecourse portion, 80 percent, was
paid in full.
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