John Sann and Marianne Sann, et al. - Page 8

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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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