- 9 -
leaseback transaction in the instant case was "indistinguishable"
from the sale-leaseback transactions in Emershaw v. Commissioner,
supra, and Martuccio v. Commissioner, supra. Although respondent
may have acknowledged the application of the "worst-case
scenario" test, respondent's position failed to properly apply
that test to the facts of the instant case, as clearly mandated
by the legal precedent of Emershaw v. Commissioner, supra, and
Martuccio v. Commissioner, supra.
In cases with facts similar to those in the instant case and
to those in Emershaw v. Commissioner, supra, and Martuccio v.
Commissioner, supra, other Courts of Appeals have applied the
"economic reality" test and have found that the taxpayers in
those cases were "protected from loss" within the meaning of
section 465(b)(4). It is the opinion of this Court that,
although respondent acknowledged the application of the "worst-
case scenario" test in the instant case, the substance of
respondent's position indicated that respondent was actually
analyzing the facts of the instant case under the reasoning of
the "economic reality" test.8 This was in direct conflict with
the legal precedent set by the Court of Appeals for the Sixth
Circuit.9 Respondent was fully aware that, "where the Court of
8 This is readily apparent in respondent's trial memorandum
and in respondent's posttrial briefs.
9 Respondent argues that respondent's position was
(continued...)
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