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C. FSAM Partnership
FSAM Partnership (hereafter FSAM) was organized December 30,
1985. Weisgal, BWK, Inc., and BRT/K Associates were partners.
The Bea Ritch Trusts were partners in BRT/K Associates.
II. Equipment Leasing
A. Equipment Leasing Generally
An investor in computer leasing equipment generally looks to
the residual value of the equipment at the end of the lease for
his profit. Because of the importance of residual value, an
investor in a computer leasing transaction would normally use a
qualified appraiser to ascertain the value of equipment involved
in a leasing activity.
B. General Facts Relative to Lack of Economic Substance, Profit
Motive and Residual Value
To the extent there was economic substance to the IRA sale
and leaseback transactions, it would principally depend on the
residual value of the equipment at the end of the lease period
between the investor and the leasing company. For the equipment
leasing transactions, the equipment owner could benefit if he
retained valuable rights to equipment after the end user's lease
and the leasing company's leasehold rights were extinguished.
The residual value, if any, of the equipment after the 96 or 108-
month lease period was the largest element of what an owner could
look for in terms of economic profit. With respect to each of
the IRA leasing transactions, IRA would make a profit on the
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