- 513 -
In light of this and the lack of evidence of residual value,
we find that no business purpose could have existed, other than
the creation of tax benefits. IRA presented no persuasive
evidence that it evaluated the transactions in a businesslike
fashion. IRA's decision makers had minimal knowledge of the
computer industry. This is supported by the fact that by the
time IRA would receive the title to equipment, in the late 1980's
for most of the deals, it no longer listed the equipment on its
returns as producing income. IRA never desired the residual
values, only the tax benefits accompanying the purported
agreements.
We agree with respondent that the various intermediaries
used in the transactions (e.g., Horizon or Pluto) were inserted
into IRA's transactions with the leasing companies, e.g.,
FSC/FSAM and O.P.M., purely for tax reasons, and that their
presence served no valid business purpose. In fact, their
presence reflects the tax-avoidance motivations of IRA and serves
to support respondent's determinations that the transactions
lacked substance and constituted nothing more than paper-
shuffling.
In our opinion, IRA's transactions with O.P.M. and FSC/FSAM
were entered into purely for tax purposes and were not supported
by economic substance in the form of a realistic potential for
profit. They must, therefore, be regarded as sham transactions.
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