- 514 -
Frank Lyon Co. v. United States, 435 U.S. 561 (1978); Rice's
Toyota World, Inc. v. Commissioner, 81 T.C. 184, (1983). IRA, in
effect, did not purchase computer equipment, but purchased a
package of tax benefits. No evidence of fair market and residual
value or useful life was ever considered prior to consummating
the transactions. The projected residual values at the time the
leases with the lessees or intermediaries terminated were not
established.
Accordingly, since IRA did not acquire an interest in
depreciable property, we hold that it is not entitled to deduct
depreciation on the cost of the equipment or to the claimed
investment tax credits. We also hold that the sham nature of
IRA's transactions precludes any deduction for interest on the
promissory notes.
Second, IRA is not considered the owner of the computer
equipment for Federal income tax purposes because it did not
possess the burdens and benefits associated with ownership. This
is a question of fact to be ascertained from the intention of the
parties as evidenced by written agreements, in view of the
surrounding facts and circumstances. See Grodt & McKay Realty,
Inc. v. Commissioner, 77 T.C. 1221 (1981).
This Court has considered a number of factors having
particular relevance to the analysis of computer sale and
leaseback transactions: (1) Whether legal title passed, (2)
Page: Previous 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521 522 523 NextLast modified: May 25, 2011