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whether an equity was acquired in the property, (3) whether the
parties treated the transaction as a sale, (4) whether useful
life in excess of the leaseback term and significant residual
value were reasonably expected to exist, (5) whether the contract
of sale created a present obligation on the purchaser to make
payments, (6) whether any other party held a purchase option at
less than fair market value, (7) whether renewal rental at the
end of the leaseback term was set at fair market rent, and (8)
whether the purported owner of the property had a reasonable
possibility to recover his investment from the income-producing
potential and residual value of the equipment. See Torres v.
Commissioner, 88 T.C. 702 (1987). In addition, the presence of
arm’s-length dealing is appropriate to the determination of a
sham. See Estate of Franklin v. Commissioner, 64 T.C. 752
(1975), affd. 544 F.2d 1045 (9th Cir. 1976).
Analysis of the transactional documents shows that IRA had
few, if any, of the rights and privileges normally associated
with legal title. For example, in one transaction, IRA could not
transfer the equipment without first securing the consent of
O.P.M. IRA could not pledge its interest in the equipment as
security for a loan or do anything that would result in the
imposition of a lien, either voluntarily or otherwise. IRA
generally did not assume the obligations of the seller/lessee.
IRA also agreed that O.P.M. could pay off its loan and refinance
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