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the equipment, and that its interest in the equipment would be
subordinate to that of the replacement lender. O.P.M. was not
required to renegotiate the terms of IRA's note if it could
replace another loan with more favorable financing.
II. Specific Leasing Transactions
The specific computer leasing deals at issue are further
analyzed in connection with the foregoing discussion:
A. Cedilla Invest.-1976 Domestic (O.P.M. Transaction)
The purported equipment purchase, in December of 1976, by
Cedilla Invest. (the predecessor of IRA) was for $1 million.
This was at a time shortly after the property was purchased by
the seller, Pioneer Computer Marketing Corp., on October 14,
1976, for $600,000. No contemporaneous appraisals supporting the
purchase price paid by IRA were presented. The bill of sale is
undated. This indicates a lack of economic substance. Moreover,
since the purchase price is clearly inflated, it lends credence
to respondent's position that this transaction was nothing more
than a sham. See Soriano v. Commissioner, 90 T.C. 44 (1988);
Falsetti v. Commissioner, 85 T.C. 332 (1985); see also Rose v.
Commissioner, 88 T.C. 386 (1987), affd. 868 F.2d 851 (6th Cir.
1989). There was no valid explanation for IRA's agreement to pay
the inflated amount, other than the acquisition of tax benefits.
The promissory note in the amount of $970,000 executed by
Cedilla Invest. purportedly to purchase the equipment was a
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