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provisions of the notes, on the payment of rent by the respective
lessees.
Moreover, although the equipment was to serve as collateral,
the equipment was likely to be worthless by the time the
obligations were to be enforced (i.e., the deferral dates or the
end of the leases between IRA and the lessees). The notes are
not enforceable because there was no possibility that the payor,
IRA, would ever be compelled to use its own funds or surrender
valuable property in satisfaction of the obligations.
Accordingly, the notes did not represent genuine debt obligations
and are disregarded for Federal income tax purposes.
The Commissioner was successful in attacking the validity of
a long-term purchase money note executed as part of a sale and
leaseback of computer equipment in Bussing v. Commissioner, 88
T.C. 449, Supplemented by 89 T.C. 1050 (1987). The facts of that
case reflect a transaction similar to those here involved. A.G.
sold computer equipment through a middle company, Sutton, to five
investors, including the taxpayer, and then leased the equipment
back from the taxpayer's investment group. The investors'
payments on their long-term note to Sutton were financed entirely
by the rent due from A.G. In the event of a default by A.G. on
the lease, the principal and interest payments on the note to
Sutton were deferred to December 31, 1991, without the accrual of
any additional interest. We found that Sutton had been inserted
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