- 603 -
Respondent, to the contrary, contends that IRA failed to
meet its burden of establishing that it was not liable for the
section 6661(a) additions.
We agree with respondent. IRA failed to establish that
substantial authority existed supporting its position on the
disallowed equipment leasing transaction items. (Issue 22). In
sustaining respondent's disallowance of the credits and
deductions claimed by IRA, we note that IRA failed to offer
probative evidence (1) that the equipment leasing transactions
had economic substance, and (2) that the long-term notes issued
were valid recourse indebtedness. Among other things, we did not
accept Mallin's conclusory opinions concerning the transactions'
profit potential and the reasonably expected residual value of
the equipment. Examinations into the economic substance of
leasing transactions are inherently factual, and, in conducting
the economic substance inquiry, significant objective factors
include the reasonableness of the income projections and residual
value projections. See Levy v. Commissioner, 91 T.C. 838, 856
(1988). Thus, IRA's reliance on other equipment leasing cases in
which taxpayers prevailed is inapposite. An authority is of
little relevance if it is distinguishable on its facts from the
facts of the case at issue. See sec. 1.6661-3(b), Income Tax
Regs.
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