Ronald and Barbara Kimmich - Page 12




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               Petitioners argue that the court's statement supports a                
          "clear inference" that the Court of Appeals rejected the economic           
          reality test in favor of the worst case scenario test.  We                  
          believe that petitioners' contention is without merit.  We read             
          Nicholson v. Commissioner, supra, only to mean that the Court of            
          Appeals has reserved for another day any decision on which of the           
          tests it will adopt.                                                        
          Petitioners also argue:                                                     
               In Nicholson Jr., the court placed the burden on                       
               petitioner, adopted arguendo the economic reality test,                
               and required a showing of abuse of discretion.                         
               Notwithstanding the fact that the court drew every                     
               inference favorable to respondent, it imposed an                       
               extraordinary sanction on the respondent and required                  
               respondent to pay the taxpayer's fees.                                 
          Petitioner asserts that respondent's defeat on the attorney's               
          fees issue in Nicholson means "certain defeat" for respondent in            
          the instant case.  Respondent, however, contends that petitioners           
          fail to account, sufficiently, for the significant factual                  
          distinctions between Nicholson and the instant case.  We agree              
          with respondent.                                                            
               In Nicholson, Equipment Leasing Exchange, Inc. (ELEX)                  
          purchased computer equipment from a third party and financed it             
          through an unrelated bank.  ELEX then leased the equipment to a             
          local school.  As a condition of its nonrecourse loans, ELEX                
          granted the bank a security interest in both the equipment and              
          the lease.  Later in the year, ELEX sold the equipment and                  





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