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assigned the lease to the taxpayer. In exchange, the taxpayer
executed two short-term notes and one long-term note. All three
notes were secured by the equipment and the lease, subject to the
security interest of the bank. In addition, the monthly rent
payments from the school were nearly the same as the monthly
payments due on the taxpayer's long-term note to ELEX. Nicholson
v. Commissioner, supra at 1022.
In the instant case, there is no bank or other third party
lien on the equipment. Accordingly, no third party has a stake
in the transaction. Moreover, unlike Nicholson, where the
initial purchase, financing, leasing, and resale of the equipment
occurred through separate and distinct transactions, all
components of the instant transaction were structured and set in
motion simultaneously on December 22, 1982. On the other hand,
the instant case involves a binding circular payment arrangement
providing for offsetting payments and bookkeeping entries; i.e.
the Depository Agreement. This is unlike Nicholson, where there
was no payment arrangement of any kind. Moreover, Nicholson does
not contain the same degree of circularity as does the instant
case. In Nicholson, the school was obligated to pay the
taxpayer, who was obligated to pay ELEX which, in turn, had an
obligation to pay the bank. Each of the obligations in Nicholson
was separate and independent of the others. There, the court
found it significant that ELEX prepaid its loans to the bank, a
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