- 59 -
that apparently were never registered. Further, the parentage of
many of the sheep in the bills of sale is either dubious or
unknown.
We conclude the stated bill of sale purchase prices for RCR
#4's and RCR #6's "breeding sheep" were many times the actual
fair market value of those "sheep". Thus, each partnership's
stated purchase price for its sheep did not reasonably
approximate those "sheep's" fair market value.
F. Validity of the Partnerships' Notes
In deciding the extent to which a nonrecourse note has
economic substance, a number of cases have relied heavily on
whether the fair market value of the property acquired with the
note was within a reasonable range of its stated purchase price.
See Estate of Franklin v. Commissioner, 544 F.2d 1045 (9th Cir.
1976), affg. 64 T.C. 752 (1975); Hager v. Commissioner, 76 T.C.
759 (1981). See also Hilton v. Commissioner, 74 T.C. 305, 363
(1980), affd. 671 F.2d 316 (9th Cir. 1982); cf. Frank Lyon Co. v.
United States, 435 U.S. 561 (1978), where, among other things,
the buyer-lessor in a sale-leaseback transaction was personally
liable on the mortgage. As the Court of Appeals for the Ninth
Circuit in Estate of Franklin v. Commissioner, 544 F.2d at 1048,
stated, in pertinent part:
An acquisition * * * if at a price approximately
equal to the fair market value of the property under
ordinary circumstances would rather quickly yield an
equity in the property which the purchaser could not
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