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facts concerning the underlying transactions that were described
in Provizer v. Commissioner, supra.
The transactions involving the Sentinel EPE recyclers leased
by Plymouth are substantially identical to the transactions
involving the same type of recyclers leased by
Clearwater Group (Clearwater), the partnership that was involved
in Provizer v. Commissioner, supra.3
In transactions closely resembling those in the Provizer
case, Packaging Industries of Hyannis, Massachusetts (PI)
manufactured and sold seven Sentinel EPE recyclers to ECI
Corporation (ECI) for $981,000 each. PI manufactures
thermoplastic and other types of packaging machinery, as well as
energy saving devices. ECI, in turn, resold the recyclers to F&G
Corporation (F&G) for $1,162,667 each. F&G then leased the
recyclers to Plymouth, which licensed the recyclers to FMEC
Corporation (FMEC), which sublicensed them back to PI.
The sales of the recyclers from PI to ECI were financed with
nonrecourse notes. Approximately 7 percent of the sales price of
the recyclers sold by ECI to F&G was paid in cash, with the
remainder financed through notes. These notes provided that 10
percent of the notes were recourse but that the recourse portion
3 Terms such as lease, sale, license, and their derivatives
are used solely for convenience, and their use in this Opinion
should not be understood to imply that the transactions described
herein constitute leases, sales, or licenses for Federal tax
purposes.
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