James D. Barber and Betty L. Barber - Page 5




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          EPS3 recyclers to ECI Corporation (ECI) for $1,520,000 each.  ECI           
          simultaneously resold the recyclers to F&G Corporation (F&G) for            
          $1,750,000 each.  F&G simultaneously leased the recyclers to                
          Whitman.  Finally, Whitman simultaneously entered in a joint                
          venture with PI and Resin Recyclers Inc. (RRI) to “exploit” the             
          recyclers and place them with end-users.  Under this latter                 
          arrangement, PI was required to pay Whitman a monthly joint                 
          venture fee.                                                                
               For convenience, we refer to the series of transactions                
          between and among PI, ECI, F&G, Whitman, and RRI as the Whitman             
          transactions.                                                               
               The sales of the Sentinel EPS recyclers from PI to ECI were            
          financed using 12-year nonrecourse notes.  The sales of the                 
          recyclers from ECI to F&G were financed using 12-year “partial              
          recourse” notes; however, the recourse portion of the notes was             
          payable only after the first 80 percent of the notes, the                   

               2(...continued)                                                        
          are also used for convenience only and do not imply that the                
          particular arrangement was a joint venture or an agreement for              
          Federal tax purposes.                                                       
               3  EPS stands for expanded polystyrene.  The case of                   
          Provizer v. Commissioner, T.C. Memo. 1992-177, affd. per curiam             
          without published opinion 996 F.2d 1216 (6th Cir. 1993), involved           
          Sentinel expanded polyethylene (EPE) recyclers.  However, the EPS           
          recycler partnerships and the EPE recycler partnerships are                 
          essentially identical.  See Davenport Recycling Associates v.               
          Commissioner, T.C. Memo. 1998-347, affd. 220 F.3d 1255 (11th Cir.           
          2000); see also Gottsegen v. Commissioner, T.C. Memo. 1997-314              
          (involving both the EPE and EPS recyclers); Ulanoff v.                      
          Commissioner, T.C. Memo. 1999-170 (same).                                   





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