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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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