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concluded that the Clearwater transaction was set up to satisfy
the safe harbor leasing rules.
Petitioners’ contention is completely circular and flawed.
Petitioners reached the conclusion that the Clearwater
transaction virtually guaranteed them a profit based on
assumptions contained in the Clearwater offering memorandum.
Petitioners did not perform adequate research nor obtain advice
from an independent expert regarding the price of resins, the
quality of the resin processed by the EPE recyclers, or the
quality of the EPE recyclers. What is more, petitioners’
argument completely ignores any fair market value consideration.
The standard for measuring fair market value is the price at
which the property would change hands between a hypothetical
willing buyer and seller, neither being under any compulsion to
buy or sell and both having reasonable knowledge of the relevant
facts. See United States v. Cartwright, 411 U.S. 546, 551
(1973). We have held that the fair market value of the Sentinel
EPE recyclers did not exceed $50,000.
If petitioners had made any reasonable effort to determine
the fair market value of the recyclers, they would have
determined, as we have found, that the recyclers’ pricetage of
$1,162,667 was grossly inflated.4 At that point, petitioners
4 There were many factors to indicate that the Sentinel
(continued...)
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