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agreements provided that the end-users would transfer to PI 100
percent of the recycled scrap in exchange for payment from FMEC
based on the quality and amount of recycled scrap. All of the
foregoing transactions were executed simultaneously.
The sale of the recyclers from PI to ECI was financed with
nonrecourse notes. Approximately 7 percent of the sales price of
the recyclers sold by ECI to F&G Corp. was paid in cash, and the
remainder was financed through notes. The notes provided that 10
percent of the amount thereof was recourse but that the recourse
portion was due only after the nonrecourse portion had been paid
in full. All of the monthly payments required among the entities
in the above transactions offset each other.
In Provizer v. Commissioner, supra, we found that the market
value of a Sentinel Recycler in 1981 did not exceed $50,000 and
that the nuts and bolts, or manufacturing, cost was $18,000.
Other recycling machines were commercially available during the
years in issue in Provizer v. Commissioner, supra.
B. Petitioner’s Introduction to Plastics Recycling
Petitioner is a civil engineer by training, and during 1982
he was a self-employed real estate broker. A personal friend and
business associate, Ira Sullivan (Mr. Sullivan), gave petitioner
a prospectus for SAB Recycling Associates (SAB), a limited
partnership, formed “to exploit steam chest molded expanded
polystyrene recycling equipment (the ‘Sentinel EPS Recyclers’).”
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