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Respondent argues that the 106 promissory notes issued
by EA 83-XII and EA 84-III should be disregarded for tax
purposes "because the debt substantially exceeded the fair
market value of the underlying property and lacked economic
substance." According to respondent's posttrial brief:
Respondent's appraisals reflect that the
nonrecourse debt by EMI exceeds the actual values
of EA83-XII's properties by 39.40% and the actual
values of EA84-III's properties by 19.53% and
that EA83-XII and EA84-III "overmortgaged" the
106 properties to support nominal purchase prices
that permitted Epic to receive substantial
builder fees, rental deficit contributions, and
rental advances.
Respondent explains the computation of the above
percentages as follows:
Respondent's appraisals reflecting values
totalling $2,658,600.00 for the properties
acquired by EA83-XII demonstrate that the
nonrecourse debt totalling $3,706,150.00
originated by EMI exceeds the actual values
by $1,047,550.00, or 39.40%. Respondent's
appraisals reflecting values totalling
$2,889,150.00 for the properties acquired by
EA84-III demonstrate that the nonrecourse debt
totalling $3,453,450.00 originated by EMI exceeds
the actual values by $564,300.00, or 19.53%.
According to respondent, EA 83-XII and EA 84-III
"overmortgaged" the 106 properties in order "to generate
substantial builder fees, rental deficit contributions, and
rental advances necessary to feed EPIC's ravenous appetite
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