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Internal Revenue Code and Treasury regulations, F&G elected to
treat Hamilton as having purchased the recyclers for purposes of
the investment and business energy tax credits.
Simultaneously, Hamilton entered into a joint venture with
PI and Resin Recyclers Inc. (RRI) for the “exploitation” of the
recyclers. The joint venture agreement provided that RRI was to
assist Hamilton with the placement of recyclers with end-users.
At the same time, PI, ECI, F&G, Hamilton, and RRI entered into
arrangements providing that PI would pay a monthly joint venture
fee to Hamilton, in the same amount that Hamilton would pay as
monthly rent to F&G, in the same amount as F&G would pay monthly
on its note to ECI, in the same amount that ECI would pay each
month on its note to PI. In connection with these arrangements,
PI, ECI, F&G, Hamilton, and RRI entered into offset agreements
providing that these monthly payments would only be kept as
bookkeeping entries, and no money actually was transferred.
Consequently, all of the monthly payments required among the
entities in the above transactions offset each other, and the
transactions occurred simultaneously.
The parties have stipulated that as of September 30, 1983,
only one Sentinel EPS recycler was placed in service by Hamilton.
However, on its 1982 tax return, also stipulated in evidence,
Hamilton reported that the four recyclers had a combined basis of
$7 million for purposes of the investment and business energy tax
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Last modified: May 25, 2011