Jeffrey H. Weitzman - Page 3




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          case are substantially identical to the transactions in Provizer            
          v. Commissioner, supra.  In Provizer, the Court held that the               
          transactions involving Sentinel EPE2 recyclers (recyclers) were             
          so lacking in economic substance that they were to be disregarded           
          for Federal income tax purposes.                                            
               In a series of simultaneous transactions closely resembling            
          those in Provizer, Packaging Industries Group, Inc. (PI),                   
          manufactured and sold3 four recyclers to Ethynol Cogeneration,              
          Inc. (ECI), for $3,924,000.  ECI agreed to pay PI $327,000 for              
          the recyclers at closing, with the balance of $3,597,000 financed           
          through a 12-year nonrecourse promissory note (ECI note).  ECI              
          resold the recyclers to F&G Equipment Corp. (F&G) for $4,650,668.           
          F&G agreed to pay $377,000 in cash, with the balance of                     
          $4,273,668 financed through a 12-year partial recourse promissory           
          note (F&G note).  The F&G note was purportedly recourse to the              
          extent of 20 percent of its face value; however, the recourse               
          portion was payable only after the nonrecourse portion was                  
          satisfied.                                                                  



               2  EPE stands for expanded polyethylene.                               
               3  Terms such as “sale” and “lease”, as well as their                  
          derivatives, are used for convenience only and do not imply that            
          the particular transaction was a sale or lease for Federal tax              
          purposes.  Similarly, terms such as “joint venture” and                     
          “agreement” 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.                                         





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