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OPINION ........................... 53
I. Procedural Issues ................... 53
II. Whether the Sale-Leaseback Transaction Should Be
Respected ....................... 55
A. Overview of Statutory Framework for the
Transactions ................... 56
B. Positions of the Parties ............. 61
C. Analysis ..................... 62
1. Andantech Is Not a Valid Partnership and Is
Not Recognized for Federal Tax Purposes ... 64
a. Andantech-Foreign Should Be Disregarded
Because Messrs. Parmentier and de la
Barre d’Erquelinnes Did Not Intend To
Join Together for the Purpose of Carrying
On a Business and Sharing in the Profits
or Losses From the Equipment Leasing
Activity ................ 65
b. Andantech-US Should Be Disregarded
Because EICI Did Not Intend To Join With
RD Leasing for the Purpose of Carrying On
Partnership Business and Sharing in the
Profits or Losses From the Partnership’s
Equipment Leasing Activity ....... 68
2. Andantech Acted as a Mere Shell or Conduit To
Strip the Income From the Transaction and
Avoid Income Taxation and, Under the Step
Transaction Doctrine, Should Be Disregarded . 69
a. Binding Commitment Test ......... 71
b. End Result Test ............. 72
c. Interdependence Test .......... 75
3. The Sale-Leaseback Transaction Lacked Business
Purpose and Economic Substance ........ 82
a. The Experts ............... 84
b. No Reasonable Possibility for Profit
Existed ................. 89
c. RD Leasing/Norwest Was Not Motivated by
Any Business Purpose Other Than Obtaining
Tax Benefits .............. 95
i. Presence or Absence of Arm’s-Length
Price Negotiations ......... 97
ii. The Relationship Between the Selling
Price and the Fair Market Value .. 99
iii. The Structure of the Financing ... 99
iv. The Degree of Adherence to
Contractual Terms ......... 102
v. The Reasonableness of the Income and
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Last modified: May 25, 2011