- 104 -
profit, independent of tax benefits, was attainable and knew that
a genuine risk of loss existed. The projections showed that,
regardless of any pretax profit, Norwest/NEFI would realize an
after-tax profit ranging from 92 to 101 percent. NEFI never
considered the financial consequences of the transaction without
the prior stripping of the rents from the transaction. A
reasonable person would not believe that there was a basis for
entering into the transaction other than for the acquisition of tax
benefits. See Helba v. Commissioner, supra at 1012.
vi. Insertion of Other Entities
In determining a lack of economic substance, the fact the
parties created and/or used intermediate entities for no valid
business purpose is of significance. See, e.g., id. at 1011.
Here, Comdisco and NEFI created and/or used various entities to
participate in the sale-leaseback transaction in order to strip the
income from the transaction and for no other purpose.
Specifically, Comdisco enlisted Messrs. Parmentier and de la Barre
d’Erquelinnes to create Andantech and EICI. Mr. de la Barre
d’Erquelinnes then used EICI and the Trust, a charitable trust (tax
exempt) previously created by Comdisco, as a depository for his
interest after his participation had served its purpose. And NEFI
used RD Leasing (previously known as Radio Dealers Leasing, Inc.),
an inactive shell corporation.
Our review of these factors shows that the sale-leaseback
transaction at issue was not compelled or encouraged by business or
Page: Previous 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 NextLast modified: May 25, 2011