- 107 -
the existence of a useful life of the property in excess of the
leaseback term; (3) renewal rental at the end of the leaseback term
set at fair market rent; (4) whether the residual value of the
equipment plus the cashflow generated by the rental of the
equipment allows the investors to recoup at least their initial
cash investment; (5) the expectation of a “turnaround” point which
would result in the investors’ realizing income in excess of
deductions in the later years; (6) net tax benefits during the
leaseback term less than their initial cash investment; and (7) the
potential for realizing a profit or loss on the sale or re-lease of
the equipment. Levy v. Commissioner, supra; Torres v.
Commissioner, 88 T.C. at 721; Gefen v. Commissioner, 87 T.C. 1471,
1490-1495 (1986); Mukerji v. Commissioner, 87 T.C. 926, 967-968
(1992); Estate of Thomas v. Commissioner, supra at 433-438.
Here, the residual value plus the cashflow would not enable RD
Leasing to recoup its $15 million investment. Additionally, there
was no turnaround point that would result in RD Leasing’s realizing
income in excess of deductions--the net tax benefits greatly
exceeded RD Leasing’s initial investment. And RD Leasing had no
potential for realizing a profit on the sale or re-lease of the
equipment.
Further, in this case, the economics of the transaction were
such as to mandate that Comdisco would exercise its early
termination option and reacquire the equipment. This is so because
the estimated residual value of the equipment at the early
Page: Previous 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 NextLast modified: May 25, 2011