- 67 -
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
After Mr. de la Barre d’Erquelinnes transferred his 2-percent
membership interest in Andantech-Foreign to EICI, EICI borrowed
from UBS $302,395.55 that it needed to contribute to the capital of
Andantech. Comdisco guaranteed the loan, and UBS treated the loan
as a loan to Comdisco. Mr. de la Barre d’Erquelinnes then
transferred his EICI stock to a charitable support trust
established in 1988 by Comdisco.
There is no evidence that EICI had assets other than its
interest in Andantech. Moreover, EICI’s only means of repaying the
UBS loan was through its 6-percent priority return distribution in
the event Comdisco exercised its early termination option.
EICI did not participate in the negotiations of the
transactions and did not intend to profit, and did not profit, from
the transactions. EICI did not join with RD Leasing for purposes
of carrying on a trade or business or sharing in profit or loss
from the sale-leaseback transaction.
EICI did not exist before the transactions at issue. It was
created as a vehicle to dispose of Mr. de la Barre d’Erquelinnes’s
2-percent interest and to create the illusion of a second
participant required for partnership classification. Under the
principles of Gregory v. Helvering, 293 U.S. 465 (1935), Andantech-
US is not recognized as a valid partnership for Federal income tax
Page: Previous 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 NextLast modified: May 25, 2011